The electricity that is sparked between employees and their companies often starts with the human resources (HR) department. Before any real work can be done an employee must pass through the department and endure a stack of paperwork. And the ongoing relationship lasts into retirement and beyond. Southern Company, an energy utility holding company, knows the importance of the HR department to an employee. Because of the physical and operational diversity of the $35 billion plus company, the electric company thought it might be a good idea to centralize the focus of it benefits administration by outsourcing, in order to improve efficiency for its 32,000 employees.
Southern Company is an investor-owned international energy company based in Atlanta. It is the largest producer of electricity in the United States and one of the world’s leading independent power producers. Through its Southern Energy Inc. subsidiary, it supplies electricity in 10 countries on four continents and has a growing presence in North America with assets in the Northeast, Midwest, California and Texas.
In 1995 when Southern Company began discussing an outsourcing arrangement with Hewitt, the electric company was managing an abundance of human resource functions on a diverse subsidiary-by-subsidiary basis. This meant that each subsidiary did things a little differently and there was no real glue that held them all together, says Chip Howden, manager of benefits delivery at Southern Company. The company decided that this process wasn’t very efficient and if it were to outsource its benefits administration it could save money by running the function more efficiently from a centralized location. And more importantly to Southern Company, if it were to concentrate its resources into a more centralized focus they could deliver more consistent services to its employees.
Expanding the Partnership
Hewitt had worked with Southern Company in the past. Hewitt had served as a benefits consultant and compensation consultant to Southern Company for a number of years and had also provided the electric company with actuarial services and some investment advising, Howden says. But in September 1996 the relationship expanded greatly when Hewitt’s service center was opened up to Southern Company. And over the past three years Hewitt’s role within the company has expanded.
“The current agreement with Hewitt is to interact one-on-one with Southern Company’s employees, their employee’s dependents, retirees and surviving spouses,” Howden says. “It handles everything within the benefits arena except those functions that fall into the medical and dental claims area and defined contribution recordkeeping.”
When the expanded relationship began, Southern Company gave Hewitt basic data about each of its employees, pay rates, social security numbers, home and work locations, etc., and continues to provide this basic information each time it changes or a new employee is hired. Once the data is given to Hewitt the responsibility for maintaining eligibility records for the employee’s health and welfare plans lies with Hewitt. The HR company translates the information and specifies to the employees what plans they are eligible for, which varies from employee to employee depending on where the employee lives and works, and what subsidiary they work for. Hewitt sends the appropriate information and the cost of the plan to the employees. The employee then calls Hewitt and enrolls and Hewitt sends them notification from the health care provider. Then they notify Southern Company’s payroll department of the required payroll deduction for the employee’s contribution to the plan.
Southern Company’s employees can tap into the services and ongoing services by using a 1-800 number. The employees can change their status as they get married, have children, change their medical benefits, or there is a death. Hewitt also administers the defined benefit pension plan. So if an individual wants a pension estimate they can call Hewitt and get it. If an employee wants to retire, they initiate the process with Hewitt and are sent all of the appropriate forms.
“We think of the folks at Hewitt as an extension of our benefits department,” Howden says. “We don’t talk about them in terms of being a vendor, we talk of them in terms of being a strategic partner with us.”
The Transition Process
The transition process took about nine months and began with Hewitt’s employees learning about Southern Company and defining all of the available plans that Southern Company offered. Looking back, there are a few things that Southern Company would do a little differently to better prepare its employees for the transition, Howden says.
“It is a very fine way to deliver benefits services,” Howden says. “But it is different from the way that benefits have been delivered traditionally. We talked to our employees about how much better this system was going to be, but we did not prepare them for the transition very well. It takes some getting used to and they are getting more used to it. But it is a big transition for our employees and while we were telling them how much better it was going to be we should have also mentioned that it was going to be kind of rough for a while until we get through the transition phase.”
Howden says that there is a continual partnership between the two companies. The two sides have a continual involvement in keeping the lines of communication open so that not only is Southern talking to Hewitt about things that it wants, but the HR company is coming up with new ideas about how things could be run better. Included among those things is initiating annual enrollment on the Internet this year, and next year, expanding the Internet to initiate things like new hire enrollment, student certification and pension estimates.
“We had a feeling that one, centrally focused delivery group would make us a lot better than we were,” Howden says. “And that has proven to be more true than what we could have ever imagined. Our employees now get the consistent and, in most cases, more efficient service that they deserve.”