Duke meets a challenge: adapting the HR system for growth - Duke University

HR Magazine, Dec, 1998 by Bill Roberts

Revamping a two-decade-old system to integrate HR and payroll takes commitment from a team of experts in technology, HR and change management.

Four years ago, Duke University, best known for basketball and high scholastic standards, employed 19,000 for the entire university and its medical center-all in walking distance of one another on the Durham, N.C., campus. After many mergers and acquisitions, the university corporation now includes the Duke University Health System, a statewide collection of hospitals, clinics, nursing homes and other health care services. Total employees: 27,000.

"The mergers and alliances will continue and the workforce will increase, perhaps to 30,000," says Mike Gower, associate chief financial officer of Duke University Medical Center. The rapid organizational changes have prompted a need for better payroll and HR systems. "Our existing systems were incapable of handling this kind of organization," he says.

"Like other organizations, Duke faces the challenge of offering employees competitive benefits," says Gaylord Maines of KPMG, the lead consulting firm helping the university revamp its systems. But Duke also has unique requirements: diverse classes of employees, including students, grants that require special controls, mandated certifications and employees who work in many different areas.

Duke's answer is to move from a highly customized legacy system-adequate for nearly 20 years-to a flexible enterprise system with a master employee database to integrate payroll and HR functions. Duke is in the middle of the first phase of this migration. University officials haven't calculated a return on investment, but they know the cost of not doing it. Otherwise, "you wouldn't be able to take on all these businesses," says Gower, project manager for the migration.

In 12 to 18 months, Duke is trying to replace a system and set of processes that have been in place for nearly two decades. "That's a huge challenge," says Maines, senior consultant on the project. "The legacy systems are spaghetti code, and the programmers who built them have moved on. Now you have to pull all of that out by the roots and install a system that might not meet every need of any one department, but meets the organization's overall needs."

DEFINING THE PROBLEM

Duke's existing payroll system and a handful of HR applications were built from scratch for the mainframe. "The applications were good for their day," says Bill Auld, HR team leader for the migration. "We won some awards for our recruiting system," he says. "It tracked and matched applicants and assisted with hiring long before others were automating those processes."

But those legacy applications had COBOL interfaces and were restricted to batch processing. The individual HR applications were not integrated with payroll and barely sufficed for 19,000 employees on one campus, let alone 30,000 across the state.

Duke now needs to differentiate benefits among various classes of workers and units. Part-time student employees, doctors, researchers and nurses all have different pay scales. To further complicate matters, many employees in a health care system do more than one class of work with more than one pay rate. Just moving from the emergency room to a surgical unit can require two pay rates for the same nurse, Gower says. Adding to the complexity, many employees choose to work two full-time jobs at different sites with different pay rates and benefit schedules. Those situations are common to the health care industry- not just quirks at Duke.

"I've never seen an environment this demanding," says Maines, who has worked on many systems implementations. Close tracking is required to account for an individual's movements on any given day or in any given pay cycle. Maines says some manufacturing environments don't have problems as diverse as Duke's. But there are similarities: Thousands of companies have dispersed workforces and need to offer HR services and payroll for a workforce operating 24 hours a day, seven days a week.

Clint Davidson, Duke's vice president of HR, says the goal of the new system from HR's perspective "is supporting the delivery of world class service. We want our HR programs and services to be of the same quality as our academic, research and patient care programs."

THE SOLUTION

Duke already had a student database from PeopleSoft of Pleasanton, Calif., and had selected general financial software from SAP America, based in Wayne, Pa. Thus, the migration team looked at the integrated HR/payroll systems of both vendors. "Functionally, they were very similar," says Auld. They chose SAP HR 4.0 because at the time of the decision, more than a year ago, that system scaled up better to large implementations and had an edge in its integration with the web, Auld says. Corporate accounting's choice of SAP's financials also influenced the decision, he adds.

Duke chose KPMG as its main consultant because the university corporation had a lot of experience with the firm, Davidson says. KPMG has been Duke's audit partner for years and worked with Duke on other ventures. When Davidson checked with other customers of KPMG, its HR practice got good marks.