In August the state of Florida signed a $280 million, seven-year human resources (HR) outsourcing contract with Convergys Corporation, a Cincinnati, Ohio service provider. As the fourth most populous state in America, Florida became the first state to outsource its HR personnel services. Governor Jeb Bush believes that state employees are a top priority and they should be served with the same resources utilized by most progressive companies. The new contract covers 189,000 state employees and elected officials. The state expects to save up to $173 million over the life of the contract.
Cynthia Henderson, Florida’s Secretary of the Department of Management Services, says the need to outsource was obvious. Each of the state’s 31 agencies had its own personnel office, with each duplicating many functions. If employees married or had a baby, they had to call the personnel office or show up in person to make any changes to their personnel file, a time-consuming and often frustrating experience. In Secretary Henderson’s department alone, eight staffers input time sheets.
Clearly, the existing system had many shortcomings. The state was unable to expand the system and unable to interface with newer technology, according to Secretary Henderson. The system crashed on a regular basis, requiring any lost data to be reentered, frustrating employees and those they were serving. Additionally, the Governor asked the department to track the transition to new employment of every state employee who was laid off. Due to limitations of the existing system, it was difficult to accurately comply.
In addition, the Governor decided to provide the difference in pay to the state’s 300 employees who were called to active duty in the National Guard. HR employees had to stay up until 3 a.m. once a month to make sure the National Guards were properly paid.
The Governor posed the question: Isn’t there a way to do these tasks utilizing 21st century technology? Outsourcing these duplicated efforts was the clear solution.
The state had neither the technical expertise nor the capital to invest in new HR technology. In addition, the Governor wanted a self-serve HR system. “He wanted state employees to look at the benefits and job opportunities available and say, ‘Look how great it is to work for the state of Florida,'” says Secretary Henderson. “We decided the best way to get the best of breed was to outsource,” she adds.
The state’s first foray into outsourcing was automating the business licensing system. Accenture is the service provider. Success here led to the decision to outsource HR, a much bigger project.
The state hired MEVATEC, an outsourcing consultant, to create a business case and help it manage the procurement process.
The first step: identifying all the functions in the state’s numerous personnel offices. The state decided to keep all policy functions: change management, collective bargaining, grievances, hiring, and specialized training in house and outsource all transactional activities with a Web-based self-serve eHR system.
The next step: determining the exact cost of providing these services.
A Different Procurement Process
With its consultant, the state evaluated the possible players; seven replied to the invitation to negotiate, and the state short listed the top three.
Secretary Henderson says the state’s procurement process allowed each service provider “to show its uniqueness and strengths.” The state was accustomed to giving contractors plans or requests for items like a new highway. “We’d tell them how to build the road,” she says. With this outsourcing project, there was “nothing in black and white.”
The best value to the state was a major consideration; the Convergys plan included a HR service center in Tallahassee and Jacksonville. “We wanted a Florida presence. That was more important than price. Convergys utilizing a Florida workforce was important to this administration,” reports Secretary Henderson.
Secretary Henderson then presented the Convergys contract to the state legislature in March 2002 for the required approval. “We needed to help legislators understand the value of outsourcing, a concept that has been proven successful in the private sector,” says Morris Applewhite, Convergys vice president of sales and marketing, Convergys Employee Care.
Before the Convergys system goes live, the state is working to adapt its business processes to the new technology. “Change is the only way to capture the efficiencies possible in outsourcing,” says Secretary Henderson.
Convergys has seven months to complete its implementation before the overall roll out. The first phase is scheduled to go live in spring 2003. Secretary Henderson emphasized data security.
The Sunny Benefits of Outsourcing
The Governor asked Secretary Henderson to study the private sector’s solution to self-serve HR and report if it were applicable to the government arena. The state will not purchase new technology unless it reduces the budget in non-core areas. “We want a smaller, more efficient government that fully harnesses the power of technology,” explains Secretary Henderson.
Outsourcing to Convergys saved the state development costs of almost $90 million, which would have been required to replace its existing HR system without improvements, reports Applewhite. Convergys is introducing best practices to the state.
“State governments are in the unique position of serving two customers: their employees, who demand the best services, and their citizens, who want the best use of their tax dollars,” says Karen Bowman, president of Convergys Employee Care. “Outsourcing allows Florida to retain excellent employees, operate more efficiently and deliver taxpayers a solid return on their investment.”
The project, called People First, does away with the need for an applicant to submit multiple applications for similar positions at various agencies. “The state will be in a unique position to place the most qualified applicant in the position that benefits the state and taxpayers most,” says Secretary Henderson.
Sums up Governor Bush, “We have the highest quality employees in the state; however, they have been trapped in bad systems. Outsourcing to Convergys will allow state employees to focus on their core mission of serving the citizens of Florida.”
Florida is already working on its next outsourcing project: eProcurement.
P.S. Someone should tell Florida’s election officials – who are not state employees – about outsourcing.
Lessons from the Outsourcing Journal:
- State governments, especially ones the size of large corporations, can adopt techniques like outsourcing from the private sector.
- Outsourcing to governments is actually quite similar to outsourcing to corporations. One big difference: service providers have to educate legislators and wait for their approval.
- Changing business practices before implementing new technology is crucial for outsourcing success.