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BACKGROUNDLike many public sector organiza-

tions, the state of Michigan has had todeal with some challenging revenueshortfalls over the last four years. Withthat comes the inevitable painfulprocess of determining which servicesand programs will have to be trimmedor eliminated. Understandably, thepublic, legislature, and administrationall rally behind salvaging as much ofthe core government services as possi-ble and look first to the administrativeside of the house for opportunities tosave money. That, in fact, was thecase for our state in the fall of 2003.

At that time, both the legislatureand the administration placed the costsavings focus squarely on the humanresources community. Both had “float-ed” concepts of how to consolidate thedepartmental HR operations into a sin-gle HR department. The state ofMichigan has 18 separate depart-ments, each with its own HR opera-tion providing full services to theemployees and management of theirorganizations. Additionally, theMichigan Department of Civil Serviceserves as the central personnel agencywith constitutional authority toadminister the state’s merit system.Together, HR services are provided to55,000 employees dispersed in 11 dif-

ferent bargaining units. Given thecomplexities of our system and thefact that we had just invested heavilyto develop our HR community intostrategic business partners, webelieved that there was another alter-native that should be considered.

In 2001, the state implemented astatewide integrated Lawson HR/pay-roll system. In discussion with IBMconsultants, we were convinced thatthe next logical step was to leveragethat platform and create a centralizedHR shared services center. The cen-ter would focus on handling the moreroutine transactions and services,thus freeing up the departmental HRstaff to focus on the more strategicactivities.

Obviously, it sounds great toespouse greater efficiency, effective-ness and accuracy, but that alonewould never get a state budget direc-tor’s buy-in. In order to really com-plete the business case, there had to besome “hard” dollar savings associatedwith it. In fact, this approach calledfor an initial reduction of a net 76 full-time equivalents (FTEs) from the HRcommunity in the first year, with sixpercent per year attrition over the nextfour years, equating to an additional62 FTEs. Savings from these reduc-tions and other efficiencies, less the

implementation and operational costsfor the center, are estimated at approx-imately US$24 million. With the fullsupport of the HR community, weapproached the executive office andthe budget director with our proposaland were pleased to get their backingto move forward with the project. Theproject came to be known as “HROptimization.”

PROJECT ORGANIZATION ANDGOVERNANCE

The HR Optimization project wasstructured with one overall projectmanager and three leaders for each ofthe sub-areas of the project. Thoseincluded the consultant team, thestate’s IT team and the state’s businessteam. The overall project manager hadresponsibility to ensure that the projectwas delivered on time and on budget.He provided leadership to the teamleaders mentioned above and inter-faced with the executive sponsorshipgroup. Our consultant team lead wasresponsible for delivering the technicalsolutions and with helping the statewith business process consultation.The state’s IT team had the responsibil-ity to integrate the consultant’s solu-tion into the state’s environment. Thebusiness team had the responsibility towork with the consultants and our HR

By James D. Farrell, Michigan Department of Civil Service

HR OptimizationThrough SharedServices:The State ofMichigan’sExperience

community to perform businessprocess analysis, to recommend whatservices should move to the sharedservices center and how those serviceswould be performed.

With the complexity of the projectand the number of entities involved inthe project, we established a projectgovernance model to ensure that wekept aligned with the mission of theproject. The model ensured that wehad clear executive sponsorship fromthe directors of key state agencies.Their role was to provide overallexecutive leadership for the projectand to handle issues that impactedtimelines and the budget. The projectmanager met with the directors bi-weekly and provided weekly e-mailupdates to all via a “dashboard” docu-ment that contained the status of keymilestones and issues relevant to thattime period. Additionally, the overallproject manager met with the leadersof the various components of the proj-ect (business team, technical team andconsultant team) to go over detailedstatus reports. This group alsoworked closely with the HumanResources Counsel (HRC), a groupconsisting of the entire state agencyHR directors to ensure they had con-tinuous opportunity for input on theproject. Finally, the sub-teams hadongoing daily meetings with respectto status and issues related to theircomponents of the project.

GOALS AND PRIMARY COMPONENTS OF THE PROJECT

With HR Optimization, the statewas seeking the following results:

• Reduce the cost of statewide HRservices.

• Leverage the state’s HRIS systemand increase the use of self-serv-ice.

• Improve the efficiency ofstatewide HR services.

• Provide excellent customer serv-ice and quality.

• Eliminate unnecessary duplica-tion of efforts.

The Project had four primary com-ponents:

1. Optimize business processes,2. Implementation of IBM’s e-HR

solution,• Launch a knowledge base that

would enable employees toanswer their own questions.

• Deploy CSR desktop technolo-gy to manage calls and cases.

3. Conduct organizational change,and

4. Establish the MIHR ServiceCenter.

BUSINESS PROCESS OPTIMIZATION

One of the first things that neededto be accomplished was to look atwhat transactions and services shouldbe put into the new MIHR ServiceCenter. While our consultants wereable to get us started by letting usknow what they felt made sense basedon their experience, we felt that theuniqueness and complexity of ourorganization required us to performfurther evaluation. As such, we enlist-ed the services of subject matterexperts (SMEs) from our agency HRoffices to map out current processesfor several activities, ranging from ben-efit and payroll transactions to person-al data modification, such as nameand address changes. Then, theymapped out how the processes shouldoccur in the new system and present-

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State of Michigan HR Optimization

Solution Component 1 Solution Component 1 –– MI HR Service CenterMI HR Service CenterThe MI HR Service Center model is a 4-tiered structure which supports HR transactions and optimizes HR systems and resources.

Employee/Manager FlowCustomer Service Representative Flow

Subject Matter Expert (SME): Agency/Process

Experts

Self-Service

MI HR Information (Knowledge

Base)

HR Strategic Partner:

Program Owner

Tier 0

Case Manager Applications

Tier 1 Tier 2 Tier 3

Call Manager Application

Customer Service Representative (CSR)

Link

Tier 0 – Employee utilizes Self-Service and/or Knowledge Base.Tier 1 – Employee contacts the Service Center and speaks with a CustomerService Representative to respond to Self-Service and HR-related inquiries.Tier 2 – Employee issues requiring additional information to resolve arecoordinated with process owner(s) or subject matter experts in the agency by a lead worker from the Service Center.Tier 3 – Program owners develop policy and procedure, and provide knowledge base content.

Tier 0 – Employee utilizes Self-Service and/or Knowledge Base.Tier 1 – Employee contacts the Service Center and speaks with a CustomerService Representative to respond to Self-Service and HR-related inquiries.Tier 2 – Employee issues requiring additional information to resolve arecoordinated with process owner(s) or subject matter experts in the agency by a lead worker from the Service Center.Tier 3 – Program owners develop policy and procedure, and provide knowledge base content.

State of Michigan Employees and

Managers

2

State of Michigan HR Optimization

Solution Component 2 Solution Component 2 –– MI HR Information Knowledge BaseMI HR Information Knowledge Base

MI HR Information Knowledge Base provides employees with the ability to answer their own questions. An employee can search for or navigate to the answer they are seeking.

MI HR Information Knowledge Base provides employees with the ability to answer their own questions. An employee can search for or navigate to the answer they are seeking.

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ed them to the HR directors andprocess owners for final approval. Inthe end, some of the activities wethought would be more efficiently pro-vided in the service center proved notto be so. On the other hand, our HRcommunity identified a number ofnew activities to be added that hadnot been previously considered.

When all of the activities wereidentified and processes recommend-ed, we held validation sessions withprocess owners and the HR commu-nity to ensure full agreement on whatand how work was to be processed inthe new service center environment.Both the service center and theagency HR staff understood whatroles they would have in the newbusiness model. The inclusion ofboth SMEs and our HR community inthis process served to cement our col-laborative relationship on this projectand resulted in greater commitmentby all parties to produce an excellentresult.

TECHNICAL SOLUTIONSOur technical solutions focused on

the creation of an online knowledgebase for employees to access via theWeb and the creation of call and casemanagement tools for the customerservice representatives (CSRs) in theMIHR Service Center.

Knowledge Base ( MIHRInformation)

The knowledge base was createdwith IBM’s product and the collabora-tive work of both knowledge baseexperts and state of Michigan content

process owners. The goal was to pro-vide employees with a single placewhere they could access easy-to-understand HR information that wasspecific to them and their employ-ment situation. In other words, towrite it in a way that was meaningfulto the user, not the HR professional,and to provide the individual withonly the information that they wereeligible for based on their employ-ment status and bargaining unit. Thisindividual look was made possible bymarrying fields from our HRIS to theknowledge base product. As such, wenamed this area MIHR (pronouncedMy-HR) Information and placed itprominently on our employee/manag-er self-service Web page.

Rather than having to search severalstate Web sites for various HR, benefitand payroll information, an individualcould just log onto the MIHRInformation location using a passwordand their employee ID and get all ofthe HR information they needed. Inaddition, from a management stand-point, we could now track what issuespeople were most interested in, howmany people used our site, and makeadjustments based on that information.In addition, our CSRs in the centercould log onto the system when theywere on the phone with an individualand see the same data that the individ-ual was viewing. In essence, it allowedthem to logon as if they were that indi-vidual. This helped to answer thequestions better and, more important-ly, it allowed us to “walk” the individ-ual through the process so they coulddo it by themselves the next time.

Call Management Tools/ServiceCenter QA

In addition to the knowledge base,we implemented Siebel technology tohelp the CSRs manage calls and cases.These tools allowed for CSRs to docu-ment each call and outcome, to createa case for those issues that neededmore research and to monitor the turn-around times on those cases. Theyeliminated the age-old problem of peo-ple “shopping around for the answerthey want” because no matter whoanswers the call, they have a history ofevery call made by that individual andthe answer that was previously pro-vided. The tools also served as anexcellent metric base to evaluate theefficiency and effectiveness of the center. In addition, we implemented acall monitoring system, which allowedus to record voice and data informa-tion that was used as the basis of theCSR quality assurance program.Supervisors could review with indi-vidual CSRs both how they handledthe call and associated transactions. Ithas been a great tool for coaching andin identifying issues where we neededto improve policies and training.

ORGANIZATIONAL CHANGEAlthough this project involved sig-

nificant technology implementation,perhaps the more important and diffi-cult component was effectively man-aging the changes to the organization.

The implementation of the sharedservices center fundamentally changedthe way HR services were provided.The impacts were on both the agencyHR offices and the state employees

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State of Michigan HR Optimization

Solution Component 4 Solution Component 4 –– Business Process OptimizationBusiness Process OptimizationThis list represents those scope areas where the MI HR Service Center provides transaction services to employees. The scope of the Knowledge Base is broader and more comprehensive.

Payroll Updates• Miscellaneous

Deductions• W4• Deferred Comp• Savings Bonds• SECC

Separation Payoff• Non-career / non-

benefits eligible employees only

Life Events•Adoption•Birth•Divorce •Marriage•Move

New Hire Setup• Medical• Dental• Employee Life• Dependent Life• AD&D• Healthcare Spending

Account• Dependent Care

Spending Account• Vision• Savings Bonds• LTD/STD• Deferred

Compensation

Open Enrollment• Medical• Dental• Employee Life• Dependent Life• Healthcare Spending

Account• Dependent Care

Spending Account• Vision• LTD

Personal Data Modifications• Birth date• Disability• Ethnicity• Gender• Veteran• Current Name• Former/Maiden Name• SSN Update• Address Information • Home/Work Telephone • E-mail address• Supplemental Address

Information• Residence City• Emergency Contact• Auto Deposit (Not Direct)

Employment Verification

Process Level Changes

Certification and Applicant Pools

Benefits Payroll HR Activities

4

State of Michigan HR Optimization

Project Schedule Project Schedule –– State of Michigan and IBMState of Michigan and IBM

Key Activities

Project Management

Business Process Optimization

Knowledge Base Design and Creation

Service Center Systems

Service Center Staffing

Service Center Strategy and Operations

Service Center Training

Service Center Launch

Phase 0

Phase 1

Phase 2

Phase 3

Post-Production Support

11/3/03 - 6/29/04

2/2/04 - 7/19/04

8/16/04 - 9/17/04

10/6/03 - 9/17/04

8/16/04 - 11/7/04

10/24/03 - 4/16/04

2/210/24 8/164/9

10/24/03 - 4/16/04

4/26/04 - 8/16/04

ProjectStart10/6

ProjectFinish11/5

4/9/04 - 9/17/04

11/3 4/26 8/31 9/27 11/7

2003 2004

8/16

8/31

9/27

11/7

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who were accustomed to receivingtheir services from their agency’s HRstaff. Those in the HR offices had todeal with a reduction of staff and theresultant anger and anxiety felt bythose whose jobs were being targetedfor elimination. Additionally, they hadto prepare the remaining staff for howto handle transitioning their long-termcustomers (employees) to the servicecenter in a positive way. On the otherside of the equation, we needed toeducate employees on when and howto access the new center.

The change management strategy forthe HR community included:

1. Involvement of the HR commu-nity in the development andimplementation of the project;

2. Change management/communi-cation for HR offices:• Conducted special informa-

tional and change manage-ment/career planning meet-ings for affected employees,

• Committed to give HRemployees priority for jobs inthe new MIHR ServiceCenter, and

• Provided support and train-ing to agency HR offices dur-ing the transition.

The change management strategy forthe employees:

1. Established department commu-nication liaisons to tailor infor-mation to their employees,

2. Developed general awarenesscampaigns,

3. Identified when employees

would go to the MIHR ServiceCenter for assistance and whenthey should go to their HRoffice, and

4. Created training/information onhow to effectively use andaccess the service center, knowl-edge base and self-service.

RESULTSIn addition to achieving the afore-

mentioned results, in less than oneyear we completely established thephysical service center, hired andtrained 30 staff members and beganproviding services. Through excellentplanning, cooperation and coordinatedefforts of both the state of Michiganteam and our consultants, we complet-ed the project ahead of schedule andunder budget and have the followingpositive outcomes:

• Escalated cases handled andclosed within the targeted timeframes,

• Average of 8,000 calls and 8,000transactions per month,

• Calls answered within 30 sec-onds,

• Call abandonment rate underfour percent,

• Self-service utilization at fourtimes greater than before MIHRwas implemented,

• Overall customer satisfaction andaccuracy rates over 96 percent,

• Continuing to add new servicesto MIHR Service Center, and

• Full-time equivalent reductionsaccomplished through attritionand placements to positions out-side of HR (no layoffs).

Sometimes when you’re in the mid-dle of a change of this magnitude, youask yourself questions like, “Are wedoing the right thing here? Will thiswork the way we hope it will?” I amhappy to report that for the state ofMichigan, the answer to both of thosequestions is a resounding “Yes!” Notonly are we on track to saving the stateapproximately US$24 million, but alsowe are delivering routine HR serviceswith greater consistency and efficien-cy. Moreover, we have positioned ouragency HR staff to concentrate on themore strategic HR issues.

ABOUT THE AUTHORJames D. Farrell

(farrellj1@michigan.gov)serves as the director ofthe Michigan Departmentof Civil Service. Thedepartment is the central

personnel agency serving a state work-force of over 54,000. Mr. Farrell hasover 16 years of HR experience withthe state. Previous to his current role,he led the HR Optimization projectand has served in a number of leader-ship positions both in the central per-sonnel department and in theMichigan Department ofTransportation. He received his B.A.from Michigan State University and hisM.P.A. from Western MichiganUniversity and is certified throughIPMA-HR.

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5

State of Michigan HR Optimization

Project OrganizationProject OrganizationThe State of Michigan project team had 27 resources and the IBM project team had 45 resources assigned to the project.

HRMNCoordinationCommittee

SOM PM HRCIBM PM

IBM KB LeadIBM BusinessProcess Lead

IBM Architect

DIT PM

Bus. Proc. DesignLead

HR Optimization ProjectOrganization Chart

SOM BusinessLead

Exec. OfficeDCS, OS E, OOB , DMB,

DIT

Security

TelecomContact CenterLead

Knowledge BaseLead

Org. Change Lead

SOM PMA

IBM ContactCenter Lead

Bus. ProcessCons. #1

KB Writer #1

KB Writer #2

KB Writer #3

KB Writer #4

Bus. ProcessCons. #2

Bus. ProcessCons. #3

AtlantaDevelopment

Team

IBM BusinessProcess Team

SOM BusinessProcess Team

IBM KB Team DIT PMA

Stakeholders

(Approximately 61,000 Users) State of Michigan Agencies

Data CenterOperations

Vignette

ApplicationSupport

Operations

Core Project Team

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State of Michigan HR Optimization

Project GovernanceProject GovernanceA Project Governance model was established to provide executive sponsorship from a cross-organizational perspective.

Executive ManagementExecutive Office, Civil Service, State Employer, Budget, Management & Budget, Information Technology

Bi-weekly Status Meetings

Approval for Items that Impact Project Timeline and Budget

Project Management Team MeetingProject Leadership Team

HRCHuman Resources

Council

(Department

HR Directors)

Weekly Status Reports

Detailed Project Status Sessions

HR Optimization Team MeetingBusiness Team, Technical Team, IBM

Daily Project Involvement

Issue Resolution