Public Service Enterprise Group, Inc. (PSEG) is a holding company in the electric and gas business with several affiliate companies in generation and distribution services in 12 countries and in 12 states in the US. Dealing at times with regulation, deregulation and increased competition, this is a company that must set and achieve its goals. One prime target for improvement in the early 1990s focused on human resources.
Dick Quinn, Director of Performance and Rewards for PSEG, remembers their main goal was to improve the quality and accuracy of service employees were receiving. They also had concurrent goals of achieving long-term cost savings while increasing their capability to offer a complex benefit program. Quinn says, “We desired to take advantage of technology and things that were not really practical internally or where our internal resources were committed to business-related technology, rather than to benefits administration. We wanted technology that would allow us to make significant changes, enhancements and complexity in employee benefits.” PSEG also wanted a single-source provider so that all of its HR systems would be more easily integrated.
PSEG had encountered Hewitt Associates, through projects off and on for five years before their outsourcing contract in 1993. They knew of Hewitt’s excellent reputation and had been pleased with what they had seen over the five years, but the close encounters through contract negotiations convinced them Hewitt was the best choice. Quinn says Hewitt’s technology stood out even in 1993, but the company’s commitment to furthering that technology in the direction that PSEG wanted to go was far better than other HR suppliers.
Employees Encounter Transformation
At the outset of their outsourcing relationship, Hewitt provided only defined contribution 401k plans. Service gradually evolved over the years and now includes a benefit service center, a retiree service center, health and welfare programs and a defined benefit pension plan. “We have gradually built one of the most sophisticated systems around in that we are linking a voice response system, two complete Internet sites that are linked for all benefit communication transactions, and we are totally paperless for any benefit transaction,” explains Quinn.
They have also accomplished the ability to offer complex benefits programs. Prior to outsourcing in 1993, PSEG had one benefit plan for 10,000 employees and 7,000 retirees. Now, its 11,000 active employees and 7700 retirees and survivors have the advantage of four benefit programs for active employees, two programs for retired employees, and various programs that meet the needs of its subsidiary companies.
The 40 HR employees at PSEG were smoothly relocated to other positions within the company during the transition to Hewitt, but Quinn says there were other challenges. “We are a very paternalistic organization,” he says “Our employees in each of our various locations were used to having someone at their location sit down with them and hold their hands, fill out their applications and do everything for them.” Since part of the outsourcing strategy was to move to a self-service mode for the employees, the handholding is gone. Quinn says it was a big challenge to say internally that PSEG could no longer be that kind of organization but would provide the very best tools for employees to handle these matters on their own.
After the initial bumps in the transformation of handling HR matters, they have experienced nothing but outstanding success. Their agreement includes service levels and specific guarantees dealing with turnaround time and accuracy. Besides an annual third-party survey on employee satisfaction, PSEG constantly monitors its employees and encourages feedback on any issues that may come up.
Objectives Encounter Victory
PSEG credits the success of their outsourcing relationship to the “partnership” attitude of both parties. Quinn says Hewitt is considered as part of PSEG’s organization chart. “We even spend time at Hewitt’s benefits center, getting to know our representatives, taking them out to dinner and giving them rewards when they get good scores on employee satisfaction surveys. We try to get them thinking they are part of our organization.” PSEG also sponsored some benefits fairs earlier in the outsourcing relationship so that its employees could meet Hewitt benefits reps and have a sense of knowing the people they would be talking to on the phone.
Hewitt also considers PSEG as its partner and, in fact, uses PSEG as a beta site for new Hewitt products and services. As a beta client, PSEG’s feedback has helped Hewitt to shape and improve its services. Quinn maintains an active role on Hewitt’s client advisory council, shaping the future of benefits delivery services. Currently they are considering a desktop tool that enables management to keep up to date on development, costs, and utilization of the outsourced services.
Together, PSEG and Hewitt consider possible technological enhancements that will improve transactions and communications for employees. PSEG is now adding links to its employee services Web site that will connect employees to financial planning and financial advice services. The service is made available through Hewitt’s subcontracting with a third-party vendor that provides the financial services, and it is fully integrated with Hewitt’s 401k system. “Ultimately,” says Quinn, “an employee will be able to get some investment planning and some specific advice, click a button and make all the transactions and changes within our Hewitt 401k plan system. It’s a very sophisticated way of helping our employees meet their own investment and retirement goals."
Hewitt and PSEG are in it together for the long haul. Quinn says PSEG knew it wanted a supplier relationship with a long-term commitment toward adding to its scope of technology and capabilities. He believes that, in HR services, it’s important to remember that “you are hiring more than a partner -- somebody to represent your own company to your own employees.” That was a very important consideration for PSEG in the beginning, and it remains important today.
Lessons from the Outsourcing Primer:
- Buyers who plan to gradually add more services to the contract over time need to choose a supplier that has scalability and integration capabilities.
- If your goal is to establish a long-term relationship, be sure to choose a supplier that demonstrates a commitment to furthering its technology.
- In outsourcing HR services, it’s important to remember that the supplier will be representing your company to your employees.