“In any vendor relationship, you can let the vendor manage you and direct you, but I’m not sure that you will get full satisfaction and have your full expectations met. Companies have to understand what they are expecting and actually make decisions based on that,” advises Vickie Pettee, Manager, Global Compensation and Benefits for Nokia.
That was the mistake Nokia made several years ago when it hired a vendor to process some of its Human Resources transactions. She says the company wanted to offer better services to its employees, but it did not have the infrastructure to support that goal. Nokia’s several locations were all operating independent of each other at that time. She says they found their “methods for serving employees were so disconnected that when you drew a picture, you saw lines crossing every which way that was possible.” Even when they turned processes over to a vendor, they ended up with 13 different payroll systems feeding to the vendor and had instances where they were actually terminating employees and yet sending them enrollment packages at the same time. No matter how great the vendor can be, she warns, “if you don’t have a process and infrastructure internally, you will have many disconnects.”
Nokia’s three lines of business – Internet hardware and software; Internet connections, which service providers use in processing signals from place to place; and mobile phone handsets – were growing rapidly. With only 6000 employees at the time, the company knew it would be growing to 10,000 very quickly; so they were adding personnel in HR to do the manual paper processing of the expected population growth.
Like Humpty Dumpty, Nokia needed someone’s help to put it all together again.
Using Hewitt Glue
Pettee says they went shopping for an outsourcing supplier who would provide transactional efficiency and outstanding technology infrastructure and capabilities to offer Nokia employees a sophisticated benefits program with a variety of choices. The agreement with Nokia for health and welfare benefits enrollment was signed in September 1999. They also sought to alleviate communication problems with end-of-the-line third-party vendors. It was key that Nokia not have to mesh multiple vendors with multiple data elements. She is very pleased with the results of Nokia’s efforts in this regard. “They have negotiated with most of the vendors that we had and have instituted a standard way of delivering data information to them. They also have negotiated a performance guarantee by which those vendors are expected to load the information.
Their outsourcing project grew from the original plan in a very short amount of time. It started when they did some parallel testing before going live. What they found was a lot of inaccurate data from the prior vendor and also several administration and company policy gaps. Hewitt and Nokia worked closely to develop policies and procedures that would meet objectives without creating a one-off manual process. The plan was to follow-up with 401k services after implementation of the health and welfare benefits. In that process, they found that Nokia’s then-current administration and trustee was not going to integrate with the Hewitt process. So they worked together to find a replacement. That led to enhancing the 401k plan and increasing the number and types of investments in which employees could participate, which in turn led to turning over the record keeping for Nokia’s executive salary deferral plan. In August 2000, they would add the employee stock purchase plan.
Humpty Dumpty was cracking almost before the glue was set. “We started changing it all in mid-stream during the implementation,” Pettee admits. “But Hewitt was very flexible. We had to hit some very quick targets, but it was a successful implementation.” On top of the changes, Nokia had projected they would go live with 6,000 employees; but, before the end of the first enrollment period, they had 7600. Nokia had also underestimated the amount of internal resources and time that would be needed for the implementation; but Hewitt was “able to bring to the table a lot of prototypes from experience with other companies, and that helped us work more quickly.”
Handle with Care
Pettee credits both sides for bringing it all together successfully. “We both look at what needs to be done, commit appropriate resources to it and, where there is a gap, we are very willing to tell the other team and discuss alternative ways of working around it.”
The fact that Hewitt is “in tune” with Nokia’s culture and business style also helps. “When people come to work at Nokia,” she explains, “it takes them three months to adjust. It’s not a place where you can point your finger to page 52 to find the rule that applies.” They also have come to appreciate the way Hewitt trains its employees, and Pettee says that Nokia employees have become interested in that methodology.
It’s a success story, to be sure. Even with all the changes, each of Nokia’s objectives has been met without Nokia having to increase its transactional costs. “We had a one-time implementation cost that we know we will recapture over four years,” Pettee explains. “The contract is for five years. Actual cost on an annual basis is less than it was costing us to serve a lesser number of employees.” That cost success is partly due to eliminating the broken, disconnected processes that Nokia had before outsourcing. But it’s due in large part to teamwork with its outsourcer-partner, Hewitt Associates.
Lessons from the Outsourcing Primer:
- In a large, complex project, it may be helpful to do parallel testing before going live with the new process.
- Buyers should not underestimate the amount of internal resources (time and people) that will be necessary to transition the work to the supplier.
- The more complex an outsourcing project is – which depends on the company size and the changes that are planned – the more essential it is to choose a supplier that is flexible, especially at the outset of the relationship.