1

IQPC Shared Services & Outsourcing Network Conference

Session Agenda

• Quick introduction

• HR’s Burning platform

• HR’s Transformation Roadmap

• Building a Shared Services Organization

• Achievements and Learning's

• Q & A

2

Presenter

S. Paige Cox , M.B.A., S.P.H.R.

Executive Director, Human Resources

3

4

Performance Imperatives: Resourceful Execution, Enterprise-wide Perspective, Active Accountability and People Development

Constellation Energy

“The way energy works”

• A leading supplier of electric and natural gas energy products and services• A major generator of electricity with a diversified fleet of nuclear and fossil generating

units

• Among the leaders pursuing the development of new nuclear plants in the United States. • The oldest utility in the U.S. (over 200 years) ; Baltimore Gas and Electric Company.

• A FORTUNE 500 energy company, headquartered in Baltimore, Md., strategic generation footprint across N.A., 10,000 employees and revenues of $15.6 billion in 2009

Mission

To be the nation's leading energy manager and competitive supplier , generating and delivering power and natural gas safely and reliably to our customers while acting in the interests of our communities , employees, shareholders and the environment . Through disciplined market analysis and agile

decision-making, we create value for stakeholders while developing and delivering products and services safely , reliably and with the interests of our communities at heart. Success is more than numbers; we

strive to achieve it without losing sight of our larger responsibilities.

5

Market Conditions

• 2000 - 2006 Constellation Energy grows out of BGE (utility)– Launch new businesses – major growth– Expand footprint across U.S. and internationally– Stock price climbs from $23/share in 2000 to over $90/share in 2006

• 2007 Merger with Florida Power and Lighting– Strategic focus on expanding foot print across all global trading markets

• 2008 Setting the course for life without FP&L– September ‘08 stock price falls 84% in 1 week due to reaction from market conditions– CE has largest reduction in force in 200 year history of company (~8%)

• 2009 Survival of the Fittest– CE divests all non North American businesses/offices– Joint Venture with Electricite’ de France

• 2010– Strategic focus on M&A – Enterprise wide Transformation under way

The driver for H.R. Shared Service changed during i mplementation

Overall Transformation Timeline for Human Resources

• Hewitt Assessment and benchmarking

• HR cost scrubbing

• Building the business case for “Transformation”

• Service delivery model redesign

• Centers of Excellence put in place for Total Rewards and L&OD

• FPL knocks on our door and all focus shifts to merger

• FPL merger ends

• New CHRO

• Hackett Assessment and benchmarking

• HR website overhauled and launched

• Centers of Excellence put in place for Staffing and Diversity

� HR Shared Service center launches

• Bottom falls out …

• New CHRO

• HR business partner role redesign and training

• Enterprise wide shared services governance put in place (pricing/metrics/SLA)

• Technology Assessment

• HR business process and enabling technology RFP on street 03/10

2005 - 2006 2007 - 2008 2009 – 2010 +

6

The Burning Platform …

2005 H.R. Assessment by company A 2007 H.R. Assessment by company B

1. Based on the benchmark survey data provided,

HR is 2nd Quartile Effectiveness and 3rd Quartile Efficiency

� Effectiveness driven by reported improvements to HR strategy

2. There is a high cost structure impacted by

redundancy and process fragmentation

� Constellation’s total cost of delivering HR services is $5,129 per employee, which is 2X higher than median placing Constellation in the fourth quartile on a cost basis

3. The current HR delivery model cannot support

World Class performance

� Constellation’s resource allocation is 17% higher across the processes than median and 52% higher than World Class

1. Current HR Delivery Model exceeds benchmarks

CE cost/TE = $3,667 vs median of $2,413

CE Staffing of 166 FTE vs. median of 129

2. Considerable duplication exist in both ofprocesses and resources

3. Opportunity to better leverage technology

Portal unorganized and lack common HR Brand

Data integrity issues prevalent

Systems highly customized

4. Work Process Inefficiency

#1 Voice of the Customer Complaint

#1 Driver in HR Engagement Survey Results

5. “High Touch” delivery model is inefficient

7

HR Efficiency and Effectiveness Challenges

$0

$5,000

$10,000

$15,000

$20,000

$25,000

Annual HR Operating Expense

>$27m*

$18.5m

>$27m*

Strategic10%

Strategic40%Professional

Services30%

Professional Services

30%

Constellation

Administrative30%

Administrative60%

Leading Co.

HR Resource Allocation

ConstellationLeading Co.

8

HR Technology Challenges

Above Average Average Below AverageRating vs. Hewitt HR Intranet Best Practices

Category Current State Observations User Impact Rating

Usability • Main HR site is listed below the fold on myConstellation (to be updated with new release)

• Each operating unit has individual HR sites and different access points to common resources

• Might not know where to start—HR Online, unit HR page• Hunt for information where it might not be located

Info Design • PeopleConnect information is organized by content area and

permits specific activities based on role.

• HR Online has two sets of navigation• Many separate places to conduct activities and find

information

• Scroll through long navigation lists

• Decide which navigation is the right set

• No context for making an information choice

Func -

tionality

• Single sign-on (SSO) is enabled between myConstellation and PeopleConnect

• No SSO to other third-party service providers• Transaction scattered among many different sites

• See many faces of Constellation HR• Don’t see the connection between the information and

the applications

Technology • PeopleConnect has search function for its content

• HR Online has no search function

• Content management system for HR Online could be in place next year

• Visit every possible link to evaluate information

• Log in to multiple applications

Content

Delivery

• Personalized content and targeted messages/alerts are not

currently being delivered

• There is no channel for HR news or announcements of interest to employees or managers

• Determine what information is relevant to them

• Don’t know what’s going on day-to-day

Brand

Alignment

• No evidence of an HR brand or employment brand identity

• Companies have different interfaces

• Visually lost

• Don’t see a cohesive organization

Credibility • Content is sporadically dated

• Content managers for only some pages are listed• Page load times are acceptable

• Might not trust that the information is current

• Don’t know why they should trust information if no one stands behind it

9

HR Future State Shared Services Model implemented July ‘08

10

Change Management

Customers

Technology

Processes

Our Mission: Operational Excellence in Transaction Processing

Team

11

Foundational Values

12

13

Team• Organizational Design and Structure (Q4, 2007 - Q1, 2008)

– Identified Functional Areas� Payroll� Benefits Operations� Data Administration� Customer Services

– Tier 1 – Employee Self Service via “myHR” intranet– Tier 2 - Call Center HR Technology

� Business Services (compliance, budget, PMO)

• People– Identified Leaders (Q4, 2007)

– Skill assessment and rationalization of transactional roles (Q4, 2007 - Q1, 2008)

� Elimination of shadow organizations

– Centralized transactional processing teams (2008)

– Built career matrix (2009)

– Cross functional team building� Monthly community service events� Cross functional project teams

– Launched Morale & Motivation (M&M) Team (2009)

� Employee of the quarter� “Block parties”

Reduced headcount by 10% before HR Direct go live by

eliminating shadow roles.

Absenteeism reduced by 13%

Example: Career Matrix

14

15

Customers• Identified “Customers”

– Internal

– External

• Training for organization– Basic Customer Service (2008)– Telephone Technique (2009)– Adopted “Hassle Free Customer Service” (2010)

• Customer Service performance goal (2008 – current)

• Multi –channel approach– Email– Telephone

• Tracking our metrics– Identifying best practice

• Implemented Service Level Agreements (2009)

– Basic services only

• Implemented quarterly customer survey (2008)– Sent only to employees who’ve engaged our services that

quarter� Qualitative and quantitative

• Implemented Quarterly Newsletter for all HR (2009)

Customer sat rates have exceeded

85% since survey implementation and have been above 90 % since Q3/09

16

Processes• Process Rationalization (2008, 2009, 2010 …)

– Standardization of process across enterprise� Example: Consolidated 4 on-boarding processes into 1� Reduced total number of transactional processes by 34%

– Documented all processes� Procedures� Work Flows

– Reduced # of touch points in every process� Example – On-boarding reduced from 7 touch points to 4

– Leveraged technology to eliminate manual processing when available� Pension calculation SLA reduced by 2 weeks

• Accountability Performance Goal (2008 – current)

– Accuracy– Continuous Improvement

– Empowerment

– Decision Making

• Single points of failure eliminated (by Q3 ‘09)

– Cross training

• Controls put in place to reduce human error (ongoing)

Eliminated 96% over -time in organization

($250K/yr) and reduced payroll run by 48 hours within first 6 months of operation. Eventually reduced headcount additional 8% via

process improvement

17

Technology –• Serious issues with technology

– Highly customized and fragmented

– Serious data integrity issues– IT was driving HR’s tech strategy due to skill deficits

– Lack of ownership of HR Technology

• Plan for turnaround– Created HR Technology group (2008)

� Hired experienced PPSFT func. leader and team� Took back ownership of HR Technology

– Implemented HR Technology road map (2008)

– Defined Roles and Responsibilities (2009)

– Implemented PPSFT CRM tool for call center (2008)

– Worked with IT to schedule regular patch updates (2009)� Not a single patch had been applied in 4 years

– Implemented change control board and process (2009)

– Rationalized core HR systems (2009 and ongoing)� Implemented 19 phased PPSFT system clean up� Upgrade pension system� Implemented ePerformance� Implemented Talent Acquisition Manager (TAM)

Reduced number of HR systems by 50%, eliminated

compliance issues by cleaning up data

integrity issues, customers have

faith in data

Example: Technology Roadmap

(1st Quarter) (2nd Quarter) (3rd Quarter) (4th Quarter)2009

HR Transformation Phase III

Medical System Implementation

PSFT Data Cleanup/Remediation (HR Tech/Business Partners)

PSFT Learning Management System

Web 2.0 Strategy

On Line Orientation Updates- Phase II

LMS Analysis Planning

eTime Patching

Nuclear Fatigue

Complement Control

Manager and Employee Self Service EnhancementsParking Self Service

Workforce Lifecycle Manager – other phases

Benefits Data Warehouse

Open Enrollment – 3 Year rolling cycle to bid new plans/vendors

ePerformance –

Annual Review Cycle

eComp/

Key Contributor Cycle

EDF – Design and Configuration Year

End

Processing

W2

HR DirectPhase II

Documentum and Applimation

HireRight Implementation – Background Checks/I-9 and Drug Testing (non –Nuclear)

Business Process Cycle

Projects

18

Example: Roles and Responsibilities

Functional Area• Lead/Own Business Process

• Participating in UAT Testing as

required by project

• Delivering Requirements

• Leading Business case development

• Participating in design sessions

• Strategic vision for area of expertise

• Reporting system issues

• Awareness of Industry (expertise) best practice

• Execution of existing reports

• Lead Operational and Change

readiness

• Responsible for working with HR/Audit

for SOX readiness

• Lead Communications

• Participates in Change Control Board

• Lead DR Planning for business

processes

Vision for HR Technology platform/roadmap shared by HRLT, HR

Technology & IT-HRHR Technology• Lead/own strategic vision for HR

Technology

• System Implementation

• Provide Program/Project management

resources as needed

• Leads requirements gathering

• Testing (System, Data, Integration)

• Provides input into Business case

development

• Leads functional design sessions

• Awareness of HRT best practice

• Application security, troubleshooting,

configuration and break-fix

• HR functional reporting and analytics

• Liaison between IT and other HR areas

• Review/Prioritize AWRs

• Provide level 2 user support

• Co-Lead Change Control Board

Corp Apps IT - HR• Liaise with IT Infrastructure

• Liaise with Corp Apps PMO

• Participates in gathering requirements

• Testing (Unit, Performance, Integration)

• Provides input into Business case

development

• Participates in functional design sessions

• Awareness of technology best practice

• Operational application maintenance,

troubleshooting and break-fix

• Lead/own technical architecture,

integration, design and security

• Manage IT budget and ERP vendor

relationships

• Participates in evaluating new technology

• Co-Lead Change Control Board

L&OD responsible for training and sustainability

All areas responsible for operational and project related change management

19

20

Change Management

Enterprise

Road Shows

Progress Updates

Town HallsStaff Meetings

Coffee Chats

Leaders & BU change agents

are a critical levers in driving

change

� Visit staff meetings to provide functional/ COE overview

� Orient BU to new COE structure

� Socialize concept of self-service in BU meetings

� Socialize concept of Integrated Delivery Model

� Regular updates “From the Desk of CHRO”

� Utilize HR Zone for ongoing, regular communications (e.g., Week in Review)

� Host dialogue with team about changes

� Communicate to employees WIIFM

� Connect peoples activity to broader transformation effort

� Reinforce vision for HR of the future

� Share information with broader HR audience

� Provide open forum for employees to ask questions

� Reinforce values and performance imperatives

� Informal forum for employees to connect with HRLT

� Create informal environment to ask questions, share concerns

� HRLT solicits feedback, issues, concerns

Leader Meetings

� Share information with teams on ongoing basis

� Provide forum for people to ask questions and raise concerns

� Arm leaders with toolkits/talking points to communicate effectively

21

What we’re working on now …• Continued focus on operational Excellence

– Employee satisfaction– Process improvement– Customer satisfaction– Efficiency and effectiveness– Implement Manager Self Service– Increase HR professionals business and industry acumen

• Leveraging HR Direct model/best practice to build Finance and IT Shared Services organizations

• Governance– Working with business to create SLAs for all operational services– Working with HR Professionals, IT and Finance to create OLAs– Development of pricing model for all services– Working with business to increase transparency and drivers of costs

• Sourcing model– Launched RFP in March, 2010

� HR transactional business process� Enabling technology

– Moving away from RFP

– Model development targeted for completion by June, 2010

• Keep the trains running!

22

Summary of Achievements since go live …

� Reduced labor costs by $600K/year (reduction of 18% headcount)

� Eliminated $250k/year in overtime (reduced 98% of OT via process improvement)

� Increased productivity by $5K/year (reduced absenteeism by 13%)

� Track and monitor customer satisfaction scores (consistently achieve better than

best practice results at average of 89% satisfaction rate

� Reduced total number of transactional processes by 34% via standardization and

rationalization

� Rationalized HRT systems by 50%

� Increased payroll accuracy to 99.999% year over year via process and technology

improvements

� Rebuilt customer faith in our ability

� HR Direct team members are “cherry picked” by the organization for project

work and open positions !

23

What we did right …

� Engaged a strong consulting partner during assessment and design phase

� Released our strong partner during implementation

� Leveraged peer companies who’d gone before us (why reinvent the wheel ?)

� Created a brand

� Created foundational values for organization

� Built a new leadership team

� Hired HR technology experts to manage the technology

� Created and implemented robust and detailed change and communications management

plans

� Refused to allow “but that’s the way we’ve always done it” to be said – at all

� Empowered our employees to become a part of the creation and development of the

organization

� Embrace the notion that happy HR employees beget happy customers!

� Monthly “Open Mike” sessions

24

What we’d do differently (aka Lessons Learned)

� Require that Sr . Business leadership be ambassadors for the effort

� Complete system rationalization before go live

� Complete process rationalization before go live

� Implement robust business intelligence strategy and tool before go live

� Ensure rigorous selection process for all roles within shared services vs.

assuming incumbents could make the transition

� Hire customer service professionals to staff the call center

� Redesign and implement HR Business Partner/Generalist role changes in

parallel to designing and implementing shared services to assist with role

clarification and transition

� Increase focus on improving business acumen within shared services team – if

you don’t understand the business, you can’t truly support it!