In 2003 and 2004, we were looking for an HR system to help dig us out from under a huge pile of paperwork.  Our processes were all based on paper forms for timecards, PTO requests, address changes, you name it.  The payroll system was fairly sophisticated but inflexible.  Most changes required vendor intervention.

We experienced some of the same problems inherent with paper-based systems that many other firms do:

Anachronistic paper timecards required employees to pause at the end of each pay period to calculate hours worked and submit the card to their managers along with signed overtime approvals from managers or attorneys.  Finding timecards for employees who were out on a particular day was a challenge.  The amount of lost time simply tracking time was unacceptable.

HR forms could take days to route from employee to manager to HR to Payroll before being complete.  Some were lost in the process, and others were processed verbally with the understanding that the form would be submitted "soon."

There was no easy way to verify that an employee's data was correct.  Addresses, telephone numbers, beneficiaries and other information that we relied on as being accurate were not easily visible to the employees.

Disaster Recovery/Business Continuity.  On paper?  Forget-about-it!  Two of our offices are located in high-rise buildings in San Francisco and Los Angeles, so the possibility of a business interruption caused by Mother Nature is high.

The crux of our problem was that we needed to move away from paper to electronic media.  Our search for a vendor led us to the conclusion that none of them had a complete solution for us.  We chose a company out of Florida for our human resources information system (HRIS) and a Silicon Valley company to write a custom timecard program that would easily upload to the HRIS.  One of the big selling points for the HRIS vendor is that they handle payroll for sports teams.  Apparently, payroll for sports teams is very complicated because they are subject to different tax rules at each location where they play a game.

The timecard system itself was a big win.  We modeled it after our paper form for ease of use (a benefit of having it custom built).  Now, each employee can fill in his or her time card daily, submit it for OT approval via e-mail, forget about math errors and submit a completed card on time at the end of each pay period.  Attorneys can approve overtime via
e-mail (including via BlackBerry devices) or via a Web page.  Managers can monitor the workflow, and administrators can release cards for laggards.

Technologically, it was a giant leap for us.  This system required setting up a SQL server and configuring IIS, but it wasn't too difficult for our IT gurus.  The HRIS, on the other hand, could have been a hot potato.  IT hadn't planned to implement another BIG application, HR didn't want to maintain it, and Payroll was pretty happy with the status quo!  Fortunately our vendor offered a "hosted" solution.

What does "hosted" mean?  All software and data are housed on the vendor's servers and are updated and maintained by them.  We connect to the application via Citrix to enter our data.  We've found that there are significant differences between a hosted and an onsite installation.

Hosted benefits:

Reduced burden on our IT department.  We were pleasantly surprised that IT's workload was greatly reduced by the fact that the servers were all offsite.  Ongoing maintenance is performed by the vendor.  We have a one-hour period each week when the server is unavailable (usually Fridays at 9:00 p.m.).

Disaster recovery and business continuity.  Our hosted-payroll could survive most any calamity - hurricanes, locusts, maybe even a nuclear bomb!  The vendor has a mirror site that will fail-over if needed.  Since they're located in Florida, we were alerted during a hurricane that they might have to activate the fail-over site, but that we should expect no interruption in service.  We noticed no interruption.

Privacy.  Because the servers are located offsite and all security is handled by HR, no one inside the firm should have access beyond his or her security setting.  I understand that this was a big concern for our HR department (they kept talking about HIPAA rules).

Availability.  With hosting, we're not responsible for the external Web portal or bandwidth issues, etc.  Employees can access their own data from anywhere using any Internet connection.  This was especially important for those who were concerned about viewing or printing their private payroll information from inside the office.  They can simply do it from home.

Backups.  We receive a weekly data backup on DVD.  We could populate this to a "test" server in-house if we ever felt the need.

Onsite benefits:

It's faster.  With hosting, when we work "on the back-end" to do the daily functions that HR and Payroll do, we must work over a Citrix connection to the servers in Florida.  There is a slight delay; not too painful, but still, it's not instantaneous as you would expect a locally installed application to be.

Data portability.  Pulling HR or Payroll data into another application (business intelligence, intranet, etc.) is simple.  The data is on SQL tables and can be accessed as needed.  In the hosted environment, I have not yet figured out a way to do this short of populating the SQL tables in-house from our weekly backup DVD's.  We do not have direct access to the SQL tables.

More control.  This is the flip-side of the "reduced burden" bullet above.

Reporting Flexibility.  We currently have the ability to use Cognos tools to generate reports from our data.  If the SQL tables were local we could use any SQL reporting tools and not be limited to Cognos.  The Cognos tools are very powerful, but the learning curve is rather steep.  In light of this, our vendor offers courses specifically for Cognos.

The implementation process was well-organized, but it was a big job.  There's no easy way to implement an HR system.  First, you must define your business rules, consider how you want to implement them going forward, and then consider the ramifications of any changes you make.  Our vendor offered excellent training which was critical to the success of our implementation.

Once the foundation was in place (the business rules defined and set up) we were able to begin populating our database.  Coming from an older payroll system, it did not make sense to import the data.  We printed a summary for each active employee and "hired" everyone into the new system.

When we introduced this system to our employees they had a flood of questions; however, after the second pay period, the number of questions trickled to a drip.  In addition, we had employees noticing errors in their personnel records.  These errors had existed for a long time but were quickly corrected, and the data took on new authority.  People were actually able to view their data and make relevant changes.

As a result, many Excel spreadsheets and Word documents became irrelevant.  The firm mailing list, birthday list, department listings, etc., could be pulled easily from the new system.  Reporting capabilities that were not possible before are now common.  Head counts, EEO and OSHA reports are built into the system, and the Cognos tools allow us to produce custom reports on the fly.

Payroll has taken on new responsibilities with this system.  We now upload our electronic files to the bank for direct deposit, send electronic filings to the states and IRS for tax reporting, upload reports for pension and benefit providers.  The few payroll checks that need to be printed we do in-house.  At the end of the year, our vendor prints W2s for distribution to employees.

All things considered, the hosted environment works well for us.  Pushing the ongoing maintenance of the HRIS to the vendor and thereby reducing the burden on IT was our primary reason for selecting a hosted environment.  However, the added security and business continuity benefits are huge.  This was a very big win for the entire firm.

About our author . . .

Larry Davick is a Project Manager for Steefel, Levitt & Weiss in San Francisco.  He is fairly new to the legal industry, being with Steefel for only two and a half years.  After earning his MCSE, he worked as an IT manager for a Silicon Valley software company supporting, among others, the legal group.  He has been dubbed "Legs" by Steefel's CFO because "to keep a project moving, you have to put some legs under it!"  Larry can be reached at Ldavick@steefel.com.