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Vicki Silvera was under siege. Complaints, as the director of information technology for Vail Resorts recalls now, were pouring into “any forum” she could imagine. In e-mail, during managers meetings, in voicemail left with the companys chief financial officer, in dinner conversations around the relatively small town of Vail—the feedback was in.
The new time-and-labor system from PeopleSoft that she had implemented was being verbally trashed. Managers of the top-flight ski resorts her company served were not happy. Their computers were hanging up as they looked at the system. They could not easily compile reports reflecting the time worked around a resort by each employee. They couldnt even find the “Delete” button.
“They were passionate” about their problems, Silvera says. And she had no recourse except to end the pain.
Getting payroll wrong is not an option at Vail Resorts. This is a business that runs five out of the top 15 luxury ski runs in North America, from Vail itself to Breckenridge, Beaver Creek and Keystone—all in Colorado—to Heavenly, on Lake Tahoe, astride the border of California and Nevada.
Every fall, Vail Resorts goes into a “period of the frantic dithers,” according to Andy Daly, president of the resort operator at the time of Silveras siege in October 2001. In the space of six weeks, it hires 8,000 employees, including 800 new managers, for the winter ski season. Come spring, the “dithering” works in reverse: The resorts let go the same thousands of workers and hundreds of managers, in about the same amount of time.
Processing the payroll correctly is critical to each resorts profitability. Labor amounts to about 40 percent of expenses, according to Daly—the largest single day-to-day controllable expense of each lodge and ski mountain.
The siege could not have come at a worse time. Vail was in the midst of the dithers, gearing up for the critical winter months. If resort managers cant calculate paychecks, “you cant pay your employees,” Silvera says.
Compounding the problem: Expectations were high. Vail had just come off a record year, reporting net income of $13.6 million on revenue of $543.8 million for the 12 months ended July 31, 2001.
Yet, all of a sudden, the travel industry was experiencing turbulence. Airplanes had struck the World Trade Center in New York and the Pentagon in Washington, D.C., just a month earlier. Customers who flew in were about to stay home in droves. The resorts were about to depend on the lowest-margin customers—in-state customers who drive in for a day.
Next Page: Switchboard beginnings lead to ERP management.
ERP Management
Fixing the payroll problems fell to Silvera. She, after all, had gotten the company into the overhaul and consolidation of its disparate human-resources and payroll systems in the first place.
Within the ski industry, she was known as something of an ERP queen. She earned her stripes deploying enterprise-resource-planning systems at the Northstar-at-Tahoe resort of Booth Creek Ski Holdings, a company started in 1996 by former Vail Resorts chairman George Gillett. She eventually converted all of Booth Creek over to a J.D. Edwards system.
That caught the eye of Vail Resorts, where Daly and chairman Adam Aron, former chief executive of Norwegian Cruise Lines, were trying to instill business discipline after buying the Breckenridge, Keystone and Arapahoe Basin resorts in 1997 and taking the company public.
Quite a peak for a woman who had started out by applying for a job at the day-care center at Northstar-at-Tahoe in the early 1980s. She wound up as an administrative assistant instead. One job: acting as the backup switchboard administrator turned out to be her technical breakthrough.
When the resort put in its own switch, she also became the backup telecom administrator and had to learn how AT&T private exchanges worked. Later, when the leisure spot went from owning one personal computer to five, she became the support desk. After that, she learned not just how the IBM Personal System/1 worked, but IBMs AS/400 servers, as well. An information-systems career was born.
But, almost two decades later, that career looked like it might just come crashing down unless she could right the deployment of the PeopleSoft software that she had championed. Heading into the crucial Christmas season, “it felt really like flying blindfolded,” Daly says now. There was no handle on the number of hours being worked each day and by whom; total payroll was basically guesswork.
Chief financial officer James Donahue convened a “come to Jesus” meeting in October, as Daly recalls it. And coming out of the meeting, Silvera set out to identify precisely where the problems in the system were. Instead of telling resort managers what to do, she listened.
She conducted a dozen focus groups, three at each of the four resorts the company owned at the time: Vail, Breckenridge, Keystone and Beaver Creek. In each, she heard from at least 10, and sometimes as many as 20, key managers and administrators.
One of the most visible problems was the easiest to fix. Computers running the PeopleSoft application werent actually crashing. Instead, they were having trouble with the Web-based system. Desktop machines running the Windows 95 operating system were “timing out” while trying to get information via the Internet Explorer browser.
That amounted to just 5 percent of the 2,000 desktops in place. But, naturally, those machines belonged to working managers—”the guys running the resorts,” Silvera would find.
Replacing the hundred machines was easy. Fixing problems that mattered monetarily was more difficult.
Next Page: Consolidating labor hours at multiple pay rates.
Consolidating Labor Hours
The key fix: Consolidating the hours worked by each seasonal hire. A single employee might work for as many as three different operating departments of a resort, each at a different pay rate, from the restaurant to the lodge to the ski facility. The time worked each day for each employer had to be combined into a paycheck for a single period. Easier said than done.
Thats why PeopleSoft sent in reinforcement development and consulting crews, Silvera says. “It took them a while to come to the realization that [the problem] wasnt just us,” she says. The vendors software had to be reworked if the system was to handle the nuances of time and labor in seasonal industries.
“Initially, we did run into some snags,” said Becky Mason, director of customer marketing for PeopleSoft. But dealing with the “extremely complex pay types” at Vail Resorts helped the software company develop such features as a desktop pagelet that summarizes where paychecks are in the approval process and alerts that highlight when an employee is about to hit overtime.
Take the case of the Heavenly resort, which was added to the system in 2002. Not only do hours need to be consolidated, state laws have to be reconciled. California requires that a person be paid overtime for any work beyond 40 hours per week in summer. But, in winter, the breakpoint becomes 48 hours because of an allowance for seasonal industries. Regardless of the season, though, if any person works more than 10 hours in a single day, anywhere within the business, that person is entitled to time-and-a-half—and double-time after 12 hours, according to Heavenly controller Paul Pfotenhauer.
By the time the rollout reached Heavenly, the vexing problems of the conversion to the PeopleSoft system had been addressed and fixed. Not only was there a mechanism for consolidating hours from multiple places of employment within the same resort and allowing for state laws, the workings of the software had been altered to make life easier for resort managers who resented the system.
These were folks who wanted to spend time with guests first, employees second and systems least of all, recalls Tim April, the PeopleSoft team leader for Vail Resorts. “Any time spent in front of a computer is considered a waste of time by managers,” he says.
The default display on the system became a view of each resorts 14-day pay period, so it was easy to see how each employees pay stacked up. Hyperlinks were added to help the managers move easily between related screens. And a molehill was made out of a mountain of distraction when the “delete” button was moved from a spot where it could not be seen to a prominent place on the left side of the screen.
While the problems werent completely resolved until the tail-end of the 2001-2002 season, Daly notes, savings were immediate. Managers could keep track of employees hours well enough to make sure part-timers were indeed part-time and not unexpectedly entitled to health or other benefits reserved for full-time workers. They reduced their time spent tracking hours worked, and increased their ability to manage workers time in order to hit profit-margin goals, Controller Pfotenhauer says. Clerical pay could be cut, by the tune of $85,000 a year.
Next Page: Significant savings with ERP system, but declining earnings.
Significant Savings
All told, Silvera figures Vail Resorts saved $1.1 million in the first year of this $10-million implementation of PeopleSoft systems and another $900,000 in the second year.
Those are material savings, but not enough to stem deteriorating earnings at the Vail resorts. In the quarter ended July 31, 2002, the final quarter of its fiscal year, the company reported a net loss of $35 million. By the end of October 2002, the company went on an austerity campaign, eliminating Dalys job and announcing a plan to lower its budgeted expenses for fiscal 2003 by $20 million. Approximately 100 jobs were cut.
Despite these efforts, fiscal 2003 also slid downhill. On Nov. 13, the company reported a loss for the full year of $8.5 million on revenue of $710.4 million. That compared to a profit of $7.1 million a year earlier. A big swing factor: Interest expense grew from $38.8 million to $50.0 million. The company also lowered reported earnings for the previous five fiscal years.
Foreshadowing the results, Aron earlier in the year blamed the outbreak of the war in Iraq for taking skiers off the slopes “during the busiest weeks of our ski season.”
As for Silvera, shes taking a new battle plan into any future deployments of software and information systems.
Her watchwords now: Do pilot implementations. No “big-bang” releases. Take one business unit live at a time. Make sure its stable. Never underestimate the complexity. And, in the end, convert all changes into clear monetary benefits.
Project leaders, she says, tend to “think somehow that were done when we implement. Were not. Youre not done until you know whether youve reached the business goals.”
If you have done that, then you have built the credibility to pursue future projects.
But when getting going again, be realistic. The benefits are easy to forget. The troubles, she says, are what everybody remembers.
Vail Resorts Base Case
Headquarters: 137 Benchmark Rd., Avon, CO 81620
Phone Number: (970) 476-5601
Business: Operator of five luxury ski resorts in the U.S., including Vail and Breckenridge.
Project Leader: Vicki Silvera, director of information technology, back office and hospitality systems
Financials in 2003: Revenue of $710.4 million, net loss of $8.5 million, net margin of -1.2%.
Challenge: Consolidate payroll, accounts payable and other accounting systems as well as human-resources management across five ski resorts in Colorado, Nevada and California.
Baseline Goals:
- Drive down operating expenses of $430.3 million a year, by cutting administrative labor.
- Reduce back-office expenses as part of a $10-million cost-cutting effort launched in October 2002.
- Support additional cost cuts, as part of a campaign to save $25 million in fiscal 2004.