Case Study

HealthSouth: The Trials that Temper an Organization1

Table of Contents
Abstract ......................................................................................................................................................... 3
Case Overview............................................................................................................................................... 5
Background ................................................................................................................................................... 6
Execution....................................................................................................................................................... 8
Managing the Project.................................................................................................................................. 10
Implementation Process ............................................................................................................................. 13
Scope Changes ............................................................................................................................................ 14
The Team .................................................................................................................................................... 16
Post-Implementation .................................................................................................................................. 18
Conclusion ................................................................................................................................................... 19
Exhibit A: HealthSouth Corporation Timeline ............................................................................................. 20
Exhibit B: SEC Litigation Release ................................................................................................................. 22
Exhibit C: Sarbanes-Oxley Act of 2002 (excerpt of Section 404) ................................................................ 24
Exhibit D: Executive Support of Re-Implementation .................................................................................. 25
Exhibit E: Re-Implementation Organization Chart ...................................................................................... 26
Exhibit F: SharePoint Screenshot Examples .............................................................................................. 28
Exhibit H: Scope Change Requests Tracking Log:........................................................................................ 35
Exhibit I: Progression of System Development ........................................................................................... 36
Exhibit J: Steering Committee Meeting Agenda ......................................................................................... 40
Appendix A: Suggested Readings ................................................................................................................ 41

This case study was developed by Fred K. Weigel, W. Heath Landrum, and Chetan S. Sankar, Auburn University,
May 2009.

In the height of the [FBI] raid, I just packed up all my stuff and brought it home. When the time came
[for me to leave], I wanted to be able to travel light.
Will I have a job to go to the next day?
What kind of impact will this have on me?
Are they going to come in and shut down the corporate headquarters?
These were just a few of the questions and concerns that started running through the minds of the
employees of the Information Technology Group at HealthSouth Corporation as many of them watched
in disbelief as the Federal Bureau of Investigation raided the corporate headquarters on March 18, 2003
in Birmingham, Alabama.
Brannon McDaniel, Vice President, Corporate Systems, Information Technology Group and 1994
graduate of Auburn University, was there from the start of the crisis, on pins and needles like many
other employees.
I think everyone thought the company was going to go bankrupt. Eventually we were swarmed
with consultants. You didnt know if you were going to be here or not, or for how long. There
were some layoffs before [the FBI raid] and right after it. Then, it was at least a good year or
year and a half before we knew we were not going to file for bankruptcy.
Matt McGuire, Director, ERP Systems, Information Technology Group, was at home flipping through the
TV channels, relaxing. He relates his memories of that evening:
I was watching on the news and it was just kind of surrealthat hey, thats the place where I
workedand you see all these FBI vehicles lined around the campus. I think it was in the [tens] or
twenty-something vehicles [that] came and raided this corporate headquarters. Youre just like I
cant believe this is happening. For us on the technical side, we were not really privy to all the
things that were occurring. You would hear rumors of what was going on, but nothing that you
took to heart as true at the time.
By 2009, these thoughts were long gone. Six years had passed and the company had avoided
bankruptcy, formed an entirely new executive management team, and upgraded its Financial software
systems. The Information Technology Group played a huge role in the financial restatement activities to
help avoid bankruptcy and also in the Financial systems upgrade during 2007. Due to the extraordinary
teamwork of the Information Technology Group (ITG) employees, HealthSouth business users, and an
external implementation partner organization, the company had successfully completed a massive reimplementation of its core Financial systems, which was a part of the companys enterprise resource
planning system (ERP), Oracle/PeopleSoft 9.0.

HealthSouth Case Study - Page 2

Abstract
Implementation:
On March 18, 2003, the FBI raided the corporate headquarters of HealthSouth Corporation in
Birmingham, Alabama. The following day, the Securities and Exchange Commission (SEC) filed charges
against HealthSouth. Subsequently, five former chief financial officers were found guilty of fraud when
the investigation showed that HealthSouth Corporation had overstated its earnings by $1.4 billion. One
former CFO testified that part of this was done by entering fraudulent or inaccurate information into the
existing Financials/Enterprise Resource Planning (ERP) system, PeopleSoft version 6.0. This version of
the software became unsupportable by the manufacturer due to its age and newer releases that were
available in the market, and the information technology group had attempted to upgrade the system
during those years, but executive management at the time would not support an upgrade. They chose
to retain the highly-customized ERP system that was unsupportable from the database as well as the
software side. There were few control measures and no procedures in place to evaluate the effect
changes had on other systems or departments. The old system was rife with possibilities for fraud and
errors.
During 2004, the company went through significant restructuring activities. These included forming a
new executive management team, building a new finance/accounting staff, and financial restatement
activities in order to avoid a potential bankruptcy. The new executive management team at HealthSouth
knew that a financial systems upgrade was critical to the continued re-building of the company and
supported efforts to upgrade from PeopleSoft 6.0. In 2007, the new HealthSouth team used innovative
leadership, teamwork, and project management skills to upgrade the ERP system to PeopleSoft version
9.0. The information technology group and business owners at HealthSouth were given a mandate to
implement the system within one year and to use the vanilla system with minimal modifications. In
January 2007, during the project kick-off, the Chief Financial Officer relayed the high-level objectives:
Replace the current highly customized PeopleSoft Financials 6.0 applications
Deploy General Ledger, Asset Management, Accounts Payable modules by January 1, 2008
Implement vanilla with minimal customization
Implement on schedule and within budget
During the project, any modification or customization requests were vetted through a rigorous change
management process that had to be approved by a steering committee composed of members from
functional and information technology (IT) areas of the company. The implementation team included
various experts from functional areas such as Asset Management, Accounts Payable, and General Ledger
who worked with the IT technical experts. HealthSouth captured thousands of documents related to the
implementation process over the course of the project. The project manager developed a SharePoint
website and it became the centralized collaboration tool for the project. One of the most useful
applications of SharePoint was that it served as a repository of all documents pertaining to the project.
Beacuase the nature of the project involved Financial systems, HealthSouth knew that internal and
external auditors would need evidence that proper controls were in place and good project
management techniques were utilized throughout the project. The project management team reported
their progress to the executives regularly. Although there were many ways to report the status of the
assignments within a project, the HealthSouth team required the use of the Red, Yellow, and Green
Status Bar Chart. The processes that were established for the project continue to be used in the
organization today and have been very effective.

HealthSouth Case Study - Page 3

Innovation:
Throughout the project implementation, HealthSouth leaders at all levels exercised creativity, patience,
and tenacity to achieve results, given a very aggressive timeline. Using an external implementation
partner and internal resources and project management staff, HealthSouth developed a cohesive and
effective team. With the introduction of the new ERP system and new security control procedures, the
team eliminated the problems caused by using an obsolete, inefficient, fault-ridden PeopleSoft 6.0
system.
The HealthSouth project team faced a major decision at the very beginning of the project. Should they
implement PeopleSoft 8.9 or PeopleSoft 9.0? Version 8.9 was the current release out on the market,
PeopleSoft 9.0 was just coming out in 2007 and HealthSouth would have been facing the issue of being
one of the first Oracle customers to go with that version. Frequently, when a new version of an
application comes out, there are some bugs that have to be worked out. Companies using the newest
version accept greater risk over a tried and true older version and are sometimes referred to as being on
the bleeding edge, a play on words for leading edge. However, based on information given to
HealthSouth from Oracle and the external implementation partner, the decision was made to
implement the 9.0 version.
The steering committee formed for the project grew into a Financial Systems IT Governance committee
that continues to meet monthly. The governance processes now in place provides a streamlined and
controlled path for new IT implementations and changes to current systems. Users are more
knowledgeable about how information technology permeates the corporation. Both the ITG team
members and the other employees have a greater appreciation and understanding of each others roles
in the information management process; the functional business employees understand how the team
members of ITG support the company and the ITG team has gained a greater understanding of the
corporate business processes and practices.
Impact:
The impact of the implementation of PeopleSoft Financials 9.0 spanned several departmental
boundaries and managerial levels. The Accounts Payable, Asset Management, and Accounting/Finance
departments reaped the advantages of using standardized applications, thereby meeting current
standard accounting practices and public law requirements. At the conclusion of the process,
HealthSouth had accumulated the following:
1. A CEO and CFO who were advocates of the new system
2. Pride of implementing an on-time, on-budget implementation resulting in a maintainable
system and service contract
3. System users who had buy-in of the new system and ownership/accountability
4. Functional users who were integral members of the implementation project, which resulted in
few complaints about the new system
5. Reduced risk due to the procedural controls established in conjunction with the implementation
of the new system.
The efficiencies gained from the implementation played a part in helping HealthSouth to re-establish
itself financially as a company. Much efficiency was gained from a reporting and controls perspective.
The Accounting and Finance staff was also able to shorten their month-end close process by about half
the time due to efficiencies within the new system. This is very important in reporting financial results
each month for public companies.

HealthSouth Case Study - Page 4

Re-applicability:
A set of best business practices that were used by HealthSouth for project management, leadership, top
management oversight, and IT practices were derived based on this case study. Others can apply these
best practices to their organizations, both in and out of healthcare, particularly to improve ERP
implementation processes and to reduce possibility of accounting fraud.
The case study also provides an analysis of the implementation using the following theories:

Task-Technology Fit (TTF) Theory (Goodhue, 1995; Goodhue & Thompson, 1995)
Change management (Armenakis, Harris, & Mossholder, 1993)
Project Management Body of Knowledge (Richman, 2006)
Transformational leadership (Judge & Piccolo, 2004; Rubin, Munz, & Bommer, 2005)
Technology Acceptance Model (Davis, Bagozzi, & Warshaw, 1989)

These connections showcase the applicability of theoretical research to real-world implementations to

other CIOs and MIS faculty members.

Case Overview
Date
Event
This case describes the incidents
HealthSouth
and
CEO
Richard
Scrushy charged with
regarding HealthSouth Corporation from March 2003
SOX
violation
and
fraud
March 2003 through January 2008
(Figure 1Figure 1; Exhibit A). The period May 2004
Jay Grinney appointed as CEO
began with the FBI raid on corporate
Contract signed with PeopleSoft for version 8.8
headquarters and subsequent Securities December 2004 software and training
and Exchange Commission charges filed
Oracle officially takes over PeopleSoft
against HealthSouth and then Chief January 2005
Executive Officer, Richard Scrushy
Management endorses PeopleSoft reJanuary 2006
(excerpt in Figure 2Figure 2; full citation,
implementation initiative (to version 9.0)
Exhibit B). The period ended with the October 2006
Re-listed with NYSE
successful implementation of PeopleSoft
Begin upgrade process from version 6.0 to 9.0
Financials 9.0 during 2007 - 2008. The January 2007
previous system (PeopleSoft 6.0) was January 2008
Upgrade process complete
highly customized by HealthSouth and
Figure 1: HealthSouth Timeline
ten years old. The manufacturer was
unable to support the system due to its
age and the many customizations made internally at HealthSouth. There was little to prevent or prohibit
changes to the system coming from many different areas in the company, and there was no governance
in place to evaluate the effect of changes on other systems or departments.

HealthSouth Case Study - Page 5

Background
On March 18, 2003, the FBI raided the corporate headquarters of HealthSouth Corporation. The
following day, the Securities and
Exchange Commission (SEC) filed
charges against HealthSouth and its
Chief Executive Officer, Richard Scrushy
(Figure 2Figure 2; Exhibit B).
The Commission's complaint
alleges that since 1999, at the
insistence of Scrushy, HRC [HRC
is the previous stock ticker for
HealthSouth Corporation based
on
its
previous
name,
HealthSouth
Rehabilitation
Corporation]
systematically
overstated its earnings by at
least $1.4 billion in order to meet
Figure 2: SEC Charges
or exceed Wall Street earnings
expectations. The false increases
in earnings were matched by false increases in HRC's assets. By the third quarter of 2002, HRC's
assets were overstated by at least $800 million, or approximately 10 percent. The complaint
further alleges that, following the Commission's order last year requiring executive officers of
major public companies to certify the accuracy and completeness of their companies' financial
statements [a requirement of the Sarbanes-Oxley Act], Scrushy certified HRC's financial
statements when he knew or was reckless in not knowing they were materially false and
misleading.
From the period of 1999 2003, HealthSouth executives during that time had resisted upgrading to a
newer version of the ERP system. An ERP system is a software/hardware structure that provides a
company-wide information system that integrates diverse business processes to enable information to
flow seamlessly across the functional areas (Rainer & Turban, 2009, p. 237) and that assist corporations
to better manage their expenditures and business processes. HealthSouth uses PeopleSoft ERP for
managing its Financial, Human Resources, and Payroll functions. HealthSouth had been using the
PeopleSoft Financials version 6.0, which was originally created by the PeopleSoft Corporation;
PeopleSoft was later acquired by the software and database company Oracle.
The PeopleSoft system handled all aspects of HealthSouths financial management. It included modules
for general ledger, asset management, and accounts payable (among other modules). It was an
overarching system that was used by each department in the company and was supported by
HealthSouths information technology support team, or Information Technology Group (ITG).
Unfortunately, because of the high level of customizations made over the years and the fact that newer
versions of the software were available, it reached a point where PeopleSoft could no longer provide
software support for the version that HealthSouth was running. Once a system has changed from its
original design that much, the designers have little knowledge of how changes will affect the
functionality of the system or the quality of information held by the system. They would have to relearn
the program every time they tried to support it. In addition, the version of the Oracle database that

HealthSouth Case Study - Page 6

PeopleSoft Financials version 6.0 was running on was also outdated and unsupported. The information
technology group at HealthSouth had a big job supporting both the software and database pieces until
an upgrade could be performed.
Subsequent to the SEC charges and investigation in 2003, five chief financial officers were found guilty of
fraud when the investigation showed that HealthSouth had overstated its earnings by $1.4 billion. Part
of this was done by entering fraudulent or inaccurate information into the PeopleSoft Financials version
6.0 system. Allegedly, these entries were authorized by the executives at the time and, therefore,
provided them a good reason to resist an upgrade (so these faults were not exposed).
The Sarbanes Oxley Act of 2002 (SOX) required far more stringent accounting practices for corporations
(excerpt, Figure 3Figure 3; Exhibit C). The act was an attempt to prevent the unauthorized use of
accounting systems just like HealthSouths from being high-jacked by those with ill-intentions in mind.
Under these regulations, firms and executives would be held responsible for manipulating financial
information or using systems that did not protect and preserve the quality of information going into
these systems.
Before the implementation of the
PeopleSoft 9.0 Financials system, minimal
controls were in place. There were few
checks and balances to protect the
integrity of data in the system. Users from
different business departments would
request changes to the system. The IT
personnel would make the changes,
without any real controls or governance
around the changes. ITG assumed the
business users requesting the change
knew what changes needed to be made
and trusted that they were being asked to
do the right things for the company.

Figure 3: Excerpt of SOX

In May of 2004, a new chief executive officer provided a fresh start for HealthSouth. An entirely new
senior management team was formed and the company began restating its financials, with the help of
many external consultants, Accounting/Finance staff, and the ITG team. Once the company had
overcome the challenges related to its financial restatement efforts, in 2006 the new executive
management gave the ITG team support it needed for the re-implementation or upgrade of the
PeopleSoft Financials 6.0 system. As a requirement to have the stock re-listed on the New York Stock
Exchange (NYSE), the new HealthSouth Chief Executive Officer (CEO) agreed to have the corporate
Financials systems comply with SOX and accounting standards and have a new ERP Financials system in
place within one year. At the January 30, 2007, kickoff meeting (Figure 4Figure 4; Exhibit D), the Chief
Financial Officer relayed the companys high-level objectives for the project:
Replace the current highly customized PeopleSoft Financials 6.0 applications
Deploy General Ledger, Asset Management, Accounts Payable by 01/01/2008
Implement vanilla with no customizations
Implement on schedule and within budget

HealthSouth Case Study - Page 7

After the executives gave direction and placed their support behind the effort, careful planning and
control mechanisms were employed by HealthSouth to prevent another financial crisis in the future. The

Figure 4: CEO Project Directives

system implemented was an out-of-the-box system that each department had to use or make a case
for why they needed certain customizations to the software. In other words, the system was
implemented as-is from the manufacturer, with limited changes to the software. While HealthSouth
termed the un-customized system, vanilla, frequently this type of system is referred to as
commercial-off-the-shelf or COTS for short. By implementing vanilla with minimal customizations,
HealthSouth preserved the warranty and support of the product, as well as making it easier for
HealthSouths IT team to support. HealthSouth successfully implemented their system within the
required period and within budget. They have since continued to prosper and grow as an organization.
The project was a large undertaking for the entire organization. Executive Managements support
emphasized to the organization the importance of the project and the fact that it was necessary. The
CFO served as the project champion. A champion is someone who supports and makes a case for the
project from within an organization. A champion is usually excited about and fights for a project or
change from within. Every project needs that support in order to fully come to fruition.

Execution
During January 2007, HealthSouth began the PeopleSoft Financials 9.0 upgrade project. As mentioned,
the intent was to implement vanilla with as few customizations as possible. HealthSouth had been
dealing with a highly customized, unsupportable PeopleSoft 6.0 for quite some time, and they wanted to
preserve manufacturer support of the new product. Also, when performing future software upgrades, it
is much easier to manage an upgrade if you do not have to carve out customizations and keep track of
them.
The timeline for the project also necessitated that minimal customizations occur. The HealthSouth team
probably would not have implemented the solutions within the timeline (1 year), if they had to deal with
a lot of customization requests. This one-year timeline was mandated by the CEO and Chief Financial
Officer (CFO) because the success of the implementation was critical to the future success and stability
of the company (Figure 4Figure 4; Exhibit E). Implementing a system and incorporating user changes

HealthSouth Case Study - Page 8

would likely take much longer than the one year. Each change would have to be tested and evaluated
before it could be implemented. Although some changes were necessary, significant customizations
(that were not critical) that had been previously incorporated were left out.
The more stringent accounting practices created by SOX required a change in the way HealthSouth (and
other companies) treated their financials. PeopleSoft 6.0, the old system, was developed before SOX
and, therefore, had fewer controls and checks and balances. PeopleSoft 9.0 provided greater controls
around security and data integrity. To preserve the integrity of the product, starting fresh was
necessary. But, the decision of whether or not to customize the new system had to be made. It came
down to two choices, do we customize the new ERP system to fit our business processes, or do we
customize our business processes to fit the new ERP? Both choices came with costs to HealthSouth.
One may wonder why the issue of customizations even came up for HealthSouth. Because the previous
system had been in place from 1997, some of the end users (people who used the ERP) had become
accustomed to the old system and were reluctant to change. They wanted to keep the same system or
modify the new system so that it functioned the way the old one had functioned. This illustrates an
argument that frequently comes up in organizational change situations -- the argument to keep it the
same, because, thats the way weve always done it. For the project team, this resistance had to be
overcome with grace, confidence, and a spirit of teamwork. The ITG team knew they would continue to
support these end users after the new system was in place. They knew it would be easier to support the
users if they were sitting side-by-side at the negotiation table than across from each other.
As HealthSouth evaluated the plain vanilla (unchanged, un-altered) approach to system
implementation, several benefits were realized. If ITG were able to implement PeopleSoft 9.0 as COTS
(commercial-off-the-shelf) instead of customizing the software, implementation time would be much
shorter. While no system can be implemented without challenges of varying degrees, a vanilla
approach provides a greater probability of compatibility with future upgrades from PeopleSoft/Oracle.
Keeping the software as close to original specifications ensures the greatest probability for
compatibility.
Although there were many advantages to the non-customized system, HealthSouth had to consider the
disadvantages, too. One of the drawbacks to upgrading to an un-customized system was the cost of
adjusting business processes to the new system. If departments were used to having a system that
conformed to their specific way of doing things, changing that system and not allowing intensive
customization would mean that something had to give. The processes would have to be different.
Training on the new system would also be a significant cost. As can happen during major organizational
change, some employees were reluctant and resistant to the change. The HealthSouth project team had
to persuade and remediate to resolve the concerns. While most of the issues were resolved, obviously
not all of them could be. Many departments had to adjust their old way of doing things to the new
system. The same information was included and the functionality was the same, but data input, for
example, may be a little different on the new system.

HealthSouth Case Study - Page 9

Figure 5: Project Organization Chart Excerpt (edited for privacy)

Managing the Project

Once HealthSouth leadership decided on the project approach, it was time to execute the
implementation process. Due to the magnitude of the project, they needed a way to manage the
project. A project manager was assigned from the HealthSouth side, as well as the implementation
partner side. Project managers are in charge of administering the project, both in terms of personnel
and progress. The project managers had to put the right people in the right place to ensure the tasks
would be accomplished within budget and within the timeframe set out by the executive staff. In order
to keep the implementation process on track and the progress moving forward HealthSouth used
Microsoft SharePoint as the tool to manage the project.
While proper planning was integral to the successful implementation of PeopleSoft 9.0, it was essential
for the project management (PM) team to assemble a diverse group of employees from the various
functional departments to coordinate with ITG. Looking at Figure 5Figure 5 and, more specifically,
Exhibit E, we see the array of talent the PM team assembled. They included various experts from
functional areas such as Asset Management, Accounts Payable, Bank Reconciliation, and General Ledger
who worked with the IT technical experts. In addition to the breadth of expertise, HealthSouth recruited
experienced people from each of these departments to bring constructive knowledge to the reimplementation.
The project management team captured thousands of documents related to the implementation
process during 2007. The SharePoint site became the centralized collaboration tool for the project.
SharePoint is a software package from Microsoft Corporation that allows for project management from
a centralized server that can be accessed companywide through the web or internal network. The
features of the SharePoint site included knowledge management, document storage, and a message

HealthSouth Case Study - Page 10

board, among others. The central module was essentially a phone book and a list of roles and
responsibilities so if an individual needed to know who was responsible for a specific portion of the
project, that individual could retrieve that information from the SharePoint site. The site also included
photographs of all the external contractors so people knew who they were .
The SharePoint site provided a means to track action items for managing the project. Action items
were activities, errors/faults, or requests that needed to be completed to move the project forward.
Action items were assigned by resource and tracked on a weekly basis. The action items could be
filtered by any logical design or status a user could come up with. For example, an employee could pull
up all action items marked critical, or pull up all training items that had to be completed before the next
phase. Action items could be set up to give e-mail notifications of an upcoming action item and what the
recipient was responsible for. Within the notification, SharePoint placed a link that would take the user
directly to the appropriate location on the SharePoint site. Imagine trying to coordinate, monitor, and
track thousands of action items with a paper-based system and you begin to glimpse the benefit that
SharePoint provided for the project team.
SharePoint also enabled the project team to track errors and issues with the system. Essentially, this
module was setup like a trouble ticket system where users could document and report errors they had
encountered while using or developing the system. This allowed the project team to have
documentation of the error with detailed information so that they could recreate and work on the
problem. The trouble tickets were in a central location and linked with email so that the users would
know that they had been received. ITG would then be able to acknowledge progress and adjust the
status of these trouble ticket items until they were complete. After they were complete, ITG still
retained the closed tickets as documentation of the problem.
One of the most useful applications of SharePoint, according to the HealthSouth team, was that it
served as a repository of all documents pertaining to the reimplementation project. All personnel were
able to quickly and efficiently track down any change requests, management hierarchy diagrams,
presentation outlines, or system design documents.. SharePoint also became a hub of contact within
the organization. Because they were working with implementation partners (outside consultants), it
was occasionally difficult to find who was in charge of what issues. SharePoint alleviated that confusion
by keeping an up-to-date directory of those involved in the project. HealthSouth used SharePoint as a
centralized collaboration tool for the project. They used it for mass messaging and kept a repository of
meeting agendas and presentation slides in case people needed to be reminded of what was said in a
meeting. It was also used to hold people accountable for actions/tasks and was clearly critical to the
success of the project.

HealthSouth Case Study - Page 11

Figure 6: SharePoint Initial Home Page Screen (edited for privacy)

Above (Figure 6Figure 6; Exhibit E), screen images are provided of HealthSouths project reimplementation SharePoint website. On the initial home page screen, notice the phone number listing,
providing users a consolidated location to find the phone numbers of other project members. Also
available from the home page was access to the different documents in the project, links to separate
locations for each of the different project teams, and links to critical documents in the projects process.
In the second image (Figure 7Figure 7), the reader can see that team members were also able to filter
phone number searches based on various criteria. The detailed phone list pages included the team
members location in order to facilitate easier contact between team members.

Figure 7: Phone List - Filtered to Include Core Team Members Only (edited for privacy)

HealthSouth Case Study - Page 12

Figure 8: Sample Action Items List (edited for privacy)

Different team members were assigned different tasks, called action items, as part of the project
management process. We direct the reader to Figure 8Figure 8 for an example screen of the action item
section of the SharePoint site. All the pertinent information (e.g., status, due date, priority, action
officer, etc.) was provided at the initial action item screen. Users were able to drill down for further
specific information regarding an action item by clicking on the title or issue ID of the item.

Figure 9: Testing Documents Folder

Implementation Process
The re-implementation of Oracle/PeopleSoft Financials 9.0 was conducted using multiple environments .
Each environment was separate and designed for a specific process. In the Demonstration (DEMO)
Environment, ITG had the system configured as delivered out of the box from Oracle. This was used to
see how the software functioned and what it was like without any changes. The major environments
used to develop and implement during the project were:

SandBox test environment for tweaking the software modules before installation
Conversion making data from the old system compatible with the new system
Configuration further tweaking of the modules using the data before installation
Move environment used to move code and objects once deemed production ready
Production the software and data were ready to be used by the company
QA used for formal Quality Assurance (QA) testing and User Acceptance Testing (UAT)
Development Used for development of code and objects

In the Sandbox Environment, ITG personnel configured different modules and did testing on the
modules. As its name implies, the Sandbox Environment was an area for playing or tweaking the

HealthSouth Case Study - Page 13

software and determining how that affects other processes. It was very important to HealthSouth that
changes not be implemented before they were fully understood. Therefore, having a safe, separate
environment in which to test those changes before implementing them on the actual software was
critical.
Taking data from PeopleSoft 6.0 and converting it into data for 9.0 was done in the Conversion
Environment. This allowed ITG to migrate all of their data over to the new system safely. Once they
configured and tested in the Sandbox Environment and the data was successfully converted, ITG moved
those changes the Configuration Environment, which allowed them to test and put the finishing
touches on the changes that were made.
These environments, along with others such as the Development Environment and the QA (quality
assurance) Environment, all ran simultaneously. Each of these environments allowed ITG to keep a
closer guard over the financial software and ensure the implementation activities were controlled. They
were able to protect the software from unauthorized changes or changes that might interfere with the
integrity of the financial data going into the system. They were able to fully explore just how little or
how much of an impact any change or modification from the manufacturers original design might have
on their software or business processes.
The ITG Project Manager emphasized the importance of managing the multiple environments:
I just remember that environment management was a big deal with this project. You think about
it, you had people developing, you had people testing; you make a change to the configuration in
one environment it has to trickle down [to all the other environments] so at one point, we had
something like nine environments.

Scope Changes
Despite the intent to implement the Oracle/PeopleSoft 9.0 as a non-customized system, changes were
inevitable because the COTS version of the system had a generic focus to meet the needs of as many
businesses as possible. The IT group had to consider how the implementation of a new Financials
system, especially one that would not include all of the previous customizations would affect
departments across the entire organization. They also had to evaluate whether or not the software they
had would satisfy the needs of each of the departments. HealthSouth needed a vetting process to
ensure requests for changes in the scope of the work were stopped and required requests were
implemented.
Prior to implementing PeopleSoft 9.0, there was little control over change requests. However, with the
new implementation of Financials, the company also instituted a Steering Committee. The Steering
Committee does exactly what its name implies. The members of the committee steer the
development or progression of the project. This is important to make sure the requested changes to the
software do not take the software in a direction that is contrary to the mission or goals of the company.
The Steering Committee evaluates changes in the software to ensure that the integrity of the software
and its functionality are preserved.
HealthSouth implemented a Scope Change Request (SCR) process to meet the needs of those users who
wanted changes to the system. (Figure 10Figure 10; Exhibit G) The originator of the request entered the
request in SharePoint using a form similar to one provided in Exhibit H: Scope Change Request Process.

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The process was systematic and organized so that each change request had to go through the same
procedure. Each change request had to be fully evaluated and its impact on the system as well as
different departments or modules had to be tracked, documented, and evaluated. Priority of the change
as well as budgetary
information about the
change was also required.
The use of the systematic
entry mechanism as well as
the standardized forms
helped control quality of
the
changes.
Change
requests also had to be
evaluated to ensure they
were viable. Functional
management and technical
management reviewed the
SCR. Changes were further
evaluated at each level to
determine whether or not
the change needed to be
further
explained
or
approved at a higher level.
The request could be
rejected by any level but
could be further reviewed
by the Steering Committee
even if previously rejected.
HealthSouth used tracking
mechanisms and status
indicators in SharePoint to
monitor the progress of the
SCRs submitted (Exhibit H:
Scope Change Requests
Tracking Log:. The project
team recognized that for
the implementation to
work, they had to work
Figure 10: Scope Change Request Process
with
the
other
departments. There were
no islands in the process. Because they had a one-year timeline to complete the project, all parts of
the HealthSouth business process had to function as a well-oiled machine. All employees had to work
together as a cohesive, efficient team.

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Figure 11: Red, Yellow, Green Status Chart

The project management team had to report their progress to the executives regularly. Although there
were many ways to report the status of the assignments within a project, the HealthSouth team used
the Red, Yellow, Green Status Bar Chart, shown in Figure 11Figure 11, (see full listing of the Progression
of System Deployment charts in Exhibit I). The steering committee wanted to be able to recognize the
progress and identify weak areas of the project at a quick glance. Using the Red, Yellow, and Green
Status Bar Charts gave them that perspective. The status was discussed in detail during the steering
committee meetings, especially for items that may have been yellow or red.
In Figure 11Figure 11, one might notice that the Budget is green in both the current period and the last
period. That means that the Budget is being met adequately and there is no problem or danger in
exceeding the budget during the current period. However, one might notice that the Issues category has
gone from green in the last period to yellow in the current period. This is an indication that problem has
occurred and the management or team leaders should take steps to mitigate the problem before it
becomes red. Items marked in red indicate that there is a high risk issue occurring that demands
immediate and critical attention.

The Team
Matt McGuire:
From a technical perspective, it helps to understand the business. It helps us to support the
system; we cant really be effective if we just say, all I really want to know is programming.
You have to be able to get in and work with the users to understand what they are requesting of
you to interpret it as a process that they need it to do. So, to that extent, I have been very
blessed and fortunate to have technical team members who really understand the business.
From the start, it was very clear this project would require a significant amount of teamwork from all
business departments. There was a tremendous amount of work that had to be accomplished in a
relatively short amount of time. It was essential that ITG employees reached out to the other
departments to help assess their needs and provide the transitional support. In a project of this
magnitude, roles and responsibilities were defined in writing to ensure the endeavor was accomplished
on time and within budget. HealthSouth developed a core team of professionals from different parts of
the business to work together to delegate the tasks required and provide oversight of different
subordinate teams (Exhibit E). This cross-disciplinary approach was crucial so that the different members

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understood the information technology changes and the effects of the changes on the business process.
The ITG employees gained a greater understanding of the business processes and the employees from
the other departments realized how integral ITG was to their own functions.
For example, the project team members had to work very closely with an internal audit (IA) employee as
the IA workers evaluated the implementation. This close oversight by the IA team could have been
construed as an intrusion and distraction by the project team. However, they recognized that it was the
internal audit team that protected HealthSouth from the external auditors who would evaluate the
effectiveness and controls contained within the financials system. HealthSouth followed a formal
Software Development Life Cycle (SDLC) in-house, and IA had approved it. The project team worked with
IA to ensure all the necessary controls were incorporated as per the Internal Audit-approved SDLC.

Figure 12: Steering Committee Meeting Agenda

To foster teamwork and to enhance communication and information flow, the steering committee met
every other week. The project manager from HealthSouth was the primary facilitator at the meetings.
While the project manager ran the meeting, sometimes the executive sponsor took over. The executive
sponsor championed the project or implementation. The champions had a particular interest in or
about certain segments of the implementation. During the meeting, all the representatives from the
different business departments worked together to compile a high-level view. The process included the
following agenda items (Figure 12
Figure 12; Exhibit J):

Summary
Timeline
Budget
Activities
Issues
Scope Changes

Because the steering committee was attended by executives, there was a lot of emphasis and support
placed on meeting the timeline, remaining within budget, and ensuring accountability for all required
activities. Once the steering committee meeting was completed, the outcomes were disseminated to
the other subordinate teams composed of members from Accounts Payable, ITG, Asset Management,
Bank Reconciliation, and General Ledger. Each of these teams had to make decisions on configurations,
what if situations, and other issues that arose. Exhibit H includes several of the presentation slide
examples used during the steering committee meetings.

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By 2008, HealthSouth had come a long way since the financial crisis that occurred in 2003. The financials
re-statement activities, while essential to HealthSouths return to financial health, started an evolution
in the approach to information technology. In the past, the corporate mentality was, You need a
report? Thats IT. You need a query? Thats IT. At HealthSouth, they were transitioning toward using
their information technology experts as advisors who explain to the functional business users how to
implement IT in the business process. The functional employees acted as liaisons to the ITG
technologists and the ITG technologists were better able to understand the clinical side of the business.
The assignment and definition of roles of each employee was critical during this time. This allowed the
functional business area employees to control certain aspects of the system that, in the past, were
inappropriately aligned with ITG. Previously, ITG had access to parts of the system that put the ITG
technologists at risk. Because they were not experts in the business processes in which they had access,
they potentially, could have made changes allowing others (or themselves) to perform illicit financial
transactions. The change of roles concept was to enable the business to take ownership of running the
business processes. In the production system, the ITG employees now only had read-only access and
were unable to update things in production without functional user authority. If they wanted to update
behind the scenes, they had to check out a user ID and have a request from a user authorizing the ITG
technologist to make the changes.

Post-Implementation
HealthSouth finished the move from PeopleSoft Financials 6.0 to PeopleSoft Financials 9.0 on-time (one
year) and on-budget. The executives (CEO, CFO, and CIO) formally accepted the project in January 2008.
The employees who worked on the project attribute its success in part to holding true to the focus or
scope of the project and not straying from that. Their goal was to implement this software as an uncustomized system and have it working within a year. HealthSouth, its external partner, its executives,
and its managers did so and did not allow the push and pull of normal organizational politics or personal
agendas to get in the way of implementing this project. Everyone worked together to achieve a greater
goal.
The company continued to use the SharePoint software well after the project was completed. As of
2009, it was still being used as a sort of wish list for future changes to the software or customizations
that they may want to explore in the future. It is also still used to track errors that may be encountered
with daily use. The managers at HealthSouth were able to provide documentation and answer questions
in developing this case study immediately using all of the information still stored on their SharePoint
site. The implementation experience of HealthSouth is the perfect example of how an implementation
or major change in organizational software should go.
As the ITG team continues to perform the Maintenance phase (SDLC) of the ERP system, they have
noticed improvements. Brannon shared some of her thoughts:
Post implementation support has been much easier than before as the IT staff is able to spend
time adding new functionality through new software installations instead of spending time in
daily maintenance and support activities as they did before due to the highly customized system.
For example, since the go-live [cutover date for version 9.0] we have been able to implement a
new automated Expenses reporting system and a cash management/bank reconciliation system.
We have also developed a regular schedule for applying Oracle's maintenance packs and bundles
(twice a year), which we were not able to do before. As a direct result of efficiencies gained from

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the implementation we have helped cut the month-end close out period by about 6 days (before,
it was running 15 days or so and now its about 8 days). Bottom line, our IT staff is much happier
because they can work on new things and also, I believe we support the business in a much more
efficient manner.
The benefits gained from implementing PeopleSoft 9.0 extended beyond the efficiency gains made
through the use of the new product. The IT governance processes now in place provide a streamlined
and controlled path for new IT implementations and changes to current systems. Users are more
knowledgeable about how information technology permeates the corporation. Both the ITG team
members and the other employees have a better understanding of each others roles in the information
management process; the functional business employees understand how the team members of ITG
support the company and the ITG team has gained a greater understanding of the corporate business
processes and practices. Brannon explains the gains made through this implementation:
Without upgrading the financial systems, we would not have been able to fully recover from the
financial fraud that had previously occurred. As mentioned, one condition of our re-listing as a
public company was the fact that we were implementing a new ERP system specifically around
financials. If that had not happened, we may not be where we are today stability wise. Of course,
senior and executive management had other things going on that have contributed to the
successful outcome the company has had, but I believe that upgrading the financial systems
played a huge part in that. We are back on schedule as far as company filings with the SEC and
quarterly earnings, [and all other reporting requirements]

Conclusion
What does todays HealthSouth look like? HealthSouth finished their implementation project on-time
and on-budget. The team was very successful considering the amount of pressure and work involved in
the project. With excellent organization skills, commitment, and the talents of those involved, the
project has continued to positively affect HealthSouths morale and stability today. While the
corporation-wide teamwork developed during the implementation of the new ERP system is not the
only variable factoring in the tremendous growth, it is likely the solidarity and affirmative relationships
built during this re-implementation will continue to have enduring effects on the companys value.

HealthSouth Case Study - Page 19

Exhibit A: HealthSouth Corporation Timeline

Figure A1: HealthSouth Graphical Timeline

HealthSouth Case Study - Page 20

Date
March 2003

Event
HealthSouth and CEO Richard Scrushy charged with
SOX violation and fraud

May 2004

Jay Grinney appointed as CEO

December 2004

Contract signed with PeopleSoft for version 8.8

software and training

January 2005

Oracle officially takes over PeopleSoft

January 2006

Management endorses PeopleSoft reimplementation initiative (to version 9.0)

October 2006

Re-listed with NYSE

January 2007

Begin upgrade process from version 6.0 to 9.0

January 2008

Upgrade process complete

Figure A2: HealthSouth Timeline

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Exhibit B: SEC Litigation Release

HealthSouth Case Study - Page 22

HealthSouth Case Study - Page 23

Exhibit C: Sarbanes-Oxley Act of 2002 (excerpt of Section 404)

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Exhibit D: Executive Support of Re-Implementation

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Exhibit E: Re-Implementation Organization Chart

*Edited for privacy

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*Edited for privacy

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Exhibit F: SharePoint Screenshot Examples

Figure J1: Initial home page screen (edited for privacy).

Figure J2: Phone List - Filtered to Include Core Team Members Only (edited for privacy).

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Figure J3: Sample Action Items List

Figure J4: Project Management Documents Folder

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Figure J5: Testing Documents Folder

Figure J4: Design Documents Folder

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Exhibit H: Scope Change Request Process

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Exhibit H: Scope Change Requests Tracking Log:

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Exhibit I: Progression of System Development

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HealthSouth Case Study - Page 37

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Exhibit J: Steering Committee Meeting

Agenda

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Appendix A: Suggested Readings

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Human Relations, 46(6), 681.
Bloom, B. , Krathwohl, D. , & Masia, B. (1971). Taxonomy of educacional objectives-Handbook IIAffective Domain.
Davis, F. D. (1989). Perceived Usefulness, Perceived Ease of Use, and User Acceptance of Information
Technology. MIS Quarterly, 13(3), 319-340.
Davis, F. D. , Bagozzi, R. P. , & Warshaw, P. R. (1989). USER ACCEPTANCE OF COMPUTER TECHNOLOGY: A
COMPARISON OF TWO THEORETICAL MODELS. Management Science, 35(8), 982-1003.
Goodhue, D. L. (1995). Understanding User Evaluations of Information Systems. Management Science,
41, 1827.
Goodhue, D. L. , & Thompson, R. L. (1995). Task-Technology Fit and Individual Performance. MIS
Quarterly, 19, 213-236.
Jarupathirun, S. , & Zahedi, F. (2007). Exploring the influence of perceptual factors in the success of webbased spatial DSS. Decision Support Systems, 43(3), 933-951.
Judge, T. A. , & Piccolo, R. F. (2004). Transformational and Transactional Leadership: A Meta-Analytic
Test of Their Relative Validity. Journal of Applied Psychology, 89(5), 755-768.
Mabert, V. , Soni, A. , & Venkataramanan, M. (2003). The impact of organization size on enterprise
resource planning (ERP) implementations in the US manufacturing sector. Omega, 31(3), 235246.
Rainer, R. , & Turban, E. (2009). Introduction to Information Systems Supporting and Transforming
Business. 2nd Editon: John Wiley & Sons Inc.
Richman, L. (2006). Improving Your Project Management Skills: AMACOM Div American Mgmt Assn.
Rubin, R. S. , Munz, D. C. , & Bommer, W. H. (2005). LEADING FROM WITHIN: THE EFFECTS OF EMOTION
RECOGNITION AND PERSONALITY ON TRANSFORMATIONAL LEADERSHIP BEHAVIOR. Academy of
Management Journal, 48(5), 845-858.
Umble, E. , Haft, R. , & Umble, M. (2003). Enterprise resource planning: Implementation procedures and
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Zigurs, I. , & Buckland, B. K. (1998). A Theory of Task/Technology Fit and Group Support Systems
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