Why Use Employment Practice Technology?

As technology jets human resources into an entirely new landscape of strategic possibilities, HR systems visionaries are eagerly surveying the terrain. Alfred J. ("Al") Walker, senior consultant with Towers Perrin and editor of the new book, Web-Based Human Resources (McGraw-Hill, 2001), sees much in store for the future of online HR. Among the observations Walker recently shared in a chat with Associate Editor Jill Elswick: Web-based HR will allow "mass personalization" of benefits communications, benefits professionals will delve more into plan-design strategies, and highly integrated systems will ease the total rewards concept.

Think back to the last time you filled out mountains of paperwork for various benefits plans merely to change an address, add a dependent or switch insurance providers. Remember your employees attending open enrollment meetings, calling the HR department for additional benefit booklets, and applications. And the time it takes to keep up with cafeteria plan, 401k, and medical insurance premium deductions?

How about those monthly chores such as keeping up with who is eligible for benefits and reconciling eligibility against the benefit carrier's billing. Not to mention the paperwork in managing Cobra, HIPAA and FMLA etc.

That stack of forms is more than a nuisance. It is a big expense to the company. In fact, American employers spend an average of $13.89 per employee every month just to administer benefits paperwork. With online employee benefits processing, this cost can be slashed to $2, because data only has to be entered once. And staffers can be freed up for other tasks - resulting in dramatic improvements in the bottom line.

Analysts predict that in five years at least half of all employees nationwide will participate in an electronic benefits management system. Clearly, we're witnessing a paradigm shaft into electronic employment practice, a bonanza for employers in savings waiting to happen.

Case studies of leading major companies, their efforts and results

One major employer moving ahead with online benefits communication is Lucent Technologies Inc., headquartered in Murray Hill, N.J. In 1996, Lucent launched its "Benefit Answers" web site, where U.S.-based employees can learn about their benefit plans by clicking through extensive pull-down menus of options that point employees to the answers they need.

Essentially a giant but highly organized destination containing SPDs, the site is segmented into what Barbara Hockfield, director of HR compensation and benefits communication, calls "logical buckets" of information:

• "Health and wellness," where employees can pick a plan, ranging from company offerings in life insurance to vision care, and select specific topics from pull-down menus.
• "Earnings and savings," which describes 401(k) and employee stock ownership plans, among others.
• "Life@work and home," which deals with work and family benefits
• "Changing needs," which directs employees through benefits changes caused by events such as getting married, becoming a parent, taking a leave of absence, changing job status or dealing with elder care.
• "Benefit links," which puts employees in touch with Lucent’s benefits providers and other programs.

For example, putting a 40-page SPD online could equate to 400 screens of information. The company shaved the amount of information appearing per page to create more readable fact screens. The online version is designed for fast navigation, with employees averaging only three clicks to get the answers they seek.

"We really went for simplification," Hockfield says. "It’s kind of like building a Lego system." The site allows employees to print out any SPD information at any time. To ensure that everyone, with or without a computer, is alerted to changes in the benefits plan, HR notifies all employees by e-mail or postal mail of SPD changes. The company estimates it saved $1.2 million the first year it put SPDs online.

A key difference between Lucent’s system and some others: Lucent communicates benefits information via the Internet, not just the corporate intranet. In other words, Benefit Answers is available for viewing by anyone via the Internet—it’s not just residing behind Lucent’s secure computer "firewall," though outsiders cannot see Lucent employees’ personal data.

"We want to reach new recruits, new hires and re-tirees," explains Hockfield. "To go forward profitably, productively and competitively, making this information widely available gives us an advantage overall."

"Through an interactive question-and-answer tool on the company’s intranet, employees logged on to the system’s "Plan Finder" to weigh the merits of different benefits and criteria, such as cost, coverage, customer service or performance. The tool sorted through dozens of different health plans offered by the company, used data and choices supplied by the employee and then returned a view of preferred plans, ranked and graphed.

Web-based enrollment was just as attractive to the company, which saved about $1 million last year in costs associated with delivery of benefits information, Brandow says.

MITRE CORP., AN independent, not-for-profit company, provides federal agencies with system engineering and information technology expertise. Founded in 1958, the Bedford, Mass.-based company's more than 4,000 employees support four primary customers: the Department of Defense, the Federal Aviation Administration, the U.S. intelligence community and the Internal Revenue Service.

In June 1994, Mitre began work on a corporate intranet with the goal of transforming the company from a culture that fostered intellectual fiefdoms and internal rivalry to one with an accessible corporate knowledge base and intellectual collaboration. As a provider of intellectual capital to government agencies, company executives felt that collaboration was imperative to Mitre's long-term success. In May 1995, the corporation debuted its Mitre Information Infrastructure (MII) company wide. Three years later, in an effort to make sure that its goals were being achieved, Mitre began a post-implementation audit of the evolving MII system to capture both its tangible and intangible benefits. (Mitre won a CIO Enterprise Value Award for the system. For more on the MII, see "Common Knowledge," CIO, Feb. 1, 1999.)

To date, Mitre has invested $7.2 million in the MII, netting an ROI of $62.1 million in reduced operating costs and improved productivity. But financial impact represents only part of the story. According to Al Grasso, vice president and CIO, "Our most important gain can't be as easily measured—the quality and innovation in our solutions that become realizable when you have all this information at your fingertips."

In order to gain a complete picture of the system, Mitre conducted an analysis not only of the hard financial benefits but also of the soft benefits the system provided specifically, how the MII helps employees collaborate more effectively. "To deliver technical excellence, it's essential for us to share information. It's how we bring all our resources together to solve problems for sponsors," explains Mark Maybury, director of artificial intelligence and executive director of the IT division for Mitre. "Our high-level objective with the MII is to make it easier for people to give information to others and to use information from others to solve the next problem that comes along."

Reduced Operating Costs

In all, the MII has enabled Mitre to save $16.6 million in labor and material costs since 1996. The savings are allocated as follows: (human resources and administration ($5.6 million), information systems management ($2.9 million), financial operations ($3.6 million), technical operations ($2 million) and miscellaneous other services ($2.6 million).

The Cost Question

The advantage for large employers like Lucent and IBM is they can afford comprehensive self-service systems. For others, the main barrier to online delivery of employment practice and benefits information is cost.

Last year’s survey by The Hunter Group found that the average company polled spent about $1.5 million on employee self-service systems, with per-employee costs ranging from $35 to more than $1,600, depending on company size and the type of solution used.

Implementation times for online benefits delivery ranged from three months to two years, although the survey found that time and associated costs were reduced by up to 20 percent when application service providers handled the project.

Using service providers is one way that smaller firms can take advantage of online benefit communication. These providers can host and supervise clients’ web sites, customizing the content, plans and programs, and handling employee transactions such as enrollments or pension calculations. 

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