HR to go: ASP model gives growing company more control over HR systems without the in-house hassles

HR Magazine,  Oct, 2004  by Drew Robb

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When you have a large family to feed, it is cheaper to eat at home. But when you are single, eating out may be more cost-effective, considering the time spent shopping, cooking and cleaning up after a meal for one. Similarly, for small companies or startups that want full-scale HR functions without a full-size HR department, it may well be cheaper to let others do the cooking.

"Most people in this company came from a very large company that allowed HR to get out of hand so much that it was a drag on the organization," says Idalee DiGregorio, SPHR, director of HR for assisted living firm Somerford Corp., which is based in Gaithersburg, Md. Somerford, on the other hand, "did not want to bring in any more than one HR person no matter how much the company grew."

But the HR job there is too large for one employee, so, with only DiGregorio working in the HR area, Somerford relies extensively on outside firms for most of its HR functions. Technology is the key factor that enables that system to work.

After carefully considering its options, the company decided to implement an application service provider (ASP) model for its HR systems when it outgrew the professional employer organization (PEO) model it had implemented to keep its HR functions manageable.

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Outgrowing the PEO

Somerford has 865 employees spread among 16 Somerford Place assisted living facilities in California, Delaware, Maryland and New Jersey for people with Alzheimer's disease or other memory disorders. Michael Carrick, M.D., opened the first facility in Fresno, Calif., in 1996. Two years later, a team headed by Lewis Price, who had established nearly 40 Alzheimer's residences for a Fortune 500 company, began opening up facilities in the East. In 1999, Price's company, Chesapeake Healthcare Corp., acquired Somerford and took on its name. In addition to the primary headquarters in Gaithersburg, it retains a West Coast headquarters in Fresno.

Because Price and his crew were not thrilled with their HR experience at their former employer, Somerford relied on a PEO for its staffing needs. While Somerford did its own recruiting at each facility, the PEO hired and paid the staff. This arrangement worked well in the beginning, but not as the company continued to grow.

"We had totally outsourced all our HR and payroll as a function of being part of that PEO," says DiGregorio. "Unfortunately, PEOs don't do well with larger organizations."

As Somerford grew, the PEO assigned a staff member to act as a liaison and to ensure that Somerford would continue to receive a high level of service. But that system broke down two years ago when Somerford hired the liaison, DiGregorio. The PEO did not replace her, and problems cropped up.

"A lot of times, for example, we would enroll someone in benefits, but the deductions wouldn't be taken out of their paycheck or vice versa," says Al Amantia, administrative services coordinator at Somerford Place in Stockton, Calif. "Or I would submit a pay increase, but it wouldn't go through."

At that point, Somerford executives knew they needed to change suppliers, but decided against trying another PEO.

"We realized it was time to go with something that was more controllable," says DiGregorio.

DiGregorio is still the first and only HR professional Somerford has hired, but hiring her didn't mean they wanted to start bringing the processes in-house. Instead, the company started looking for other ways to outsource its HR functions via either an ASP or a business process outsourcer rather than a PEO. Under that new arrangement, the employees would be theirs, and the company would have greater control over HR operations. Somerford initially considered more than 10 possible vendors before narrowing it down to three, including Genesys Software Systems Inc. of Methuen, Pa.

"One of the most important criteria for choosing a vendor was that we had to have a web-based program since we have no centralized server nor any information technology department," says DiGregorio. "We needed someone who could host all the data, maintain the software and take care of security."

The other key factor Somerford looked for was the quality of customer service.

"We are a boutique company that provides a high level of customer service and expect that same level of service from anyone we partner with," she says. "Genesys was No. 1 in that area, had the biggest track record, and I had gotten beautiful reviews from other customers."

Somerford adopted the PeopleComeFirst HR management system (HRMS) from Genesys on an ASP basis.

Customers can purchase People-ComeFirst HRMS either as software to run on their own servers or access it as a service, the way Somerford does. Both are the same application, built with the same tool set and supporting the same attributes.

"A lot of people like the control of owning the software and don't mind the cost," says Mike Hanninen, director of Genesys' Strategic Systems Group. "But for others, it is not their core competency and they don't want to be encumbered with supporting it, so it is better to buy the service."