That stack of forms was more than a nuisance. It was a big expense to your company. In fact, American employers spend an average of $13.89 per employee every month just to administer benefits paperwork.

With online benefits processing, this cost can be slashed to $2, because data only has to be entered once. And staffers can be freed up for other tasks - resulting in dramatic improvements in the bottom line.

Analysts predict that in five years at least half of all employees nationwide will participate in an electronic benefits management system. This will create a $3 billion industry for software and application service providers (ASPs). At present, only a handful of companies offer electronic processing packages. Clearly, we're witnessing a business bonanza waiting to happen.

Simple but Comprehensive

Another employer moving ahead with online benefits communication is Lucent Technologies Inc., headquartered in Murray Hill, N.J. In 1996, Lucent launched its "Benefit Answers" web site, where U.S.-based employees can learn about their benefit plans by clicking through extensive pull-down menus of options that point employees to the answers they need.

Essentially a giant but highly organized destination containing SPDs, the site is segmented into what Barbara Hockfield, director of HR compensation and benefits communication, calls "logical buckets" of information:

• "Health and wellness," where employees can pick a plan, ranging from company offerings in life insurance to vision care, and select specific topics from pull-down menus.

   

• "Earnings and savings," which describes 401(k) and employee stock ownership plans, among others.

   

• "Life@work and home," which deals with work and family benefits
• "Changing needs," which directs employees through benefits changes caused by events such as getting married, becoming a parent, taking a leave of absence, changing job status or dealing with elder care.
• "Benefit links," which puts employees in touch with Lucent’s benefits providers and other programs.

For example, putting a 40-page SPD online could equate to 400 screens of information. The company shaved the amount of information appearing per page to create more readable fact screens. The online version is designed for fast navigation, with employees averaging only three clicks to get the answers they seek.

"We really went for simplification," Hockfield says. "It’s kind of like building a Lego system." The site allows employees to print out any SPD information at any time. To ensure that everyone, with or without a computer, is alerted to changes in the benefits plan, HR notifies all employees by e-mail or postal mail of SPD changes. The company estimates it saved $1.2 million the first year it put SPDs online.

A key difference between Lucent’s system and some others: Lucent communicates benefits information via the Internet, not just the corporate intranet. In other words, Benefit Answers is available for viewing by anyone via the Internet—it’s not just residing behind Lucent’s secure computer "firewall," though outsiders cannot see Lucent employees’ personal data.

"We want to reach new recruits, new hires and retirees," explains Hockfield. "To go forward profitably, productively and competitively, making this information widely available gives us an advantage overall."

"Through an interactive question-and-answer tool on the company’s intranet, employees logged on to the system’s "Plan Finder" to weigh the merits of different benefits and criteria, such as cost, coverage, customer service or performance. The tool sorted through dozens of different health plans offered by the company, used data and choices supplied by the employee and then returned a view of preferred plans, ranked and graphed.

Web-based enrollment was just as attractive to the company, which saved about $1 million last year in costs associated with delivery of benefits information, Brandow says.

The Cost Question

Another advantage for large employers like Lucent and Schlumberger is they can afford comprehensive self-service systems. For others, the main barrier to online delivery of benefits information is cost.

Last year’s survey by The Hunter Group found that the average company polled spent about $1.5 million on employee self-service systems, with per-employee costs ranging from $35 to more than $1,600, depending on company size and the type of solution used.

Implementation times for online benefits delivery ranged from three months to two years, although the survey found that time and associated costs were reduced by up to 20 percent when application service providers handled the project.

Using service providers is one way that smaller firms can take advantage of online benefit communication. These providers can host and supervise clients’ web sites, customizing the content, plans and programs, and handling employee transactions such as enrollments or pension calculations, usually on the providers’ own computers rather than the client company’s computers.

MITRE CORP., AN independent, not-for-profit company, provides federal agencies with system engineering and information technology expertise. Founded in 1958, the Bedford, Mass.-based company's more than 4,000 employees support four primary customers: the Department of Defense, the Federal Aviation Administration, the U.S. intelligence community and the Internal Revenue Service.

In June 1994, Mitre began work on a corporate intranet with the goal of transforming the company from a culture that fostered intellectual fiefdoms and internal rivalry to one with an accessible corporate knowledge base and intellectual collaboration. As a provider of intellectual capital to government agencies, company executives felt that collaboration was imperative to Mitre's long-term success. In May 1995, the corporation debuted its Mitre Information Infrastructure (MII) companywide. Three years later, in an effort to make sure that its goals were being achieved, Mitre began a post-implementation audit of the evolving MII system to capture both its tangible and intangible benefits. (Mitre won a CIO Enterprise Value Award for the system. For more on the MII, see "Common Knowledge," CIO, Feb. 1, 1999.)

To date, Mitre has invested $7.2 million in the MII, netting an ROI of $62.1 million in reduced operating costs and improved productivity. But financial impact represents only part of the story. According to Al Grasso, vice president and CIO, "Our most important gain can't be as easily measured—the quality and innovation in our solutions that become realizable when you have all this information at your fingertips."

In order to gain a complete picture of the system, Mitre conducted an analysis not only of the hard financial benefits but also of the soft benefits the system provided—specifically, how the MII helps employees collaborate more effectively. "To deliver technical excellence, it's essential for us to share information. It's how we bring all our resources together to solve problems for sponsors," explains Mark Maybury, director of artificial intelligence and executive director of the IT division for Mitre. "Our high-level objective with the MII is to make it easier for people to give information to others and to use information from others to solve the next problem that comes along."

The Hard Benefits
1. Reduced Operating Costs
Government restrictions forbid Mitre from increasing its workload or even making a profit. As a result, Mitre's perspective on ROI is more qualitative than quantitative. "We have a fixed number of dollars and staff we can deliver because of our unique role as a group of federally funded research centers," explains Maybury. "Therefore, we need to make people more efficient or save on other indirect costs so that we have more staff to deploy to government projects."

Assessing reductions in operating costs was fairly straightforward. One of the key measurements Mitre sought to capture was whether the MII enabled the company to apply fewer people more effectively to a task. The Innovation Team, a panel of IT directors responsible for managing Mitre's IT resources, decided to track efficiencies along operating cost centers. Within each of those cost centers, Mitre examined the impact of moving a number of tasks toward self-service on the MII. For example, with employees able to log on to the MII and update their own human resources records or research routine questions, fewer HR staff were required to support benefits administration. Call logs also indicate that the HR staff now typically handles more sophisticated queries.

In all, the MII has enabled Mitre to save $16.6 million in labor and material costs since 1996. The savings are allocated as follows: human resources and administration ($5.6 million), information systems management ($2.9 million), financial operations ($3.6 million), technical operations ($2 million) and miscellaneous other services ($2.6 million).

2. Improved Staff Productivity
To validate the notion that shifting many mundane activities to the MII would make people more efficient, Mitre focused measurements on three tasks that affect all employees: document management, daily time card submission and purchasing. In the area of document management, the Innovation Team focused primarily on how the MII expedited the dissemination of documents to employees and sponsors. In the past, employees spent tens of minutes a day laboriously converting documents for publication. Today the MII automatically translates PowerPoint presentations, spreadsheets and documents into HTML, and indexes and publishes them so that they're immediately available company wide. Through surveys and observation, the Innovation Team determined that the technology was saving employees at least five minutes a day that they could devote to other tasks.

By comparing the time spent filling out physical time cards each day with the time it took to submit that data over the MII, the Innovation Team determined that employees saved at least a minute a day with electronic submission. And using a purchasing card online and tracking the status of one's purchases over the MII, instead of relying on a central purchasing organization, saved the average employee at least two minutes a day. The Innovation Team also factored in improvements in help desk operations and job pricing activity due to the ready availability of key information through the MII. According to time logs, help desk staff saved an average of eight minutes per call; job pricers saved an average of one hour per job. By multiplying these aggregate time savings by the salaries of a conservative three-quarters of the Mitre population ($436,800 per minute), Mitre estimated widespread use of the MII was saving $12.8 million in improved staff productivity.

In the case of the help desk, the Innovation Team also based its estimates on the number of calls handled and the average staff salary—which comes to 56 cents a minute. The value attributed to time saved in performing job pricing was based on 600 jobs priced quarterly and the average salary of staff covering that function ($70,000).