Processes first, technology second: For International Paper, successful HR transformation depends on getting the steps in the right order - Technology - Statistical Data Included

HR Magazine, June, 2002 by Bill Roberts

Four years ago, the HR function at International Paper Co. operated at a ratio of one HR professional to 80 employees at a cost of $1,600 per worker. By the end of February 2002--11 months after going live with new HR systems--the company had improved the ratio to 1 to 126 and reduced the cost to less than $1,200 per worker.

These two measurements prove the success of Project Viking, which is redesigning HR processes across U.S. operations and installing technology to support them, say executives at the company, based in Stamford, Conn. "When our project was conceived, those were the two primary metrics," says Paul Karre, vice president of HR at the forest products company, which has about 60,000 workers in 46 states and a total of 100,000 worldwide. "While there are other strategic deliverables, we justified Viking based on our ability to get to these metrics. This is how you impact the bottom line."

The ongoing Project Viking is the second attempt to transform HR at International Paper (IP). The first, in the mid-1990s, fell short for many reasons but mainly, say Karre and others, because the company installed technology without first understanding how the change would affect processes and people.

In 1998, the company's HR leaders decided to try again. Viking involved assessing, redesigning and integrating payroll and HR administrative processes, aligning the workforce with the processes and installing technology. The technology included four projects on parallel tracks: a data warehouse, new technology for an existing HR service center, SAP's HR and payroll modules, and an employee portal on the corporate intranet.

"This was an HR transformation project," says Joanne G. Olson, a principal at PwC Consulting, a business unit of PricewaterhouseCoopers in New York, which IP retained to work on Viking. "There was a lot of synergy between the PwC vision of transformation and what International Paper had in mind," says Olson, PwC's Viking project leader.

Sea Change

What IP had in mind was an overhaul of HR processes. The decentralized company was mired in inconsistent procedures, most of them undocumented, and several legacy systems. "We had no long-range integrated strategy around people, processes or technology," says Karre. "There was a clear pattern of non-integrated, complex HR systems. It was very fragmented and very costly."

How bad was it? "We could not easily generate an accurate companywide head-count report," says Gail Cantrell, a program manager and the HR lead for Viking. And forget about complicated administrative transactions. For example, there were 16 distinct steps in the retirement process, she says, including numerous hand-offs from one person to another. "Part of it was enabled by technology and part of it wasn't," she says. "We couldn't do an accurate retirement process." In early 1998, after completing an assignment in Russia, Jack Flynn returned to IP's operational headquarters in Memphis, Tenn., to assume his previous job as vice president of HR. Right away the CEO asked Flynn to figure out what happened with the first implementation and to decide what to do next, recalls Flynn, who has since retired.

Flynn hired a strategic consultant to help him understand the earlier problems. He then proposed a new plan, contingent on getting outside help. Given the mixed results of the first implementation, it was essential that the second effort include assistance from a top-tier consulting firm. IP chose PwC because it had a similar vision of HR transformation: First, redesign processes, next, align the people and, then, make technology decisions.

Beginning in August 1998, a small vision team laid the foundation for Viking. Team members included Flynn, Olson and Karre, who was head of HR for one of the six IP domestic business units at the time, and John Beckham, a longtime IT professional at the company. They made the business case for the HR system and payroll implementation. Besides process change and organizational restructuring, the plan involved upgrading technology in the 200-worker HR service center, including case management software, a knowledge base and computer-telephony integration. It also included SAP, a data warehouse and a web portal for employee self-service (ESS). "I didn't even know what a portal was in 1998," recalls Flynn.

Leadership, Sponsorship, Ownership

Viking project leaders say success had little to do with technology per se. Rather, it depended on HR leadership, the HR-IT partnership, executive sponsorship and a sense of ownership among rank-and-file HR workers. Beckham, who became the project's IT lead, and Cantrell agreed that Viking was an HR project, not an IT project. "You can't say it is the responsibility of the technical people, dust your hands of it, then blame them later," says Beckham, a veteran of many IT implementations.

HR was responsible, but its partnership with IT had to be strong. "It worked out well," says Beckham. "Jack Flynn had the ear of everyone up to the chairman. I had the ear of every IT person. Gail Cantrell had the ear of the whole HR organization, and so did Jack."