Managing HR administration for large to medium-sized corporations in today's highly competitive environment is similar to the challenge facing the Olympic athlete. The principles are the same-only the terminology is different. Today's HR administrators rely on the skills and expertise of their staff, who must continuously sharpen their capabilities through training and development. They must be supported by the most appropriate technology and must be able to adapt quickly and efficiently to a changing operating environment. They must analyze their own as well as their competitors' strengths and weaknesses. Finally, they must develop an operating strategy that takes all of these into account, along with corporate capabilities, culture and long-term objectives.
Below, Robin Lissak-managing director of HR information technologies with Lyndhurst, New Jersey-based Alexander & Alexander Consulting Group-shares his insights on technology and HR administration.
Although it might seem obvious to the highly experienced manager, in practice the issue of goals frequently becomes not "How can I go for the gold?" but "How can I just manage to stay in the game?" The continuing trend toward wholesale insourcing or outsourcing of HR administration to systems integrators or other service providers is a reflection of administrators' attempts to stay in the game. In my experience as an HR information technologies consultant to major corporations throughout the United States, I've come to recognize that it's time for a more enlightened approach to effective HR administration. By taking a fresh new look at the way you approach the problem-by determining exactly what's the best practice for your organization given its particular strategic objectives and operational parameters-you stand a much better chance of winning the gold.
Just what is best practice?
Best practice doesn't mean just purchasing and installing expensive, state-of-the-art technology. Nor does it mean outsourcing your entire HR administration to the service provider that comes in with the lowest bid or the one that your closest competitor isn't using. Best practice means satisfying a complex equation-unique to your organization-that includes the following variables: the level of service you wish to deliver to your employees, the cost that fits comfortably within your budget, your existing resources (including systems and personnel), your corporate culture and your overall corporate strategy.
This isn't to say technology doesn't play an important role in solving the equation, but like the Olympic athlete's equipment, it must be the right technology, it must be used properly, and it has to make sense in the context of overall strategy.
Consider this scenario: You're presented with a proposal-solicited or unsolicited-from your own staff, an outside service provider or consultant, or from your corporate reengineering task force. The basic premise of the proposal is to automate HR administration using the latest technology and save the company lots of money. Now, how do you go about evaluating the proposal? Even more difficult, how do you compare this proposal with a similar one you reviewed the week before?
Most senior business managers have been trained in classical cost-benefit and activity-based cost analyses. These standard analytical tools compare the hard- dollar costs estimated for the proposed changes with the costs of the existing arrangement. Although these tools are very useful for many day-to-day operational and purchasing decisions, my experience has revealed that for so all-encompassing a decision as reengineering HR administration, neither cost-benefit nor activity-based cost analysis results in a decision that can be implemented with confidence. They fail to take into account three factors: the value of the improvements in service; the indivisible costs of resources, such as systems and personnel that are shared by different departments or operating divisions; and most important, the current hidden or soft-dollar costs that simply can't be identified or accurately valued.
Going for the gold means thinking smart.
To win a gold medal in HR administration you must sometimes adjust your way of looking at things. I decided this after a recent meeting with the vice president and controller of a large industrial concern. On his desk was a proposal for a 10-year contract with an outsourcing partner who would reengineer his HR department and completely run his benefits administration. This arrangement would cost the firm $7 to $8 million, which would take a substantial bite out of the corporation's annual capital budget. Before seeking approval for the contract, he had to make sure he could sell it to management, and his reasoning had to be airtight. This very astute controller decided to abandon traditional cost-benefit and activity-based cost analyses and take a less tactical, more strategic approach.
Over the course of our consultation, we discussed a series of questions that would shape his analysis. Here's a sampling of the issues we discussed:
- Do we have an existing core competence (skills and expertise) in compensation and benefits management enhancing stockholders' value?
- What is the strategic importance of this project compared to other proposed capital projects and in relation to managing our overall capital structure?
- What are the minimum requirements in terms of technology, programming, organizational structure, critical paths and time to achieve the desired improvements in administration?
- What does our ideal centralized service center look like in terms of technology: computers, database, interactive screens and phones?
- Which systems (HRIS, payroll) would drive the data consolidation, and what are the relative costs and benefits of each?
- How do we compare this proposal with the option of doing everything in-house with respect to value added, service levels and risks-such as loss of control, flexibility and skills?
- If we approve this contract, how do we minimize the risks and maintain flexibility?
- What benchmarks in benefits administration do we currently find in practice in our industry? In the marketplace as a whole?
This example is important because it demonstrates the type of integrative, strategic thinking that produces gold-medal results. My client realized he couldn't perform a meaningful analysis of that proposal without looking far beyond the immediate problem that it was intended to solve. Instead, he had to determine what would be the best practice for his company as a whole. As a result, the contract in question wasn't signed.
A silver medalist goes for the gold.
In the HR Olympics, everyone can be a winner. A large service corporation recently consulted with us about its benefits administration. In a well thought out move to cut costs and improve service, management had just completed outsourcing agreements with two separate providers to administer its four distinct benefits plans. Management was more than pleased with the results-a savings of more than 25% a year. Still, they had lingering concerns about maintaining the quality of benefits and service to employees over the long term. After all, the HR department had just been downsized, but the workload stayed the same-and there was still a need for additional services and improvements in certain competencies. Management firmly was convinced additional money could be saved. Clearly, this was a case in which a few highly strategic moves, combined with improved technology, could make the difference between just a winner and a true champion. We performed a comprehensive operations review. Within 60 days, management had accepted our recommendations. As a result, the company realized an additional 8% savings per annum. Now that's going for the gold.
Personnel Journal, February 1996, Vol. 75, No. 2, pp.99-101.