Human Resources Management in the eBusiness Age

Certainly it's a balancing act of developing the right combination of direct and indirect pay versus the bottom line. Once the strategy is in place and the structure has been developed, other factors come into play. How is the information communicated to line managers and employees? How easy is it to allocate stock options or enroll in benefits? Is the process efficient? Accurate?

Management can look to several areas for solutions:

Compensation Structure and Value
Process Improvements
Technology Improvements

Compensation Structure and Value
Compensation and benefits professionals have a pretty good arsenal to throw at these issues. They can reduce costs by changing the components of the total compensation package and they can vary the cost itself.

From the simple salary perspective, they can restrict salary increases and bonuses, or go further by implementing pay cuts or layoffs. Restricting salary is drastic and a pay cut can send worker morale into a tailspin. Although economic conditions may demand it, layoffs are even less preferable.

Providing optional or nonrecurring forms of compensation such as performance-based stock options or bonuses allows companies to slow the increase of escalating salaries and avoid committing to a higher recurring employee payroll expense. Furthermore, employees are more motivated because they are rewarded based on their performance and the company's performance. To keep the distributions in the employee's sight, companies may also pay bonuses more frequently, e.g. semiannually or quarterly.

More companies are making variable compensation a larger piece of the direct compensation pie. A news release on the 2000-2001 WorldatWork (formerly ACA) salary survey cites: "Base salary increases have been in the 4 to 4.5 percent range for a few years now, but many compensation packages have been significantly bolstered by variable pay items like stock options," said Patricia Llantino, CCP, CBP, director of the compensation line of business for ACA. The release also states that "One of the key reasons spending has increased while salary increases have remained stable is the escalation in variable pay items, such as stock options and bonus programs, flowing further down the corporate ladder to more employees in the past few years."

Varying the balance of regular and variable pay can be effective, but other types of compensation are gaining wider usage. WorldatWork's 2002/2003 Total Salary Increase Budget survey asks members: "(In 2002) What actions has your organization taken to attract and retain employees?" The choices range from salary and variable pay changes to training opportunities to stock grants to work environment enhancements. Companies also have many choices when it comes to the types and price tags for benefits offered. The 2001 Employee Benefits Study released by the U.S. Chamber of Commerce cites that "employee benefits cost employers an additional 37.5% over wages in 2000". Considering the importance of benefits to employees and the large amounts of money spent, it's imperative to offer a suitable mix of benefits to their employee population at as reasonable a price possible.

A traditional approach widely used in North America is to provide flex credit programs. This approach allows employees to select the benefits most useful to themselves and their families. Flex credits and benefit costs can be structured to meet particular goals, such as cost-shifting or influencing benefit elections. For example, companies can draw employees into selecting certain lower cost plans like HMO's versus higher-cost plans, or to waive coverage, by providing higher flex credits for those choices. Companies can also show employees the actual cost of benefits to make them aware of how much the company pays versus how much employees are asked to pay. Employee satisfaction is much higher when they have choices and the company demonstrates that their employees' voices are heard and their needs are being considered.

In current times when cash is extremely tight, even flex credits are being squeezed. HR professionals may look to the work environment for ways to enhance the employee's working experience. They might consider offering benefits like flextime, telecommuting, and job sharing or convenient onsite services such as photo processing, dry cleaning, gyms and day care.

Process and Technology: The Power of the Web
While we've been discussing ways to structure the content and the cost of benefits, the biggest gains in cost savings and worker satisfaction may lie in process and technology improvements. Consider the following processes: managers awarding spot bonuses, managers going through the annual salary review process, or employees going through open enrollment. The annual focal process brings visions of spreadsheets filled out, sent, revised, resent, lost, and resent.

It can be a seemingly endless cycle of trying to get the right people on the right spreadsheets with the right information. Last minute manager changes must be accommodated. For employees and HR professionals, annual open enrollment can be a tedious human resource- and paper-intensive process fraught with the frustrations of incorrect information or information lost, misplaced or misdirected.

Employee X's spouse calls to say he is sure his wife sent in their open enrollment elections but has not heard anything or the elections shown on the confirmation statement are incorrect. Communications involved in these processes are also costly, especially monies spent creating, producing and mailing glossy employee enrollment packets. These processes can be much more efficient and cost effective.

Implementing a web-based solution for these types of processes accomplishes remarkable savings:

Cost savings - Fewer people are needed to do the work, because the people who own the information enter the information.
Time savings - Information is more accurate. When employees enter their own information less time is spent on data re-entry, and an electronic interface imposes adherence to process and edits ensure correct entry of information.

Savings in materials - Electronic interfaces and communications reduce material and postage costs! Companies may also eliminate phone-based enrollment and associated costs.
Training time - People are familiar with the way the web looks and the way it operates. If all of the processes look and feel the same, people become comfortable with doing the work. These tasks are performed on a periodic basis.

If the user interface is not intuitive, people will need refresher training each year. If the application is not easy to use, people may also develop a negative attitude toward the whole process.

Greater overall worker satisfaction - People can be influenced in more ways than just money. Reduced time spent making elections or getting stock options allocated and approved means less frustration. Employees coming from traditional paper-based environments think using the web is fun.

Possibly the biggest impact that can be made on an HR department's bottom line is in terms of the human and monetary capital it's not spending rather than on the money it is spending. Oracle Corporation reported that using the web for open enrollment reduced the enrollment cycle time by 70% and reduced the HR professional to employee ratio by 275%.

How can you get there?
Companies implementing web-based HR solutions, such as employee enrollment or manager compensation workbench, should consider the following guidelines:

Maintain one source of data
One true source ensures that you are working with the most current and accurate information. From the start you have the right people on the right worksheets. Have all of the relevant decision-making data available to the manager, approver, or employee. This includes current and historical data.

Implement one process
One process brings all of the people involved into the cycle at the same time. Whether managers, approvers, or employees, people should be aware of due dates and be notified of their actions or actions taken by others, such as elections made, defaults that will be applied, awards given, budgets allocated, or approvals given. Having one consistent process improves accuracy, ensures consistency, and reduces cycle times.

Flexible design
It's essential that the types and amounts of compensation being provided are targeted to the right employees and that your software accommodate those requirements. For example, you may need to be able to provide one or a group of rewards to executives and a separate group of rewards to non-executives. You may need to offer separate benefits programs to union and non-union employees. You may provide some rewards such as a company safety bonus that are distributed to all employees in a specific division.

Enforce security and approvals
It almost goes without saying that security and approvals must be enforced. For example, managers should only see and have access to the people who work for them, however they may also need to be able to add employees to their worksheets. Information should not be updated until approved by the appropriate person(s). You should be able to specify the order in which information is approved and by whom. For manager worksheets, you should be able to specify the method to be used to develop the reporting hierarchy, for example by supervisor or by position hierarchy.

Communicate to managers and employees
For the process to be effective and work efficiently, it's necessary to keep managers and employees informed of what actions have been taken and what actions need to be taken next.

Easy to use
If an application is hard to use, people will fight it. If all of your self-service applications look and act the same, then your employees will be more proficient and will require less training. You should be able to use terms familiar to your company and you should be able to provide tips and instructions so users know what to do. For example, a properly engineered enrollment interface should only show those options for which a person is eligible; invalid elections should not be displayed.

These guidelines should help you choose and successfully implement web-based solutions, whether to allow employees to update basic personal information, such as family members or W-4 elections, or to manage high-volume, time-critical processes such as annual focal reviews or employee enrollments.