University of California HRIS Needs Assessment

1. University of California HRISNeeds Assessment Executive Summary Presentation July 25, 2001

2. Page 2 Overview Introduction Recap Current State Assessment Recommended HRIS Solution and Architecture HRIS Solution Advantages and Benefits HRIS Solution Deployment Options Estimated Costs and Potential Benefits HRIS Solution Implementation Considerations Go Forward Plan Addendum

3. Page 3 Introduction In April 2001, the University of California Office of the President (UCOP) selected KPMG Consulting, Inc. to conduct a human resources needs assessment for campuses and medical centers. The objectives of the assessment included: Determining core goals and requirements for human resources processing and reporting Developing a strategy for moving forward and implementing identified goals and requirements This document presents considerations relating to the adoption of a University-wide HRIS, outlines a recommended HRIS strategy, and provides a “go forward” plan that outlines an implementation framework and deployment approach consisting of short, measurable project steps.

4. Page 4 Project Recap Compile Requirements HR requirements were compiled through a series of user workshops and surveys Users characterized requirements as currently “met”, “partially met”, or “not met” Results indicated a compelling need for change with the vast majority of requirements identified as ‘not met’

5. Page 5 Project Recap Summary of Needs Strategic HR Improved access to data Improved reporting capabilities Enhanced functional capabilities University wide data and process standards Better Tools to Introduce Efficiencies Intuitive, user friendly interface Workflow enabled Real-time edits User friendly query and reporting tools

6. Page 6 Project Recap KPMG Recommendations Best of Breed Off The Shelf HRIS -Will work as a complement to PPS -Standard configuration to be deployed at participating locations -Interface with data warehouse Campuses May Elect Not to Participate Late Adopters Will Be Required to Meet Minimal Data Requirements for Data Warehouse -If required, standard modifications can be applied to PPS -Campus specific satellite systems may require modifications -Standard ETL (Extract,Transform,& Load) Tools will be provided to facilitate the data warehouse interface Selected HRIS To Contain Optional Integrated Payroll Functionality Should the University Desire a Consolidated Solution in the Future KPMG’s Recommendations Map Closely to the PWC Assessment

7. Page 7 Project Recap Data Warehouse Requirements Solution Analysis and Design Phase will identify data warehouse data requirements for non-participating campuses Phased Implementation Approach Solution to be deployed at a pilot campus in year 1 At the conclusion of this phase, the HRIS and data warehouse strategy, and the cost and deployment schedule will be reevaluated and modified based on lessons learned at the pilot campus

8. Page 8 Current State Summary Overview of Existing HR Function HR services in the University are distinguished between support for academics and faculty and for non-academic employees and students employees. HR roles and responsibilities are separated and often repeated among UCOP, central office HR units at each campus or medical center, and departments (e.g., the English Department, or College of Chemistry). Responsibility for HR data, information, and services is distributed across many HR organizations within the University. Data must be shared across UCOP, departments, and central administration HR offices.

9. Page 9 Current State Summary University Wide Payroll Personnel System (PPS) Purchased 20 years ago to serve as the University’s payroll system, it is the primary source of workforce data Modified over the years to address the University’s evolving HR policies and regulatory requirements Lacks HR functionality to meet increasingly complex analytical and reporting needs Satellite Systems Other University personnel systems (also known as “satellite” systems) have been developed by each location in response to the need to supplement HR data tracked in PPS Systems vary greatly

10. Page 10 University of California Satellite Systems

11. Page 11 University of California Satellite Systems

12. Page 12 University of California Satellite Systems

13. Page 13 High Priority HR Functional Needs Need to increase the efficiency and productivity of HR processing activities in order to meet the challenges of Tidal Wave II: Need to provide detailed employee transaction history Need to be able to quickly and easily extract data for reporting purposes Need to ensure the integrity of HR data Need to provide user-friendly interfaces for users Need to have a complete set of data to report on actual costs of HR transactions and make cost projections Need to have current, up-to-date HR information Need to be able to quickly update the system to reflect changes in labor agreements, policies, and regulations Need to consolidate the number of satellite systems

14. Page 14 Recommended HRIS Solution Purchase a “Best of Breed” HRIS Integrate the HRIS with PPS Develop a standard HRIS configuration for eventual rollout to all campus and medical center locations Allow individual campuses and medical centers to enhance the standard configuration to meet unique requirements (with customization “outside the border” of the purchased HRIS) Minimize the use of campus and medical center satellite systems, and standardize the satellite systems retained Take full advantage of integrated HRIS flexibility and functionality Locations that do not implement the HRIS will identify which local systems can provide the required data elements and develop interfaces to the HRIS data warehouse. A strategy and toolset will be developed to facilitate this effort

15. Page 15 Recommended HRIS Architecture The recommended HRIS architecture has 2 components: Transactions-based system University-wide/corporate data warehouse for strategic analysis and reporting on HR information The recommended HRIS architecture would leverage existing technology infrastructure The University has 5 locations with DB2/OS390 installed The University operates a network with an OC12 backbone Existing infrastructure allows distributed and replicated HRIS functionality. Existing network and server capabilities provide the University with options on how many instances—from a single instance to 15 instances—of the HRIS would exist

16. Page 16 Recommended HRIS Architecture

17. Page 17 Recommended HRIS Architecture

18. Page 18 Recommended HRIS Architecture The corporate data warehouse would leverage existing University technology capacity by utilizing UNIX/Sybase clusters The corporate data warehouse would be developed based upon a system-wide definition of HR data requirements All campuses and medical centers—including those that opt not to participate in implementing a new HRIS—would feed required HR data into the corporate data warehouse

19. Page 19 HRIS Benefits Enhanced Reporting Capabilities Enhanced Ability to Track and Report History Reduction in Costs of Satellite Systems Enhanced Process Efficiencies Enhanced User Friendliness Improved Data Accuracy

20. Page 20 HRIS Deployment Options

21. Page 21 HRIS Deployment Options – Option 1 Benefits User friendly interface Multiple transaction detail will be preserved Automatic integration of data collected during the recruiting process into new hire transactions Making the HRIS the system of record conform to best practices Once all locations have adopted the new HRIS, the University will be ready to deploy a fully integrated payroll system Disadvantages Data critical to payroll will be entered differently Multiple payroll critical solutions will need to be maintained

22. Page 22 HRIS Deployment Options

23. Page 23 HRIS Deployment Options – Option 2 Benefits All locations would enter payroll related transactions into the same system Integrity of existing payroll system is not put at greater risk Disadvantages Multiple employee transactions occurring on the same day can be consolidated for PPS resulting in the loss of transaction detail User interface of PPS is not as intuitive as the new HRIS Lack of integration of certain complementary systems into PPS (such as Recruiting) Some users will be required to utilize two systems for HR data entry and queries

24. Page 24 Alternative Options KPMG Consulting recognizes that some locations may choose to enhance existing solutions instead of adopting a new HRIS. As a result, PPS will require continued maintenance and enhancements to meet data warehouse requirements. Specific enhancements identified include enhanced Appointment/Distribution structure, Action Code edits, and Time and Accounting KPMG Consulting recommends that a management review be conducted after deployment to the pilot campus to determine additional enhancement requirements for PPS

25. Page 25 Go Forward Plan

26. Page 26 Estimated Costs and Potential Benefits HRIS Cost Components Tier 1 – Design and Development of a HRIS Standard and University-wide Data Warehouse The HRIS Standard consists of two elements : 1) Base requirements—which include personnel data, salary/job/benefits history, leave balances, payroll deductions—will be installed at one prototype campus and for the consolidated instance at UCOP. 2) Enhanced HR functionality—which includes labor relations, health and safety, recruitment administration, position management, and training—will be installed at the prototype campus and the consolidated instance at UCOP. The HRIS Standard would be configured to meet University requirements while keeping modifications and customizations to a minimum. The corporate data warehouse would receive HR data from all locations, regardless of whether they adopt the HRIS Tier 2 – Deployment of HRIS Base to Participating Campuses Location-specific configurations added to base system (e.g., business rules, local security requirements, interfaces, data conversion) at adopting campuses (medical centers may or may not be implemented with their affiliated campuses) Tier 3 – Deployment of Enhanced HR Functionality to Participating Campuses Enhanced HR functionality installed at participating locations (medical centers may or may not be implemented with their affiliated campuses) According to Dave Hemingson: Cal State is pursuing a similar 3-tiered approach: Tier 1 is the development of the CSU baseline HRIS; Tier 2 involves distributing the HRIS to the campuses in a series of deployment waves; Tier 3 deals with HRIS enhancements (this will be ongoing). When KPMG Consulting met with University of Maryland recently, we discussed that there were six different deployment approaches taken by university systems. They range from completely centralized (centralized development of the HRIS and centralized deployment and control) to completely separate (each campus develops and deploys its own HRIS with only loose coordination from a central organization). The Tiered approach is one of the six approaches and is used a fair amount. Refer to “Comparison of Implementation Approaches in University Consortiums”: U MO implemented the entire suite of HR products (payroll, HR, benefits admin, pensions, etc.) CSU, KCTCS, WI, RI HR implementations involved HR and payroll and some other modules. It is rare to find implementations of just HR systems; most universities are implementing HR and payroll together. In addition, best practice as represented by Harvard, Stanford, Michigan, and Ohio State is for universities to implement the entire solution package. According to Dave Hemingson: Cal State is pursuing a similar 3-tiered approach: Tier 1 is the development of the CSU baseline HRIS; Tier 2 involves distributing the HRIS to the campuses in a series of deployment waves; Tier 3 deals with HRIS enhancements (this will be ongoing). When KPMG Consulting met with University of Maryland recently, we discussed that there were six different deployment approaches taken by university systems. They range from completely centralized (centralized development of the HRIS and centralized deployment and control) to completely separate (each campus develops and deploys its own HRIS with only loose coordination from a central organization). The Tiered approach is one of the six approaches and is used a fair amount. Refer to “Comparison of Implementation Approaches in University Consortiums”: U MO implemented the entire suite of HR products (payroll, HR, benefits admin, pensions, etc.) CSU, KCTCS, WI, RI HR implementations involved HR and payroll and some other modules. It is rare to find implementations of just HR systems; most universities are implementing HR and payroll together. In addition, best practice as represented by Harvard, Stanford, Michigan, and Ohio State is for universities to implement the entire solution package.

27. Page 27 Estimated Costs and Potential Benefits According to Dave Hemingson: Technology Licensing—PeopleSoft bases is licensing prices on the total number of employees. However, not all HRIS vendors base their costs on a per employee basis; other pricing mechanisms are available. It’s currently a bit of a buyer’s market for HR systems so licensing costs may be slightly discounted. However, for purposes of evaluation and analysis, it is probably reasonable to present a most conservative estimate of costs. Hardware & Supporting Software--$500k + $250k sound low to Dave. He’s seen HW/SW costs go much higher, but it’s based on what’s currently in place at the implementing organization. We could provide a much better estimate with an inventory of existing systems. From the text: “Hardware and supporting software—this represents a general estimate of costs associated with the addition to hardware capacity and relational database management system capacity. It’s assumed that existing infrastructure is in place and that costs for hardware and infrastructure are dedicated solely to addition of capacity required for the HRIS. Actual costs may vary significantly depending on available hardware and database capacity at existing locations, and may be reduced by leveraging existing hardware and database capabilities. All other costs (support software, operating systems, network, and communications capacity) are assumed to be part of existing infrastructure.According to Dave Hemingson: Technology Licensing—PeopleSoft bases is licensing prices on the total number of employees. However, not all HRIS vendors base their costs on a per employee basis; other pricing mechanisms are available. It’s currently a bit of a buyer’s market for HR systems so licensing costs may be slightly discounted. However, for purposes of evaluation and analysis, it is probably reasonable to present a most conservative estimate of costs. Hardware & Supporting Software--$500k + $250k sound low to Dave. He’s seen HW/SW costs go much higher, but it’s based on what’s currently in place at the implementing organization. We could provide a much better estimate with an inventory of existing systems. From the text: “Hardware and supporting software—this represents a general estimate of costs associated with the addition to hardware capacity and relational database management system capacity. It’s assumed that existing infrastructure is in place and that costs for hardware and infrastructure are dedicated solely to addition of capacity required for the HRIS. Actual costs may vary significantly depending on available hardware and database capacity at existing locations, and may be reduced by leveraging existing hardware and database capabilities. All other costs (support software, operating systems, network, and communications capacity) are assumed to be part of existing infrastructure.

28. Page 28 Estimated Costs and Potential Benefits According to Dave Hemingson: CSU Implementation: The CSU Chancellor’s office developed a “baseline” version of PeopleSoft HRIS. Approximately 96% of the “vanilla” version remained; 4% was modified to develop the baseline version. The baseline was developed collaboratively by the CMS project team and the campuses. CSU developed the baseline in about 1 year and is rolling it out to the first wave of campuses in about the same time. It’s now being deployed in several waves—the first wave of 7 campuses went live with Financials on July 1. The second wave is now gearing up. Campuses cannot make their own modifications unless they agree to pay for their own hardware and provide their own maintenance. Each institution has its own instance of the software. The instances are operated and maintained at a single site by a single outsourced vendor (Unisys). Best practice re: modification: Best practice is to explore and, if necessary, eliminate every other option prior to even considering a modification to core code. These options include changing business practices, innovative configuration using the flexibility of the system and “bolt on” development of functionality around the core. Best practice is to justify each modification either through regulatory requirement or cost/benefit analysis that includes not only the modification cost per se, but also the longer term costs of maintenance. The first modification is almost undoubtedly the most costly.According to Dave Hemingson: CSU Implementation: The CSU Chancellor’s office developed a “baseline” version of PeopleSoft HRIS. Approximately 96% of the “vanilla” version remained; 4% was modified to develop the baseline version. The baseline was developed collaboratively by the CMS project team and the campuses. CSU developed the baseline in about 1 year and is rolling it out to the first wave of campuses in about the same time. It’s now being deployed in several waves—the first wave of 7 campuses went live with Financials on July 1. The second wave is now gearing up. Campuses cannot make their own modifications unless they agree to pay for their own hardware and provide their own maintenance. Each institution has its own instance of the software. The instances are operated and maintained at a single site by a single outsourced vendor (Unisys). Best practice re: modification: Best practice is to explore and, if necessary, eliminate every other option prior to even considering a modification to core code. These options include changing business practices, innovative configuration using the flexibility of the system and “bolt on” development of functionality around the core. Best practice is to justify each modification either through regulatory requirement or cost/benefit analysis that includes not only the modification cost per se, but also the longer term costs of maintenance. The first modification is almost undoubtedly the most costly.

29. Page 29 Estimated Costs and Potential Benefits According to Dave Hemingson: Benefits: Although we have never measured or directly quantified benefits, there are always improvements following a HRIS implementation. There aren’t actual direct savings; employees spend their time performing other work, and positions aren’t eliminated. But 90% isn’t unreasonable when you consider that 90% of labor time spent on reporting, manual processing activities, going to multiple sources of HR data, and handling exceptions would be reduced from an HRIS. (Primary benefit—more work can be processed by the same number of HR employees using the new HRIS.) David states that cost savings are a factor of how quickly a university can move forward. He estimates a set of institutions would achieve the 90% savings level after it has completed the implementation and had at least a year or two to find-tune the application. Projects in Missouri and Cal State are early in their implementation and benefits are not yet immediately evident. Costs: Costs are difficult to estimate because they depend on the difference between the current and future states and these vary significantly by implementation. A primary factor in the cost equation is the decision-making ability of the institution. Missouri has allocated $40 million for the implementation of all 3 major applications, and is 3 years into its project and is now rolling out financials and payroll across all of its 7 entities at this time. It usually takes about 5 years to roll out all 3 major applications across a multi-campus system. Michigan has spent more than $100 million; Ohio State and Cornell are somewhere in between.According to Dave Hemingson: Benefits: Although we have never measured or directly quantified benefits, there are always improvements following a HRIS implementation. There aren’t actual direct savings; employees spend their time performing other work, and positions aren’t eliminated. But 90% isn’t unreasonable when you consider that 90% of labor time spent on reporting, manual processing activities, going to multiple sources of HR data, and handling exceptions would be reduced from an HRIS. (Primary benefit—more work can be processed by the same number of HR employees using the new HRIS.) David states that cost savings are a factor of how quickly a university can move forward. He estimates a set of institutions would achieve the 90% savings level after it has completed the implementation and had at least a year or two to find-tune the application. Projects in Missouri and Cal State are early in their implementation and benefits are not yet immediately evident. Costs: Costs are difficult to estimate because they depend on the difference between the current and future states and these vary significantly by implementation. A primary factor in the cost equation is the decision-making ability of the institution. Missouri has allocated $40 million for the implementation of all 3 major applications, and is 3 years into its project and is now rolling out financials and payroll across all of its 7 entities at this time. It usually takes about 5 years to roll out all 3 major applications across a multi-campus system. Michigan has spent more than $100 million; Ohio State and Cornell are somewhere in between.

30. Page 30 Estimated Costs and Potential Benefits

31. Page 31 HRIS Project Resource Loading This example of a project resource loading graph assumes deployment to campuses, medical centers, and UCOP. Consultants will support University personnel by providing knowledge of project management, implementation methodology, change management, facilitation and issue resolution, software functionality, software tools, database tuning, network analysis, and other complementary skills. They will provide knowledge transfer to the University team by year four to ensure smooth ongoing operations. Projected use of consultants: Tier 1, Year 1: 8 FTE (+9.5 UC FTE)—technical, functional, and organizational requirements identification; data definitions and standardization, e.g., salary plans Tier 1, Year 2: same as year 1—systems design and development of prototype HRIS; modifications, configurations, customization Tier 2, Year 2: 12 FTE (+14 UC FTE)—2 teams of 8 people implementing HRIS at 2 participating campuses at a time Tier 2, Year 3: same as Year 2 Tier 3, Year 3: 12 FTE (+14 UC FTE)—additional deployments of HR functionality to campuses; 2 teams of 8 people implementing enhanced functions to HRIS at 2 participating campuses at a time Tier 3, Year 4: same as Year 3 Activities to be performed by Consultants: Per David Hemingson: there is 1 full time consultant for every 2-3 full time internal staff. Consultants typically bring a knowledge of project management, implementaiton methodology, change management, facilitation and issue resolution, software functionality, software tool capabilities, knowledge of complementary software (e.g., Resumix), and related tools (e.g., Mobius), database tuning, network analysis, etc.Projected use of consultants: Tier 1, Year 1: 8 FTE (+9.5 UC FTE)—technical, functional, and organizational requirements identification; data definitions and standardization, e.g., salary plans Tier 1, Year 2: same as year 1—systems design and development of prototype HRIS; modifications, configurations, customization Tier 2, Year 2: 12 FTE (+14 UC FTE)—2 teams of 8 people implementing HRIS at 2 participating campuses at a time Tier 2, Year 3: same as Year 2 Tier 3, Year 3: 12 FTE (+14 UC FTE)—additional deployments of HR functionality to campuses; 2 teams of 8 people implementing enhanced functions to HRIS at 2 participating campuses at a time Tier 3, Year 4: same as Year 3 Activities to be performed by Consultants: Per David Hemingson: there is 1 full time consultant for every 2-3 full time internal staff. Consultants typically bring a knowledge of project management, implementaiton methodology, change management, facilitation and issue resolution, software functionality, software tool capabilities, knowledge of complementary software (e.g., Resumix), and related tools (e.g., Mobius), database tuning, network analysis, etc.

32. Page 32 Implementation Considerations User Buy-In Integration Efforts and Data Integrity University Policies and Procedures Perceived Loss of Current Flexibility Satisfaction of University Needs Without Full Participation

33. Page 33 Go Forward Plan Focus Creation of project scope and objectives Creation of implementation guidelines Identification of participating locations Preliminary assessment of solutions Formation of Project Team, Steering Committee, and “User Jury” Confirm and formalize system requirements (completed as part of this study) Procure HRIS solution and begin establishment of the corporate data warehouse

34. Page 34 Go Forward Plan Design Solution Details Document detailed functional and technical requirements for data and processes Prepare a detailed functional and technical design Develop a transition strategy to leverage the HRIS functionality as quickly as possible and accommodate late and non-adopters of the HRIS Organizational change management

35. Page 35 Go Forward Plan Build and Test Create training strategy Perform outreach and communications Define core HRIS data structure Configure prototype to meet base and enhanced HR requirements Install, integrate, and test HRIS solution

36. Page 36 Go Forward Plan Deploy Deploy at participation campus locations Provide training at participating campus locations

37. Page 37 Go Forward Plan Enhance On-going maintenance and enhancements of production system

38. Page 38 HRIS Needs Assessment Addendum At the conclusion of this study, a great deal of discussion was generated by campus representatives regarding the general solution recommended by KPMG Consulting. In light of the views expressed, this addendum has been created to recognize certain assumptions and to address the need for additional analysis. Assumptions There is acceptance of the documented requirements obtained through workshops and surveys conducted with University HR specialists Of the requirements identified, over 80% were classified by University HR specialists as “currently not being met”, or “only partially being met The 80% requirements gap is part of KPMG Consulting’s justification for recommending an HR package. This is in line with industry practices for higher education today. Virtually all major research institutions have purchased and implemented packaged solutions.

39. Page 39 HRIS Needs Assessment Addendum Additional Analysis During their review of this report, multiple campuses expressed a desire for further analysis of solution alternatives with particular emphasis on modifying the current payroll system to meet HR requirements In light of suggestions to enhance the current payroll system, KPMG Consulting recommends that the University undertake steps to document the costs and risks associated with modifying the existing payroll system vs. purchase and implementation of a packaged HR solution