BASF, a world-wide chemical manufacturing company, was an early adopter of using the Web to let its employees change their own benefits settings. In fact, the German company was one of the first users to test the Web-based benefits enrollment system of its outsourcing service provider, Mellon HR Solutions (formerly PwC).
BASF sent out emails with every employee's pension projections. A week later, 8,000 employees had enrolled via the Web.
"Our employees really like self-service HR," reports Jay Hurst, manager of HRIS for the U.S. subsidiary, which is based in Mt. Olive, New Jersey. In fact, the Web-based solution was so popular it allowed the manufacturer to eliminate its interactive voice response system for open enrollment.
Based on this success, BASF asked its service provider to expand the scope of its outsourcing engagement to include a payroll piece. The buyer's goal was to "eliminate administrative work" by allowing everyone to use the Web or call a familiar toll-free phone number. "We figured the employees would like it," Hurst recalls.
When it came to the paycheck part, they did. Employees can print their pay stubs directly from the Web site. This will eliminate the cost of mailing the stubs to them soon.
The Challenge of Enrolling the Managers
But BASF discovered enrolling managers in a self-service program of the payroll process "was a very difficult thing." Hurst says when managers learned BASF was going to outsource this piece, "there was a lot of grousing." Managers were unhappy "they couldn't call Sally -- someone they had a 20-year relationship with -- and instead had to call a service center or do it themselves on the Web," he reports. They were also negative because they felt the outsourcing initiative was "HR dumping their work on the managers" he adds.
To make matters worse, the new payroll outsourcing initiative got off to a bad start. BASF reports the time data amounts to Mellon, which then produces the payroll. That week there was an error in BASF's program, so it reported incorrect data to its service provider. When the paychecks were wrong, "political pressure from the employees and our unions grew. They said, 'Look, this thing doesn't work,'" reports Hurst. He says it took Mellon three weeks to recover from the BASF error.
There was only one way to overcome the resistance: "We spent a lot of time bringing the managers into the fold," reports Hurst. He says he explained to the unconvinced the benefits of variable versus fixed costs, one of the bedrock's of outsourcing's benefits.
Then he demonstrated how outsourcing the payroll segment gave the managers the gift of time. Hurst says the HR organization was spending 62 percent of its time handling HR transactions, which left precious little time for strategic thinking. "That was a staggering number," says Hurst. When the managers looked at how many of these time-consuming transactions they could do on the Web, "it was a powerful message."
Today managers can complete a promotion in less than five minutes. The paper-based system routinely took much more time because many of the managers who had to sign off on the promotion were traveling or the paperwork got lost during the approval process.
Managers got behind the project when they realized they could improve their contributions by putting technology to work. "Now our HR staff is doing more important things for the organization," Hurst reports.
"HR transformation is not about, 'Does the system work?' It's about, "Are the employees ready to use it?" says Margaret-Ann Cole, director of implementation for Mellon HR Solutions, which is based in Fort Lee, New Jersey.
As BASF learned, putting a self-service process on the Web "is not enough," according to Cole. In hindsight, Hurst says he would have done some things differently. He never held any formal training sessions for the managers. Since no manager would do more than eight transactions a year, he instructed Mellon to build a Web-based training tool. It turned out formal sessions were necessary. BASF is now conducting these sessions with the managers.
From Traffic Cop to Strategic Consultant
The HR department has to focus on what's left after it outsources the transactions if transformational outsourcing is to be truly effective, Cole continues.
Hurst also realized his team had to teach its HR managers new skills. Often, the outsourcing initiative involves reengineering, which changes the entire process. "The HR department has to understand the changes as their responsibilities," explains Arthur Mazor, Mellon's service leader for HR delivery. "Instead of being an intermediary, they are become strategic consultants."
The need for strategic thinking is what led BASF to outsource in the first place. Hurst says BASF originally realized it needed to outsource the transaction part of the HR process because of calls from BASF business leaders who begged, "Help me develop my people." Now that the managers are comfortable with the technology, they have the time to do that. "We don't get those calls any more," reports Hurst. "Finally, we have time to give the business units the HR help they need."
The HR department undergoes a metamorphosis from traffic cop to true business partner, concludes Cole.
Lessons from the Outsourcing Journal:
- Buyers must enlist the support of all employees to harness the power of HR transformational outsourcing. Communication and explanation are two ways to engineer a change of heart.
- Once a service provider removes the transactions from the HR department, the HR professionals have time to become strategic consultants.
- At BASF, transactions accounted for 62 percent of the HR department's efforts before it outsourced them.
Margaret-Ann Cole, director of implementation for Mellon HR Services, lists five ways to improve the success of HR transformational outsourcing.
- Focus on what's left after the outsourcing. Too often HR departments are preoccupied with the transactions they will be losing.
- Make sure the HR employees understand the changes in their jobs.
- Win over the leaders of the HR department. Let them convert employees in the field.
- Do this at the very beginning of the outsourcing engagement.
- Select a significant business unit and let it be the pilot. Let the employees get a feel for the new technology.