“We’re a people-intensive business,” says Tom Leahey, chief operating officer of STI Knowledge, a help-desk and call-center company headquartered in Atlanta. He isn’t exaggerating: employees account for up to 80 percent of the company’s overhead. As a result, Leahey, who joined the company as CFO in 2000, says, “I spend a lot of time on human-resource issues. And I ask our HR staff to do a lot with a little so we can make sure that most of our employees are on the front lines, serving customers.”
The search for back-office efficiency is on the minds of many CFOs these days, and automating various facets of HR (a trend known as “e-HR”) has become a popular way to achieve it. Web-based systems that allow employees to enroll in benefits programs, manage 401(k) accounts, track vacation time, and in general handle their own administrative chores rather than burden an HR staffer, continue to gain in popularity. But analysts say the driving force behind this trend has changed, from an emphasis on convenience to a focus on hard-dollar savings.
Operating as a provider of outsourced call-center and PC support services, STI was comfortable with the idea of relying on an outsourcer for a major part of its own HR needs. The firm signed on with Employease Inc. and pays on a per-employee, per-month basis for a range of Web-based services that address benefits, payroll, and other issues. Leahey says the company’s annual $36,000 outlay has produced savings of 15 times that amount. That’s a message Employease now pushes heavily; in fact, it offers advice to HR professionals on how to make a case for e-HR services in a way that CFOs will respond to.
A survey conducted by consulting firm Watson Wyatt & Co. found that e-HR efforts built around savings and efficiency produced a measurable shareholder return, while those intended to enhance employee communication, which was a popular goal as e-HR began to take hold in the late 1990s, actually correlated to a sizable drop in shareholder value.
Steve McCormick, senior consultant at Watson Wyatt, says that HR departments are now trying to leverage the savings provided by e-HR technology so that their function will be taken more seriously by CFOs and other C-level executives. “Historically the perception of the HR department has not been very positive,” he says. “But if technology can address the low-end administrative tasks, HR staff may be able to provide more valuable services.” For example, he argues that while IT departments function as technology advocates, in most companies there’s no “worker advocate” to focus on productivity, development, and quality-of-life issues. If HR departments can tap low-cost technology to handle the paperwork, they can contribute in more substantive ways.
That’s the plan at Lafarge North America Inc., a $3.3 billion construction-materials maker. As part of a multiyear HR transformation project, the company is using technology from Cyborg Systems Inc., Authoria Inc., and other companies to make a new HR service center more efficient and to allow employees to serve themselves in much the same manner as workers at STI. Phyllis DeVane-Timmons, vice president of HR performance at Lafarge, says that by putting technology at the heart of one of the firm’s “three pillars” of HR, transaction management, staff can be devoted to other functions, such as compensation and benefits, or serving various lines of business. Jim Black, the company’s director of HR IT, notes that with its current decentralized system, simply tabulating the number of employees the company has (about 18,000) can actually take nine days. “Managers need quick access to all kinds of information about the workforce,” he says, “and that’s where e-HR technology comes into play.”
Watson Wyatt says most firms view e-HR as providing a tactical boost, not a strategic reordering. That may be fine with CFOs: they take improvements to the bottom line wherever they can find them.
Motivate and Compensate
There are any number of ways to motivate a sales force, from the pink “Kay-cars” dangled before Mary Kay cosmetics salespeople to the “Third prize is you’re fired” stick wielded so memorably by Alec Baldwin in Glengarry Glen Ross.
No matter what approach a company takes, someone, somewhere, has to keep track of those ever-more-complex bonus and commission structures. That has given rise to a category of software known as incentive compensation management (ICM). Niche players such as Callidus Software Inc., Incentive Systems Inc., and Synygy Inc., and ERP vendors such as Oracle and PeopleSoft now take much of the grunt work out of determining how and when commissions are paid to sales staff.
So far, only about 1 percent of large companies are using ICM packages, says Katherine Jones, managing director of enterprise business applications at Aberdeen Group, an IT market analysis and consulting firm based in Boston. Most use old legacy software or spreadsheets, which she says are “cumbersome, error-prone, and can’t be changed easily.”
“Compensation analysts have been spending too much time number-crunching and not enough time examining what the results mean,” adds Jennifer Kemmeter, an analyst at AMR Research Inc., another IT analysis and consulting firm.
ICM software lets companies break away from those constraints. Using data feeds from CRM, ERP, and other front- and back-end systems, it monitors the work of individual sales staff and then calculates payouts. On top of that, some ICM packages offer more-sophisticated features such as analytics and modeling, which show the margins or other ramifications of specific incentive plans.
It’s not just incentive plan administrators who benefit from those added features, notes Jones. “Sales staff themselves like those features. They can key in different combinations of product mixes and target customers into their ICM program, and then find out what their commissions will be. It lets them be proactive.”
ICM tools are designed to be used by someone who is handy with a spreadsheet, according to David Blume, UK general manager at Callidus, of his firm’s TrueComp ICM software package. Callidus targets midsize to large companies with sales teams of at least 200 people. Licensing fees are calculated according to how many people the system will track, not how many use it (managers, in a sense, ride free), with a 200-seat implementation costing in the low six figures.
Speed and accuracy are ICM’s biggest attractions, says Brad Savage, who led the implementation of TrueComp at Netscape Communications, the Internet browser company now owned by America Online. Before the roll-out to the company’s 400-person global sales staff three years ago, Netscape’s sales incentive administrators struggled to manage more than 30 commission plans. “Entering information manually, preparing statements on spreadsheets, and E-mailing them out one at a time to the sales organization created a lot of room for error,” recalls Savage. “The process was so painful, it was done only quarterly.” Today, sales staff are paid their commissions monthly.
Against this backdrop, IT experts see a bright future for ICM. With more companies introducing variable components to their remuneration packages, Aberdeen’s Jones predicts that ICM will spread beyond sales incentives to help companies manage variable-compensation plans as well as all sorts of bonus programs, even those aimed at channel partners, distributors, and customers. –Adam Lincoln
Eye on the Clock
Efforts to make employees more productive take many forms, and are often measured in minutes or even seconds. Even something as simple as punching a time clock or filling out a time sheet may offer room for improvement. Workbrain Inc. makes a time-and-attendance software system that uses a biometric clock triggered by an employee’s eyeprint or thumbprint to track hours worked. Among the first customers was United Rentals Inc., which says that by trimming two to four minutes a day off this routine administrative chore, it can reap big rewards. With well over 10,000 employees using the system, the company may be on to something, although it may be the back-end reporting functions that provide the biggest savings. The system is part of Workbrain’s larger ERM (employee relationship management) product family, which also addresses scheduling, training, and skills management. Other ERM players include Synygy, PerformaWorks, Replicon, and Incentive Systems. –S.L.