Because of human resources snafus, as many as 2,000 employees or about 35 per cent of its 5,000-person workforce were leaving PSS World Medical Inc. each year. And many of those workers were leaving within just a month of hire.
The Jacksonville, Fla.-based medical supplies company required new workers to fill out 17 separate forms. The human resources department processed about 85,000 pieces of paper annually, including forms for insurance enrolment, vacation requests, tax withholdings and payroll.
As often as not, those forms were getting lost in the shuffle, according to Jeff Anthony, senior vice-president of corporate development. The result: New hires sometimes went unpaid or were denied insurance coverage because their initial forms weren’t processed correctly. “HR was one of the most poorly performing departments in the company,” Anthony says bluntly. “And I should know, because I’ve been here 11 years.”
To stem the tide of paperwork and employees, PSS World Medical rolled out a Web-based, self-service human resources system outsourced from Employease Inc., an Atlanta-based application service provider. Now, new employees have to sign only four pieces of paper. Working with their managers, they fill out the rest online, and the time for processing new hires has been cut drastically, from seven to 10 days to less than an hour.
PSS World Medical is one of a growing number of companies turning to self-service applications to cut costs, reduce paperwork, streamline processes and increase productivity. By enabling employees to conduct their own online transactions from updating HR information to buying supplies and booking corporate travel these companies are easing managers’ day-to-day burdens, capturing information about their workforces, getting more out of their intranet investments and even generating incremental revenue.
Taken together, the measurable hard-cost savings and the harder-to-quantify improvements in operations generated by self-service applications can yield a considerable return on investment, users say.
In particular, self-service human resources applications have caught on at large companies because employees see them help reduce costs and streamline processes, as well as offer employees a convenience that creates buy-in to the self-service concept. A first-quarter survey of 100 Fortune 500 companies by human resources consulting firm Towers Perrin found that HR applications are among the most common self-service packages: 60 per cent of respondents said they allow employees to complete benefits enrolment online, 80 per cent enable 401(k) allocation changes online, and 43 per cent allow employees to change their personal data online.
Hewlett-Packard Co. has embraced self-service HR as part of a companywide effort to reduce infrastructure costs by US$1 billion over two years. The applications, rolled out last fall, are part of a full-blown business-to-employee portal that, in addition to handling HR functions, lets employees purchase supplies and, eventually, plan and schedule their own business travelling. The manufacturer’s portal, dubbed @HP, has corralled 4,700 separate intranet sites into 180, while extending uniform self-service transactions to all employees across the company based on their individual roles.
“We could have taken the traditional route of looking for more cost efficiencies and gone through a traditional cost reduction process,” says Barry O’Connell, general manager for HP’s business-to-employees solutions. “But we thought it better to use the Net as a tool to change the way we run the business. Just as the Net has changed B2B and B2C, we wanted to look at the processes we manage internally and [how they could be improved] if we had a direct connection with employees.”
With an overall investment in the portal of about US$20 million so far, the human resources components alone have saved the company an estimated US$50 million, O’Connell says.
Giving employees online access to human resources processes takes a lot of pressure off the HR department and increases the accuracy and timeliness of employee data, Towers Perrin found. More than 75 per cent of the survey respondents reported that benefit enrolment transactions are more accurate online. The ROI that can be drawn from increased HR accuracy can be significant, including cost reductions, productivity improvements and higher employee retention.
PSS World Medical expects to reap US$800,000 in savings this year from its new self-service system. That’s because the company’s previous human resources snafus were creating tremendous overhead. For example, lost paperwork generated astronomical overnight-mail fees, as the company rushed to appease disgruntled new hires who hadn’t received their first paycheques, Anthony says. When employees left the company, HR often couldn’t prove whether they had taken their vacation time, so the company ended up cutting a check for it. Because of manual processing delays, PSS World Medical continued to pay insurance fees for employees after they were gone.
“It’s very unprofessional to lose an employee’s paperwork and not be able to pay,” says Gil Howie, a PSS World Medical project manager in Louisville, Ky., who has seen his share of employees leave in a huff. “I don’t think we’ll ever have any more lost paperwork. It has made my life as a manager much easier.”
PSS World Medical paid US$20,000 upfront to join the Employease Network and pays a monthly usage fee of about US$17,000. The US$800,000 Anthony expects to save includes US$250,000 in hard savings from the elimination of certain HR positions and reductions in printing costs, next-day air fees and other overhead; US$250,000 in productivity improvements in branch operations, resulting from reduced management headaches; another US$100,000 in payroll savings from getting employees out of the system as soon as they leave the company; and about US$200,000 in legal costs, which he declined to specify.
The company originally planned to build its own human resources system, but Anthony, who was formerly the company’s CIO, opted to outsource to start getting an immediate ROI.
“To go from having no system to having one without spending 12 to 14 months implementing it had a lot to do with that decision,” he explains.
“We’re already going through a J.D. Edwards system [implementation] to support the business, and we didn’t need to add another major development project on top of that,” Anthony says.
Companies that have had measurable success in transaction-oriented self-service applications are starting to experiment with other high-end self-service tools. New York-based public relations firm Hill & Knowlton Global, for example, has implemented a self-service knowledge management system to increase collaboration across the firm by connecting the right people with the right information at the right time.
Instead of spending time thumbing through a Rolodex or shuffling through business cards collected at the last company picnic, Hill & Knowlton’s 1,900 employees can use pull-down menus or keywords to find the talent, skills or knowledge they need from colleagues spread across 66 offices in 35 countries.
Hill & Knowlton employees create and maintain personal folders in which they store information about their professional experience, expertise, hobbies and extracurricular activities. Then, when an account executive needs a specialist in crisis management or a rundown on health care industry regulations, a quick search yields employees with matching credentials. The system also captures team e-mails and documents that contain critical information about clients and projects.
Intranet use at the firm has grown sevenfold since Hill & Knowlton rolled out the system. Before, the most commonly accessed document on the intranet was the vacation request form, notes Ted Graham, worldwide director of knowledge management services.
“We have a slimmed-down research department, so our employees do a lot of self-service research,” says Graham. “Before the knowledge management system, they would search the much larger universe of the Web, and that’s OK. But if you can search your own intranet, that will get you the critical pieces you need much faster.”
Some internal Hill & Knowlton measurements suggest that employees are absorbing the knowledge they need about clients and industries in about one-third the time it once took them, Graham notes. But, in general, the more a self-service system depends on an employee’s voluntary participation, the more nebulous the ROI.
For example, whether employees are finding people and resources that they wouldn’t have found otherwise is difficult to determine, Graham says, as is whether the increased intranet usage translates into increased productivity. So arriving at a specific ROI for the system, which was co-developed with Brisbane, Calif.-based Intraspect Software Inc. at a cost of about US$400,000, is largely anecdotal.
“I could say our people bill out at x dollars per hour, so if the system saves them two weeks of billable time in research on a project, that’s the ROI factor,” Graham says. “But I report directly to the CEO, and…it’s more important for him to hear from the head of Ernst & Young that they purchased our services because we differentiated ourselves with this [system].”
But Graham can partly quantify the ROI based on incremental revenue the system is generating. Since the system captures project and client information, Hill & Knowlton can create branded extranets that enable clients to review their press releases, communications and other documents at their leisure. The company charges US$4,000 each for the extranets.
“I would say we have made the investment back at least twice, including productivity gains and revenue from extranet sales, as well as some clients we wouldn’t have gotten otherwise,” says Graham.
HP also has found that quantifying the ROI on self-service applications is an inexact science. Aside from specifying the US$50 million in human resources-related savings, O’Connell would say only that the company is on track toward meeting its goal of US$1 billion in cost reductions.
While the company is deriving part of those savings directly from the self-service HR applications, other savings come indirectly from the information that HP can capture from those applications, he says. For example, by analysing workforce data collected in the human resources applications, HP has been able to reduce real estate costs. Since workers who are primarily mobile, such as the sales force, can now conduct office-related business from anywhere at any time, the company has closed or reduced the physical size of some offices. It also has been able to shut down a number of internal call centres.
“We were diligent about understanding what processes we would be changing and how much those processes cost to manage and administer, and understanding the cost reductions from the changes,” O’Connell says. “But some parts of the ROI are more tangible than others.”