News & Events
Share and share alike: Interdepartmental shared information, goals ensure benefits program success
By: Michael Byers
March 1, 2007
Today's business headlines echo what human resource professionals already know: The effect of rising health care costs in this country is being painfully felt - in depressed earnings, an additional burden on employees and often, a sacrifice in the quantity and quality of employee benefits.
As HR/benefits executives look for a silver bullet to reverse this trend, they may come up empty handed. However, there are proven strategies that can be initiated from within a company's four walls to help slow rising cost increases. Best practices like interdepartmental collaboration and centralizing organizational information are helping leading Fortune 500 companies shave millions from annual health care bills.
Today, managing employee benefits no longer is the sole domain of the HR department, and corporations are realizing that annual health care insurance rate increases is a trend that they can control if multiple areas of the business work collaboratively.
Making friends in finance
There are many more stakeholders involved in employee benefits management than HR executives, and when they collaborate and map to shared goals, the results can be astounding.
Historically, finance has applied pressure on the procurement process to reduce costs, while HR has worked to preserve benefits employees value. Without collaboration between the groups, one party is focused on employee retention and another is looking at the bottom line, and the sacrifices ultimately may yield less desirable outcomes for all parties.
Alternatively, interdepartmentally collaborative processes and technologies to support them can ease tension and achieve common goals.
First, finance and HR must collaborate from the very beginning of the benefit procurement cycle. HR teams do their due diligence, establish industry and peer benchmarks - often with the help of a consultant - and set cost targets. Finance must bless these targets before HR and procurement begin the sourcing process.
HR/benefits managers and their strategic consultants are then tasked with creating and sourcing appropriate suppliers for appropriate medical, disease management or prescription drug plan designs. With a framework established for costs, they can narrow concerns to quality and have the greatest ability to support a healthy employee group.
With a tight fiscal focus and priorities for plan features and details in place, procurement can take that information and create a sound, competitive purchasing environment that rewards employees and employers with the lowest- possible-priced plans without sacrificing quality.
As a result of this interdepartmental collaboration, cost is put on par with quality. Just as other parts of the organization can adopt more efficient ways to manage supply chains, these same principles can be applied to the human resources group.
Individual departments often struggle to procure health and welfare benefits. But if each group is tasked with a specific objective, works collaboratively and makes a decision as a team, a company can actually create a cost savings impact that it may not be able to achieve otherwise.
Information is power
Perhaps the greatest reason interdepartmental collaboration is stymied is that companies rarely have a single source of rich, actionable information about benefits programs and suppliers.
Amazingly, health and welfare benefits represent one of the top corporate cost concerns, but is the least automated and most data-intensive line item on the income statement.
Until now, the control and management of data has traditionally been governed by third-party consultants who have built custom databases for each client. These are typically manually driven database-type applications, to which only the consultants have access. This model is akin to asking a tax attorney or accountant to build a software package to automate your tax returns. Meanwhile, the VP of HR/benefits misses out on a valuable opportunity to exploit critical enterprise data.
Advances in the software industry allow for far better in-house management and control of data. With greater access and transparency to health care data, HR executives gain an audit trail of buying decisions, substantiate why one supplier is selected over another and eliminate the impact on internal controls to support Sarbanes-Oxley and HIPAA compliance.
Most importantly, companies must store information in one domain-specific data repository, giving access to disparate business units for a comprehensive view of the entire organization, eliminating siloed decision making.
It's not uncommon for companies to have data warehouses, content management systems and business intelligence systems in use. Many companies also employ homegrown systems that are incompatible with other enterprise-level systems or rely on multiple parties to analyze the data output. This is both costly and inefficient.
A single companywide benefits data repository creates a knowledge base that allows a CFO and VP of HR/benefits to have a single view into heath and welfare plan design, purchasing models and claims data. This empowers the corporation to readily respond to health care issues affecting their organization and gives them the necessary information to renew an existing plan or to go back to the market for a new plan.
Additionally, information that is readily available in electronic format - and that does not have to be gathered every year - is an efficiency that alone reduces cost. This online information can also be used to benchmark a company's performance against a peer group, which enables the adoption of industry-leading best practices, reducing exposure to rising health and welfare costs.
Much at stake
If employers need an incentive to change how benefits are procured and managed, they need only look at the stark health care reality at three companies:
- On a per-car basis, GM's health care expenditures exceed the cost of steel, and officials cite rising health care costs as a reason for the company missing projected earnings targets.
- spends more on health care than they do on coffee beans.
- Wal-Mart often is in the spotlight for its lack of health care coverage across its employee base.
The scope of the issue is so great that some organizations have gone so far as to outsource many human resources functions or cut costs in personnel, since cutting the cost of health care seems futile.
Before resorting to these measures, companies can implement best-practice strategies like collaborative procurement, centralized and electronic information collection and automating annual administration. The result of this collaborative and streamlined effort is powerful and undeniable, as organizations deliver higher quality health and welfare benefits, coupled with a lower cost, year after year. And human resources executives can stand tall, having gained the upper hand on rising costs while continuing to offer competitive benefits packages that keep employees happy, healthy and productive.
Michael Byers is president and chief operating officer for HighRoads, Inc., whose technology solutions have helped Fortune 1000 companies drive billions of dollars in savings on employee benefit costs. He can be reached at mbyers@highroads.com. - E.B.N.