Cloud HR pivotal to Direct Line share offering

Cloud HR proved pivotal to insurance group Direct Line separating from the Royal Bank of Scotland (RBS) before it launched on the stock market

The cloud played a pivotal role in separating insurance group Direct Line from parent company the Royal Bank of Scotland (RBS) to launch on the stock market.

Direct Line had less than 6 months to re-engineer its HR process to prepare for an initial public offering (IPO) on the stock market, Direct Line’s HR director, Mark Martin told Computer Weekly.

The project was instrumental in RBS taking Direct Line public with the first tranche of the shares in October, paving the way to recoup some of the bank’s losses to the taxpayer following its £41bn state bail-out.

Tight deadline

The tight timetable put Direct Line’s HR department under intense pressure, as it sought to disentangle Direct Line’s HR operations from RBS’s.

“I didn’t want to be the first HR director responsible for an IPO failing to happen,” said Martin in an interview with Computer Weekly.

RBS invested tens of millions in the project, which required Direct Line to renegotiate its contracts with 15,000 staff and create new HR processes. IT accounted for a significant proportion of the overall investment.

Cloud HR and compliance

Direct Line’s specifications for an HR system

  • Trust worthy and accurate
  • Object-orientated design
  • Enables timely and accurate updating  of records
  • Configurable

Persuading the Bank and Financial Services Authority that a cloud-based HR system would meet compliance and security requirements took 18 months, Martin revealed.

“We had to answer questions such as how you can audit the system, how you know data is secure, how you know the system is going to work,” Martin said.

RBS had been using a Peoplesoft system to manage the HR but the system was complex and heavily customised, said Martin.

“We were a massively integrated work force. Over two-thirds of HR was handed by RBS group. There was no logic or rhyme or reason to it, it was like spaghetti,” he said.

Direct Line initially looked at moving to a new version of the Oracle Fusion HR solution and investigated HR systems from SuccessFactors and Ceridian.

“We looked at Fusion. It was going to be new on the market but it only had one customer,” said Martin.

IPO deadline for HR implementation

The importance of usability

Businesses and HR departments get hung up on the technical capabilities of HR systems.

But they are missing the point. Usability is far more important, says Mark Martin, HR director of Direct Line.

If a system is user-friendly, employees will use it and the capabilities will come as they populate the system with data.

But many platforms prove less useful in practice, because staff find them difficult to use, Martin said, speaking at the HRTech2012 conference.

“People get excited about version five of the latest talent management system. But your people are not using version one. Start thinking about usability not capability,” he said.

But the choice of a cloud-based system from Workday prompted calls from RBS and regulators for reassurance that the solution would be robust enough to support the IPO.

Internally, managers were sceptical that Workday – along with 7 supporting HR systems – could be installed in time for the IPO deadline.

But with the benefit of agile project management techniques, the project went live in June 2012, just in time for the IPO deadline.

Cloud HR cuts time and costs

Moving to a cloud-based system has allowed Direct Line to cut its HR costs by 20% so far. This figure is expected to increase to 35% by 2014, when the systems are fully rolled out .

But the savings to the business of having a more efficient, easier system to manage its work force will be far greater, Martin revealed.

“Simple tasks like booking a holiday with Peoplesoft was a very manual process. It required manual sign-off and manually checking who else was away at the same time. It took hours and hours of time,” he said.

Cloud technology changing Direct Line's corporate culture

Direct Line is using the technology to change the culture of the organisation, in a way Martin believes will empower and engage employees.

For example, line managers have the authority to set pay awards for their staff themselves, rather than asking HR, using the Workday package.

“Empowering means giving people the ability to make mistakes," said Martin. “But how do you empower people and still have control? You can only do it with the right system.”

Cloud payroll system - a work in progress

There are still some challenges to overcome. Direct Line has linked Workday to its payroll system, but the system lacks the full capabilities the insurer needs.

“We are making fewer mistakes than we used to but have to have lots of people doing manual stuff,” he said. 

“We are asking very politely for Workday to speed up the development of its UK payroll system.”

Direct Line is halfway through a project to upgrade its 16,000 desktop PCs with up-to-date models that are capable of support Workday and its other HR platforms.

Martin plans to roll out the next phase of the project over the coming weeks. That includes Workday’s learning managing system, employer self-service and manager self-service functions.

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