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ISSUES AT LARGE - Personnel Connections

ISSUES AT LARGE - Personnel Connections

In an effort to make their humans feel like valued resources, many companies give workers free turkeys around the holidays. But Olin Corp. tops that by a mile. In 1995, the company's Chlor-Alkali division in Cleveland, Tennessee, gave each of its 1,300 primarily blue-collar workers a new, US$2,800 home PC, and the division continues the practice with all new hires.

The extraordinary giveaway helps employees become familiar with PCs in a comfortable environment, and it is part of Olin's broader plan to use information technology to modernise and improve efficiency. One key cost-saving system at the company is a self-service intranet that lets employees look up their own benefits information using browsers and the World Wide Web. For instance, the company now pays all employees electronically, and workers find their payment stubs online. This feature alone saves Olin $65,000 a year in postage costs associated with mailing out the stubs, says Mike Gilley, vice president of human resources at the Chlor-Alkali division. "There was resistance from some at first-people like holding their check stubs. But now it's second nature to them," he says, adding that learning computing skills in their own homes, often with their children's help, has gone a long way toward decreasing people's resistance.

In this information-driven age, highly skilled employees are more valuable than ever before. To help employees gain skills and to retain those who have them, companies are offering more creative and elaborate incentives, training and benefits options. The increasing complexity of benefits plans naturally leads to escalating costs and efforts involved in administering them. According to a survey of 500 organisations conducted by The Bureau of National Affairs Inc. and the Society for Human Resource Management, U.S. businesses spent $994 on average per employee on human resources activities and programs in 1997, not including the actual cost of the benefits. That represents a sharp increase from $762 per employee in 1996, according to the survey. For those who haven't paid attention to this often overlooked field, human resources departments typically administer health insurance, workers' compensation, payroll processing and staff recruitment. They also provide 401(k) supervision, strategic consulting on workforce development, legal guidance on employment regulation compliance and tax services.

Now companies like Olin are at the forefront of a movement in corporate America to use the Web to help streamline human resources administration in hopes of providing better service while stemming rising costs. The range of HR services going online extends from employee self-service tasks such as updating addresses to sophisticated management services such as teaching division heads how government regulations affect hiring practices. Forrester Research Inc., a market researcher based in Cambridge, Massachusetts, estimates that a firm with $10 billion in annual revenues can earn back a $1.2 million startup investment in an HR self-service system in roughly one year via reduced paperwork, printing and staffing costs. Most companies do not perform such rigorous cost justification exercises for these systems, but they cite general benefits such as serving growing employee populations and providing better service without increasing HR staff, refocussing HR staff on more strategic duties, reducing costs of processing transactions and improving access to data for managers and employees. And like Olin's $65,000 a year in postage savings, there is enough spot evidence of hard returns to convince executives that such systems are worthwhile.

Reaping similar rewards is not necessarily easy, however. It takes careful thought to prepare the workforce for changes in how their human resources programs are run. After all, most workers are motivated by pay and benefits, and paper forms and human voices have been the interface between companies and employees since the initials "HR" first came to signify "human resources." Replacing the paper documents and voices with Web browsers and hyperlinks can frustrate and scare the unprepared, many of whom consider the Internet an unsafe place for personal information, even when the data is protected on an intranet.

In addition, the technology for providing top-notch HR self-service systems is still evolving. Industry analysts say today's software packages either superficially cover a broad set of functions, such as letting employees sign up for health-care coverage, or they deeply cover a narrow set, such as explaining in detail the minutiae of specific health-care plans-but none covers all bases.

Needless to say, this can limit their usefulness. For instance, if employees can use the system to pick from a list of 10 health-care providers, but there's no way to access keybackup information on the providers, they'll call HR information and won't bother with the system next time, says Tom Gormley, senior analyst in the packaged applications strategies practice of Forrester.

Still, companies that approach Web-based HR systems with plenty of forethought are finding that the gains outweigh the hassles, making this area an increasingly hot candidate for using the Web as a business efficiency tool.

Companies vary in their approaches to putting HR services on the Web, but the most common items to put online first are Web forms for tasks previously transacted using paper forms, such as making changes to personal information.

Typically, firms that do so have installed the HR portions of business management systems from companies such as The Baan Co., Lawson Software, Oracle Corp., PeopleSoft Inc. and SAP AG. Within the past two years, these vendors have adapted their systems so that people with Web browsers can view and update data, making it relatively simple to extend Web access to employees' HR information.

For example, electric utility Carolina Power & Light Co. in Raleigh, North Carolina, installed a PeopleSoft HR management system in 1996. The company wanted to let employees update their personal information and look up job postings online, but the IT department didn't want to have to maintain PeopleSoft desktop software for 6,400 employees. So in early 1997 the utility, working with systems integrator NexGen SI Inc., Web-enabled its PeopleSoft applications in order to let employees review job postings, employee biographies and benefits information notices via the company intranet. Since then, the company has added the ability to check vacation days and "wellness" credits (reimbursements for healthful activities such as health club memberships) and has put paycheck stubs online. In the planning for next year are online performance appraisals, 360-degree feedback and pension revision programs that let employees conduct "what if" scenarios for their retirement plans, says John Gray, supervisor of human resources information systems at Carolina Power & Light. The PeopleSoft system enabled the utility to centralise administration of the HR function, and the Web self-service aspect reduced administrative trivia to the point that 12 people in a call centre can now handle the questions that roughly 50 people in distributed divisions used to handle, albeit not full-time. Now the remaining HR staff is freed up to pursue more strategic initiatives such as recruiting. "The fact that we can provide this information online in a Web format means we can provide a valuable service to employees with fewer people and less processing," Gray says.

That's a goal shared by most companies. HR departments characteristically spend 70 percent of their time answering repetitive questions, according to GartnerGroup Inc., a market-research firm based in Stamford, Conn. By letting employees access their own data, HR staff can spend more time attending to more vital tasks. A Web-based self- service intranet also can offer higher quality service because people get answers more quickly and more consistently than if they talk to potentially bored old-timers or inexperienced fresh hires on the HR help desk. And the intranet is available around the clock-a boon for international firms-and it improves people's ability to find each other in big organisations. At San Antonio, Texas-based insurance and financial services organisation USAA, for example, one way CIO Donald Walker uses the HR intranet is to look up names, profiles and pictures of employees. "We have such a large organisation, it's hard for me to learn everybody's names," Walker says. "So when I get a message saying, 'Joe was critical to a project,' I look him up and say 'good job.'"Another process that companies often move online first is recruiting. Companies seek good candidates by posting positions internally and externally and soliciting résumés electronically. "The days of going out and buying expensive paper for your résumés are over," says Jenni Lehman, research director for applications of technology at GartnerGroup. Some packaged applications, such as those from Resumix Inc. and Restrac Inc., help manage large databases of résumés by performing sophisticated searches and ranking the findings by relevancy. One service, Alexus International Inc.'s Networker, lets companies that have outsourced their résumé processing to Alexus both contribute unused résumés (with the candidates' permission) to a Web-accessible database and search that database themselves for candidates that better meet their immediate needs.

A handful of leading-edge companies are taking Web-based HR applications a step further by providing call centre staff, employees and managers with customised benefits and HR policy information needed to make important decisions. For instance, a manager might need to know whether an employee's complaint qualifies as a discrimination issue. To support these advanced Web services, companies are building so-called knowledge systems that link employee data from transaction systems such as PeopleSoft with sophisticated databases of information on executive compensation, discrimination, international employment practices, government rules and regulations and so on. The systems also link to the Web sites of benefits service providers such as Aetna Life Insurance Co. of America and Fidelity Investments, where employees can get more detailed information on retirement investment plans such as 401(k) mutual funds.

A leading vendor in HR knowledge-base systems is Foundation Technologies Inc. of Waltham, Massachusetts. The company's product, called Beneflex, comes with built-in databases, or "knowledge bases," that contain customable HR information, such as general models about how health plans work. Beneflex also lets companies link knowledge bases to individual employee data, so employees get a customised Web page when they log in to the HR intranet.

Two large Foundation customers, Sears, Roebuck and Co. and Ford Motor Co., may make such knowledge bases available to all employees via the Internet eventually, but they are beginning by rolling them out on HR call centre intranets. Both companies want to make certain the systems work well and answer the right questions before spreading them more broadly.

For instance, over the past year, Sears has put thousands of pages of documents about benefits and health plans into the knowledge base used in its Tucker, Georgia., human resources call centre. Now, when one of Sears' 335,000 employees calls, a staff member uses the intranet to quickly answer questions, regardless of what health plan or benefits program the employee is enrolled in.

Previously, the call centre staff had to take a message, then shuffle through myriad books and manuals to find the answers to questions, says Ken Millen, director of human resources services at Sears.

For Sears, the main benefit of this system is not direct cost savings but the ability to centrally support a business strategy of diversification. When CEO Arthur Martinez joined the troubled retailer in 1992, it essentially had a one-size-fits-all benefits plan. Martinez diversified Sears' business through acquisitions and new business launches. The HR department needed different benefits plans to address recruiting and retention needs in the different lines of business. The call centre application is one step in a larger plan to improve administration of the increasingly elaborate stew of benefits options.

"Sears is [a set of] different companies with different target markets and different kinds of people and skill sets needed. And that plays in to a need to tailor not only things like pay and benefits programs but everything that makes up the relationship with associates," Millen says.

Likewise, Ford is using the Beneflex system in its call centre and plans to roll out a full-service upgrade of its current HR intranet to some 330,000 employees and a roughly equal number of retirees by the middle of 1999. The call centre application lets representatives look up benefits and HR policies based on the caller's salary grade, union status and other factors. When Ford makes the system available at large, users will be able to view their pay stubs online and conduct transactions such as changing addresses. According to Tod Loofbourrow, president and CEO of Foundation Technologies, Ford is the largest company rolling out an employee self-service HR application on national basis.

Providing this level of Web-based HR self-service is no mean feat. Sears plans to integrate the Beneflex knowledge application with its PeopleSoft HR management system and a self-service voice response system from Edify Corp.

Sometime in the future, when an employee calls and uses the phone to enter his or her Social Security number, a Web page with the caller's personal benefits plan will pop up on the call centre representative's desk. "But it's going to take some time to connect all the pieces together," says Gail Holmberg, director of HR systems for Sears in Hoffman Estates, Illinois. She explains that her staff will have to hand-code scripts that enable the different programs' databases to exchange information.

Ford also has a big integration job ahead before it can launch its full-service HR Web system. Employees are spread around the world. Some are unionised, some are salaried. Many different systems, from new PeopleSoft systems to older, custom-coded ones, furnish HR data. "Pulling that together and presenting it simply and concisely to an employee is a difficult task," says Geoffrey Scott, supervisor of human resource information for Ford in Dearborn, Michigan. One method Ford is considering is to use scripted rules to present custom interfaces for each employee.

Another technical hurdle is extending Web access to employees who don't have PCs on their desks. In addition to giving employees home PCs, Olin's Chlor-Alkali division set up semiprivate workstation kiosks for its workers without regular PC access at work. At Sears, most sales associates don't have PCs, and the overall cost of technology will have to come down radically before the company makes the HR intranet universally accessible, Holmberg says.

And, of course, companies must set up a self-service culture. To get employees excited about its HR intranet, Carolina Power & Light created a videotape hosted by a claymation character who explained what employees could do with the new system and why the company created it. The company mailed the videotape plus a booklet and training programs on floppy disks to all of its employees' homes in December 1996. The video caused a buzz, and callers soon contacted the project team with their concerns. Primary among them was whether their data would remain private.

In January 1997 the company brought the intranet online, but the transition wasn't entirely smooth. "We also went live with a conversion to Microsoft Office, and users were still suffering hangover from that. There were many changes hitting them at the same time," says Gray. The utility's help desk assisted workers in overcoming their anxieties and technical issues one question at a time. Now users are accustomed to the system and employ it to answer many of their own questions.

Indeed, the Web is helping companies like these concentrate more on their core businesses and less on HR, while still enabling them to keep strategic HR services in-house. "We needed to get people focused on the fact that we are in the chemical business. We're not in the payroll business, we're not in the print or paper business. Those are things that we needed to automate yet still provide," Gilley says. The Web, because of its broad access and familiar browser interface, is the right technology at the right time for doing so, he says, but only if a company has built the right culture first.

Fear of Prying

When it comes to putting HR information online, privacy concerns aboundMiscreants can collect personal data from many sources, but there's something about knowing that information is on the Web that makes folks nervous. Perhaps it's the fact that there is no physical separation between online information and potential hackers. Or perhaps it's the fact that unlike paper, electronic records have a way of lingering even after being deleted. Whatever the reasons for the mistrust, employees' privacy misgivings constitute the largest nontechnology hurdle to jump when making human resources and benefits information available on the Web.

Carolina Power & Light Co., for example, had considered putting employee photographs on its HR intranet, but privacy issues put that on hold. "Some employees just don't want their pictures out there," says John Gray, supervisor of human resources information systems at the utility in Raleigh, North Carolina.

Computer industry experts assert that such feelings are unfounded, noting that the people who worry about giving out their credit card information over the Internet often have no trouble giving it to a stranger in a restaurant or over the phone. "Privacy to some extent is a red herring because most employee data is already in electronic form somewhere," says Geoffrey Bock, a senior consultant specialising in electronic commerce at the Patricia Seybold Group in Boston.

Of course, experts say, companies must set up proper protective rules and technical systems. At Sears, Roebuck and Co.'s human resources service centre in Tucker, Georgia., employee information is protected by identity numbers and pass-code numbers like those used in the financial industry to protect money, says Ken Millen, director of human resources services.

HR and IT managers must also consider regulatory requirements. Among them are complex Equal Opportunity Employment Act rules and strict new European Union (EU) privacy laws, says Jenni Lehman, research director for applications of technology for GartnerGroup Inc. in Stamford, Connecticut. "The EU laws are strict beyond what's available in technology today," Lehman says. For instance, if a travelling executive downloads company directory information while in a country other than his home base, he may be breaking new EU laws about employee privacy, she says. (For more on these requirements, visit the International Association for Human Resource Information Management's Web site at http://www.Ihrim.org.) On the positive side, many HR managers report that in time, employees do become more relaxed about the existence of their personal and benefits information on the Web. Says Mike Gilley, vice president of human resources at Olin Corp.'s Chlor-Alkali division in Cleveland, Tennessee., "Privacy is a continuing concern, but people are getting more and more comfortable."How It All Adds UpSelf-service HR systems can be well worth the investment © Initial development Self-service platform license and implementation 414,000 Content-intensive applications licenses and implementation 300,000 Development team for six months 139,650 Server hardware and public PCs 350,000 [total startup costs $1,203,650] © Annual maintenance and operations Software upgrades at 18% per year 153,657 Ongoing content and technical staff 126,350 Public PC maintenance 150,000 [total ongoing costs $430,007 per year] © Annual savings Elimination of benefits and payroll paperwork 180,000 Elimination of 75% of printing employee and manager manuals 112,500 Staff reduction 790,020 [total annual savings $1,082,520 per year]Source: Forrester Research Inc. Estimates are for a company with $10 billion in annual revenues, 15,000 U.S. employees across 9 sites,60 percent with PC and intranet access, and PeopleSoft HR management system fully implemented.

(Lynda Radosevich is a senior editor at InfoWorld. She can be reached at lynda_radosevich@infoworld.com.

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