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Still on a Winning Streak

September 1, 1997
When PECO Energy decided to redesign its human resources unit, it wasn't the company's first attempt to transform. A former Personnel Journal Optimas Award (now Workforce Magazine Optimas Award) winner for managing change (see Personnel Journal, March 1993), Philadelphia-based PECO had already moved from being a fat, complacent public entity to a leaner learning organization with increased partnership between managers and employees. The culture change, however, took approximately six years-triggered by a plant shutdown ordered by the Nuclear Regulatory Commission (NRC) in 1987 and subsequent industry criticism. HR then began to steer PECO toward a new vision for change. Since the companywide restructuring, HR decided to employ a "whole-scale interactive methodology" to its own department. It seemed like the right way to go.

As PECO's consultant, we at Ann Arbor, Michigan-based Dannemiller Tyson Associates knew that all 7,200 employees would be affected. After all, they're HR's customers. They're the ones who use HR's processes. Naturally, their involvement was essential to its restructuring. Bill Kaschub, vice president of human resources at PECO, told us that his unit needed a redesign that would streamline HR processes, lower costs and make HR more responsive to employees, managers and PECO's business units. He also felt that the knowledge and know-how to make these changes already existed because of its earlier restructuring efforts.

Dannemiller Tyson consultants, therefore, recommended the whole-scale interactive methodology to bring together, in a series of meetings, from 200 to 300 employees from every level, function and perspective of corporate hierarchy. The gatherings were structured so participants could pool information, exchange ideas and discuss the actions required.

Using the knowledge and experience, the minds and hearts of the entire employee population was key in helping guide PECO's HR to fashion a new department that would operate in sync with the needs of the entire organization.

Facing the challenges.
The past five years of deregulation in the electrical power industry already had driven PECO Energy's other divisions into broad restructuring. They had to adapt to survive the transition from being a protected monopoly to a competitive industry player. By the end of 1995, PECO'S human resources units-corporate and field-were among the very last to be redesigned. Kaschub was confronted not only with the challenge of aligning HR with those divisions that already had undergone cultural, structural and process redesign, but with other issues as well.

First, the department was overstaffed-one HR person per 35 employees-at a cost that already was staggering and still rising. It was now HR's turn to cut costs. After a series of benchmarking visits, it was clear that a healthier ratio would be 80 to 100 employees per HR professional. Then, there was the problem of continuity. There were two human resources divisions-a corporate group based in mid-town Philadelphia and a business group headquartered downtown-which weren't working together. Kaschub needed to get these two units going in the same direction to get them focused and aligned functionally.

HR also faced a problem with PECO employees' dependence on human resources staff to perform transactional tasks. Staff members were buried in paperwork that was purely clerical in nature. They were forever updating information that no one ever looked at or answering procedural and policy questions when their duties should have been strategic and consultative.

A simple query about benefits often required numerous steps and personnel to generate an answer: An employee first had to go to his or her supervisor who would ask the same question of someone in HR who would then research the answer.

Kaschub also told us that HR needed to make the grievance process more consistent. "We no longer thought it appropriate that supervisors come to HR for permission to discipline employees when HR's function should've been to provide guidelines and coaching," he says.

Other changes were necessary. For example, PECO's hiring processes were slow, often taking 90 to 120 days. It also was necessary to discard the last vestiges of PECO's tradition of lifetime employment, a practice that was spawning excessive salaries based on progressive raises. It was especially important to change the systems and culture to enable employees to rely less upon supervisors and managers for information and direction, a shift requiring a change in everyone's role. That transformation could only come about by retraining and reengineering the way people worked.

Forging change.
In wanting real, substantive change, Kaschub and his core team were determined to avoid the traditional way of doing things: teams of experts descending upon the company with answers and solutions, leaving behind a legacy of mega million-dollar bills and analyses that don't translate into implementation. Nor did anyone believe it would work to have a small coterie of senior managers formulate a strategy and assume a "this is the way it is" posture. That's where the whole-scale methodology came in.

To get the ball rolling, in November 1995, a team of 20 core HR professionals and line managers set about investigating consulting firms, traveling nationwide to compare different reengineering processes. The team also benchmarked HR departments in other companies such as DuPont, Houston Light and Power and IBM, confirming that PECO's HR department was incredibly overstaffed. In addition, these visits led the team to discover that many of HR's processes were antiquated, and that the department had failed to make use of cost-saving technologies for doing human resources work.

For Kaschub and his core team to evaluate whether the whole-scale methodology was appropriate, I invited them to California. They were able to participate as members of a logistics team in sessions we were facilitating for The Bank of America at its headquarter offices in San Francisco as part of the company's reengineering efforts. As members of the logistics team, they could experience the whole-scale approach from within and get a gut feeling for the way it works. The PECO team observed 220 individuals from all parts of The Bank of America grapple with their problems and understandably found the process a little overwhelming at first.

By watching The Bank of America whole-scale sessions, PECO team members were able to see that no one would know better than they what would-or wouldn't-work for them.

Selling whole-scale methods to PECO executives.
The PECO core team returned to Philadelphia feeling confident it had found the right approach for its company. However, the team still had to get management's buy-in. It wasn't a slam-dunk. The managers were concerned about what might happen if they effectively gave everyone-every last employee-a voice in the HR reorganization. "You can't close the barn door once you let all the horses out," was one manager's response. The managers' also wanted to be sure they had a process that would engage people in productive work.

"The very last thing we wanted was to have employees walk away from a session thinking it was a waste of time. Certainly, we didn't want to sacrifice our integrity by merely giving lip service to this more democratic way of restructuring our HR unit," says Kaschub. "Once we gave our people a voice, we knew we would have to follow through and not let them down."

So the core team members had a lot of persuading to do, usually in one-on-one meetings with senior managers and division leaders. Even PECO's CEO, Corbin McNeil, had his doubts, agreeing to support HR's choice of whole-scale methodology only after extensive discussion. He agreed to support the whole-scale approach in the end, but not until he had put his doubts to rest by grilling the event facilitators for several hours on its key aspects. In the end, McNeil became a staunch supporter. His enthusiasm inspired the entire company.

Implementing a four-phased approach.
After some preliminary work to determine what issues had to be addressed, all of PECO's executives were brought into the picture and educated about why they had to be involved. The executives, in turn, selected a cross section of employees from their departments to participate in the first of four meetings held in February 1996-referred to as a visioning event.

  • The four stages included:
  • A visioning event (three days)
  • A process design/redesign event (two days)
  • An organizational design event (two days)
  • An implementation/planning event (one day).

The four meetings were held over a five-month period. Rotating groups of employees -about 220 in each-gathered in a single room for brainstorming, question-and-answer and problem-solving sessions. Sometimes they formed smaller groups to focus on components of the problem that had been identified in earlier sessions. At the end of the cycle of four meetings, the employees had 1) set guidelines for overhauling HR, and 2) reinvented the mission-critical processes, restructuring HR work and redistributing HR tasks more effectively. They also created an implementation plan that would guide the transition over the next six to 12 months. Meeting in various hotel ballrooms in downtown Philadelphia, the employees often sat at round tables of eight individuals, 20 to 30 tables at a time.

These were rare moments in the company's history: 220 PECO employees, representing every level and perspective, thronged together in united purpose. Even employees who weren't present in body were able to follow the action from session to session and to contribute their ideas via videotapes, newsletters, memos and faxes. Employees also got a chance to offer their input at smaller meetings interspersed between the keynote events. All 7,200 PECO employees were, therefore, involved in shaping the future of HR's processes and services.

PECO employees tell it like it is.
To encourage honest dialogue at the first event, employees were asked to see themselves as customers of HR with a right to express their opinions and feelings openly and frankly. "No one's better than anyone else, so speak up. Remember, whatever you want HR to be, it can be," Kaschub urged. His assurances broke the ice and elevated the mood and energy level of everyone at the event.

Attendees were seated in a way that facilitated involvement. "Max-mix" groups of eight people sat at round tables, each table representing a microcosm of the company. In other words, people were divided up so each table had a representative sample of the company's departments and included hourly and salaried employees, and a mix of both line managers and human resources managers. The proceedings at each table were animated, to say the least. CEO McNeil, senior level officers and supervisors also were present, ready and willing to hear about HR "straight from the horse's mouth." Many of the questions put to them were tough ones and, sometimes, the frankness of the input was startling. Participants asked the leadership directly, "What are you doing to ensure that the various efforts throughout the company are being coordinated and integrated?" They also were to define specifically what they believed was and wasn't working with how HR was operating. Staff members directed questions to other leaders that questioned their roles in supporting human resources practices. There were a lot of things wrong with HR, and only the truth would help PECO employees arrive at a redesign they could all live with.

As consultants, we tried to keep a low profile, facilitating but not steering. We helped the core team understand the whole-scale process and encouraged them to run the show themselves. We provided broad guidance on how they could engage PECO employees and helped out with specific advice on how they could enhance their contributions to the process. But as facilitators, we tried to keep our expertise in the background -always accessible but never obtrusive. That made it possible for the collective knowledge that already existed in the organization to emerge.

How HR was redefined.
Essentially, HR was redefined around its processes rather than around its former roles as gatekeeper and regulator. This redefinition transformed the department from a transactions-oriented organization to a team of strategic senior consultants who are there not to manage, but to provide coaching and guidance. HR's vision was that all employees should be regarded as individuals who are accountable to themselves. That is, no one should be the responsibility of supervisors or HR professionals. Rather, each should be responsible for himself or herself, for the company and for making the company successful. This is why the restructuring meant actually transferring some routine functions of HR, such as answering basic inquiries about employees' pension plan status, from HR to the employees. This was achieved by installing a new information system that all could tap into as needed. The technology for the information system is to be put in place this year, and will be a key element in moving the company's HR professionals out of their transactional mode. The key element in this system, from HR's point of view, is a computerized call center, which will allow employees direct access to the information they need to answer approximately 80 percent of their questions regarding such things as their pension accounts and more. Moreover, this will allow the company to cut the HR staff-many of whom will be absorbed elsewhere in the company-and enable the department to respond quickly and efficiently to the special needs of PECO's other divisions.

What else has resulted from the redesign? Policies of automatic salary increases based on seniority and annual cost-of-living increases have been replaced by practices that reflect market pricing, productivity and the specific needs of PECO's business units. The PeopleSoft HR technology is now in the process of being integrated with HR's reference system. And, new career planning processes are in the works, even as changes are still going on in HR's infrastructure.

Defining Big HR and little hr.
During the whole-scale sessions, PECO's employees were able to define a crucial distinction for themselves, between what they called "Big HR" and "little hr." Once the HR department is restructured, HR professionals will apply their know-how to strategic, high-order Big HR problem-solving, while the routine little hr tasks will be assumed by everybody via his or her computer and the call center. Ultimately, human resources will speed up its processes and by doing so, reduce costs, generate greater flexibility in career planning, hiring, policy development and promotion practices that will result in attracting the very best job applicants.

Workforce, September 1997, Vol. 76, No. 9, pp. 97-102.