VideoAn increasingly vocal chorus within the industry is calling for the boring old HR department to be updated into a shiny, strategic function that helps companies achieve their most-vital missions. Given that employees are expensive (according to data from the Saratoga Institute, people costs — compensation, benefits, and HR itself — represent 43 percent of the average corporation's total operating expenses) and difficult to manage efficiently (PeopleSoft claims that a corporation with annual sales of $10 billion is likely wasting $231 million a year on HR processes, which can run the gamut from excessive recruiting fees to overpaid benefits), the time seems ripe for change.
Some say it's already starting to happen. "In the last 18 months, we've seen a real evolution from HR as an administrative, back-office responsibility to a role that can affect enterprise performance," says Mark Lange, a vice president of global product marketing at PeopleSoft.
A recent white paper from Cedar eWorkplace Research Group shows that self-service applications reduce HR costs by anywhere from 44 percent to 80 percent, depending on the application. In 2000, General Motors launched a Web-based employee portal that has helped reduce the company's costs by millions of dollars, according to Kathleen Barclay, the company's vice president of global HR.
The GM system, known as mySocrates for its ability to impart information, was built around software supplied by Workscape. Barclay calls it a "big-bang step" in the company's HR strategy. "Not that many years ago, we spent a lot of time on very necessary tasks that we do address today, but in a different way," she says, pointing to such things as payroll, benefits administration, and answering policy questions. "Technology is a big lever for these," she says.
Big indeed. Automating just one small task — how employees update their emergency-contact information in their file — now saves GM nearly $150,000 a year, says Barclay. Automating a slightly larger task — how managers authorize subordinates' pay raises — saves an estimated $650,000 a year. Moving technical training for GM's dealers from classrooms to satellite-fed monitors in the dealers' own service bays has cut the cost of supplying the training from $89 per student hour to just $38. Last year, GM provided more than 1 million hours of training this way, saving $50 million.
Costly Catch-Up
The original concept for mySocrates sprang from an interdisciplinary committee with representatives from GM's finance, IT, HR, manufacturing, product-development, and engineering departments. When the committee was able to show the Automotive Strategy Board how the system would support a broader HR, the project was approved.
E-HR also has a role in melding once-disparate workforces into a cohesive unit. Financial-services giant Wells Fargo installed what it calls its Ask HR system following its 1999 merger with Norwest. The system is one part standardization on PeopleSoft's payroll and HR applications and one part employee self-service, using Authoria software. Building the system, converting the files, and getting all 130,000 employees to reenroll was a "ton of work," says Carol Johnson, HR technology manager with Wells Fargo.
Yet it was so successful that the original plan — provide service-center representatives with Web access to key HR information — was expanded so that all employees now have access to benefits and payroll files. That lets the company do things it could not do before, at least not easily. For example, a Life Events database tells employees who are expecting a child how to get a Social Security number for their newborn. Another page, called Personal Profile, contains secured information on employees' jobs, payroll, and benefits, so they can check to see whether they got that extra week of vacation.
Another major E-HR driver is underinvestment in any form of HR. Take PSS/World Medical, a medical supplies and equipment distributor in Jacksonville, Florida. The company, founded in 1983, grew its sales from just $30 million in 1989 to roughly $1.2 billion today. Impressive, but not without a downside. HR remained a paper-based department, one so muddled that it was a "complete nightmare," says Jeff Anthony, who oversees HR as the company's senior vice president of corporate development.
"It would take us 6 to 7 weeks to get employees the benefits-enrollment forms and information, and another 8 to 10 [weeks] to clean up what they passed in." An internal audit revealed that PSS/World Medical had overpaid more than $180,000 in administrative fees to a medical insurer because it listed the wrong number of employees. In another snafu, some employees were receiving their paychecks days, or even weeks, late. One year, the company paid out approximately $600,000 in unused vacation time to departing employees because it lacked a system to track that information.
One result of this accounting chaos: nearly half of PSS/World Medical's employees were quitting every year. That was bad enough, but each time the company replaced one of those employees, 20 new pieces of paperwork had to be generated. Anthony estimates that his company was generating nearly 60,000 pieces of HR paperwork a year.
He was tapped to fix the mess, and saw automation as the way to go. With a thumbs-up from then-CFO David Smith (today the firm's CEO) and the executive committee, Anthony brought in software vendor Employease, and by September 2001, a new system was in place. Now paychecks roll out on time, enrollments proceed smoothly with the use of self-service technology (during a recent benefits-enrollment drive, the company's roughly 3,100 employees made fewer than 30 errors in total), and employee turnover has shrunk to just 8 percent.
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