When HR IT Goes Bad

By Michelle Rafter

Dec. 31, 2008

If there was ever a good example of a bad HR payroll implementation, it is the unfortunate case of the Los Angeles Unified School District.

    In January 2007, the district flipped the switch on a $95 million system built on SAP software customized by Deloitte Consulting. The system was intended to replace a mishmash of outdated technology with a streamlined system for tracking earnings and issuing paychecks for 95,000 teachers, principals, custodians and other district employees.

    But it was doomed from day one, done in by technology glitches, inaccurate and often conflicting data from the old system, inadequate employee training, and infighting and lack of internal oversight within the district, among other problems.

    The trouble was apparent from the first month the new software went live. Some teachers were underpaid, some overpaid and some had their names completely erased from the system. It took a year and another $37 million in repairs for the school district to work out the kinks. In November 2008, the district and Deloitte settled a dispute over the work, with the contractor agreeing to repay $8.25 million and forgive $7 million to $10 million in unpaid invoices to put the matter to rest.

    The real tragedy, according to HR industry insiders, is how often such HR IT implementation failures occur. While they might not be on the same large scale as the school district’s debacle, instances of payroll and other HR system upgrades gone wrong happen all the time.

    “Depending on the statistics you read, 30 percent to 70 percent of these projects will be late, over budget or don’t deliver the planned scope,” says Michael Krigsman, CEO at Asuret Inc., a Boston IT consultant, and author of the IT Project Failures blog. “It’s huge. It’s a horrible problem.”

    But it is possible to pull off a software upgrade or switch to a different technology provider without the level of problems the Los Angeles Unified School District had, experts say. For that to happen, companies need to plan ahead, put proper management and oversight in place, negotiate wisely, and if the situation warrants, get outside help, they say.

    “The reasons for the problems, generally speaking, are not technical,” Krigsman says. “They’re organizational, political and cultural in nature in almost every case.”

Off to a bad start
   The Los Angeles Unified School District started out on the wrong foot by not having a high-level executive with IT experience dedicated to the project, according to HR IT experts briefed on the situation. According to news accounts, the district’s original point person was a COO with little computer experience. The district’s CIO was involved but quit after disagreeing about the project’s direction. Then the CFO stepped in, but confusion remained over who was in charge.

    In instances where a company doesn’t have appropriate experts on staff, they’re better off working with a third party that can act as their advocate, HR IT consultants and insiders say. Whether that’s a team from one of the major HR consultancies or an advisor who runs her own shop, an advocate can help a customer decide what business problems they need a new system to solve and what the best technology is to do it. Depending on how involved a customer wants a third-party advisor to be, the consultant could help work up a request for proposals, interview prospective technology partners, negotiate a contract and oversee the implementation, according to HR experts.

    Another reason to get help from an outsider: While HR managers may know a lot about the systems they’re already using, they aren’t necessarily experts on all the newer options available in the marketplace, says Scott Showers, an HR technology consultant with Watson Wyatt’s technology administrative services group in Dallas. Too often, corporate execs assume HR “can jump in and start interviewing vendors and move forward and there won’t be issues. That couldn’t be further from the case,” he says.

    Getting an outsider’s opinion can also help a company avoid making unreasonable requests of technology vendors, although “that doesn’t mean they’ll always listen to you,” Showers says.

    If a company works with one of a technology vendors’ preferred system integrators, they may be able to get the vendor to review their implementation plan, says Jacqueline Kuhn, proprietor of a Chicago HR IT systems integrator and former HR IT manager at Office Max. “You bring them in and almost have them bless the plan,” Kuhn says. “They say, ‘Go ahead’ and it’s almost like they have some skin in the game” in the event something goes wrong, she says.

Garbage in, garbage out
   Another thing that tripped up the Los Angeles school district’s new payroll system was bad data. According to news reports, the district’s old payroll databases were riddled with inaccuracies that weren’t resolved before the new system took over. An exceedingly complicated pay structure—much of it negotiated under multiple union contracts—only added to the problem.

    Computer systems are only as good as the data they have to work with, so if a public agency or company starts out with bad information, there’s not much a new system can do about it, HR experts say. Payroll is about the hardest HR system there is, especially for large enterprises or companies with employees in multiple countries that have to accommodate different languages, cultures and government regulations because of it, says Michael Custers, marketing vice president at Northgate/Arinso, whose HR systems integration business works with midsize to Fortune 100 companies.

    Besides that, payroll has to be on time and has to be right, and if it’s not, you hear about it, Custers says. Gary Reece, Northgate/Arinso’s Houston-based U.S. sales lead, tells the story of one 20,000-person company that encountered problems implementing a new system and couldn’t run payroll.

    “The CEO had to hand sign checks, and he made the executive responsible hand-deliver them to the people in town,” Reece says.

    Companies also run into trouble because they select a software application or technology platform based on a presentation by the systems integrator’s A team, only to have the C team do the actual work, Reece says.

    Companies that accept a lowball bid in an effort to save money can also land in hot water. If three vendors say they can do a job for $1 million and the fourth bids $500,000, something in bid No. 4 will be missing, says Kuhn, the Chicago HR systems integrator. “I don’t understand it, but I’ve seen it forever,” she says. “When it comes to work life, people don’t necessarily use the same logic they do at home, and it baffles me.”

    When it comes to negotiating contracts with HR IT vendors, HR managers should draw upon the expertise within their company for help. When she was still at Office Max, Kuhn says she used to let the company’s legal and IT departments hammer out HR IT contracts. They had more experience, and it allowed her to start building relationships with the vendors’ reps with whom she would be working “and not deal with the other noise,” she says.

    Contracts should include incentives for systems integrators and technology vendors to complete a job on time and penalties if they don’t, Krigsman says. Without them, a company and its integrator may be working at cross purposes, with one wanting the job finished as soon as possible and the other looking to drag it out in order to collect a higher fee.

    “Companies need to make sure both the software vendor and system integrator understand their absolute intention that the project be performed on time and within budget,” Krigsman says. On the flip side, “You must make sure your own house is in order as well.”

    Even when everything goes right, HR managers have to have realistic expectations, and expecting a new payroll or other HR IT system to perform perfectly out of the gate isn’t realistic. Says Watson Wyatt’s Showers, “If you expect to buy software and three months later everything will be better, it’ll never happen.”

Michelle Rafter is a Workforce contributing editor.

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