How HRO helped streamline Shell’s HR.
Paper is a bad word at Shell. The diversified energycompany’s Employee Services department (a division of HR) at its U.S.operations in Houston, Texas, has endeavored for the past decade toautomate administrative functions like the issuance and delivery ofW-2s, unemployment claims, and employment verification to employees.Employees can now receive their W-2s and pay information electronicallyby simply logging on at work or at home.
But Shell HR doesn’tjust take paper-intensive functions and automate them. The companyoutsources certain employment services to TALX, a St. Louis-basedbusiness process outsourcer focused on replacing slow, costlypaper-based manual methods in the payroll and HR space. Shell began arelationship with TALX more than 10 years ago that served as thefoundation for three additional HR outsourcing agreements, with anotheroutsourcing opportunity possibly on the horizon. The overarching goal,aside from providing enhanced services to employees, is to rid Shell ofpaper and related manual processes. “We strategically review HRactivities to determine which ones we want to do ourselves with our ownstaff and infrastructure” and which ones are best outsourced to othersbecause of their staff expertise and supporting infrastructure,explains Sheila Carter, Shell manager of employee services.
TALX,a public company listed on the NASDAQ, first came to Shell HRsattention in 1993, when the department was looking to outsource themanagement of unemployment tax services. The two companies signed anagreement whereby TALXs UC eXpress service handles the unemploymentclaims administration process following the separation of Shellemployees. Since then, the companies have inked three additionalcontracts, including the most recent, the implementation of theePayroll paperless pay stub service that Shell calls ePay. The newservice allows Shell employees to receive their pay stubs and other payinformation electronically or via the telephone through a secureaccess, thereby removing the cost of printed pay stubs. “Paperless paystubs are complementary to boosting direct deposit rates, which in turnsaves an employer the time and money associated with printing checks,”notes Mike Smith, TALX vice president of marketing.
Shell andTALX exemplify the importance of relationship development in thecontext of outsourcing HR functions. While many companies have optedfor comprehensive soup to nuts HRO programs, where a broad spectrum ofHR functions are outsourced on a relatively fast timetable to a singleprovider, other companies prefer to take their time, introducing theoutsourced functions to employees over a longer-term horizon. “Changemanagement is a critical consideration here when it comes tooutsourcing, so we like to take a phased-in approach, outsourcing asingle function in a part of the organization before we roll it outacross the board,” says Bill Fitzpatrick, vice president of HR forShell Trading, the division of Shell that will first experience the newelectronic pay concept.
Shells approach to outsourcing also isfavored by TALX. “Shell has a strategy of selective outsourcing,choosing to outsource the functions that it determines take them awayfrom their core competencies,” says Smith. “We believe this is prudentoutsourcing in that it allows you to obtain best practices on afunction-by-function basis. It also gives a company the opportunity totest the competency of the outsourcing service provider before movingforward in the relationship with other assignments.”
BUILDING THE FOUNDATION
Shell’sfirst go around with TALX in the unemployment claims administrationarea is a bona fide winner, saving the company a substantial amount ofcapital. When erroneous or inaccurate unemployment claims arediscovered, TALX files appropriate protests and provides hearingpreparation and representation for Shell. Annually, TALX has removedmore than $4 million in claims liability for Shell and recovered morethan $300,000 in state-charged errors. “In 2004, for example, we wereable to remove $4.4 million in liability that was not charged againstthe unemployment accounts nationwide,” says Kelly Owens, TALX clientrelationship manager for Shells UC eXpress account. “In addition, wefound $318,000 in overcharges, meaning people were collecting benefitsthey were not eligible for or that Shell tax accounts were chargederroneously. When combined, we were able to save Shell $770,041 inactual tax payments for the year, marking a significant return oninvestment.”
TALX handles unemployment claims electronicallythrough a proprietary system that is an efficient paperless method forprocessing unemployment claims from all 50 states. “We manage the claimselectronically and respond appropriately with information provided byour clients,” says Smith. “Through this automated process, we’ve been ableto increase the amount of disqualifications and charge credits comingfrom the states. Essentially, were identifying things that had beenoverlooked when this was a paper-intensive process.” The automatedprocesses are streamlined for the client and are more efficient forTALX, as well. “Our unemployment team receives tens of thousands ofunemployment claims on a daily basis on behalf of our clients, and weprocess all of them electronically,” Smith adds.
The success ofthis initial outsourcing agreement encouraged Shell to implement TALX’sautomated employment and income verification service in August 2003.Known as The Work Number, this service benefits Shell by removingapproximately 10,000 incoming requests from mortgage lenders, creditcard agencies, social service agencies, and other entities that have aneed to verify a Shell employee’s income and employment status. “We’reable to assist Shell by providing a faster response to a request, aswell as reducing their liability and providing better overall serviceto employees,” says Jeri Sims, TALX CRM manager.
“If an employeeis getting a car loan and needs verification instantly, they dont haveto wait for a response,” Tom Fischer, manager of product marketing atTALX, adds in, “they simply call The Work Number and get instantverification. Our goal is to help the application process move faster.It is not uncommon when the verification is handled internally thatemployees can wait two weeks to a month to get a response.”
TheWork Number also protects the privacy of employment information andeliminates a particular concern at Shell that too much employeeinformation or inaccurate information could be provided to agenciesrequesting this data. “Companies have a concern that remote managers arebeing put in compromising positionsbeingasked to provide employment verification that might result in a slip,like saying that ‘Tom works for us but hes out on recovery,’ when theindividual may no longer work for the firm,” Smith explains. “They wantto avoid that kind of liability and assure a consistent, accurateresponse all the time. Moreover, they dont want managers with screensup on their desktops containing private employee information that couldcreate an identity theft risk. When TALX handles this work, theirexposures in this regard are vastly reduced.”
In 2004, Shell worked with TALX on another outsourcing assignmenttheoutsourcing of Shells W-2 process. Rolled out at the end of last year,more than 7,800 Shell employees now receive their W-2 informationelectronically via TALXs W-2 eXpress service. “We also provideelectronic reissues and corrections [to W-2s],” Sims notes. Each time anemployee consents to receive the W-2 electronically, it translates intosavings for Shell and additional convenience for employees. But,Fischer says the key to the success of the relationship is TALX’sreceptivity to Shell’s priorities. “Employee sensitivity and satisfactionare always at the top of the mind at Shell,” he says.
STUBBING OUT PAPER
Eachof these outsourcing assignments boosted Shell’s confidence to discussother outsourcing strategies with TALX, culminating in the most recentagreement between the two companiespaperlesspay stub and pay information services. Implemented initially as a pilotprogram, this service will be rolled out to all Shell employees in thecoming months, beginning with employees at Shell Trading.” Employeeswill have 24 by 7 access to pay information, with deductions clearlyexplained and available via an Internet-based system,” says Carter fromShell.
“Previously, we were printing paper copies of the payadvice for employees for each pay cycle and distributing these hardcopies through the mail. You can imagine the manual labor,” she notes.”We wanted to get out of the paper end of the pay business, with thesefunds deposited electronically or via pay cards and the pay stubinformation electronically available to employees, as well.”
Shelltalked to TALX and other service providers in building the businesscase for the electronic pay project. Ultimately, it determined TALX hadthe best product and a track record of consistently providing highlevel service. “We undertook a cost-benefit analysis of migrating to anelectronic mechanism for payroll, as opposed to a human and mailingmechanism,” says Fitzpatrick. “We estimate about $500,000 in annualsavingsmore than enough to go forward with this decision.”
Bygiving employees 24-hour access to their pay information and providingpay cards as an additional option to employees, Shell greatly reducesthe cost of printing checks, not to mention the problem of lost checks.Moreover, employees obtain immediate access to their income in a securemanner. “They dont have paychecks and associated pay information goingthrough the U.S. mail,” Carter explains.
Employees can not onlyobtain information about their pay from the Internet, but also have itfaxed to them or receive it over the phoneinEnglish or Spanish. They’re also able to access a greater degree ofdetail about their pay and related deductions, reducing the likelihoodthey will call HR for answers. “There’s only so much information you canput on a paper pay stub,” notes Carter.
At present, Shellemployees continue to receive their pay information via traditional payadvices, although this information is now posted online as well. Shellhas been encouraging employees to use the online tool as part of itspreparatory work to transition fully to the TALX-provided system. OnSeptember 1, 2005, the company will stop printing and mailing pay stubsto approximately 1,000 Shell Trading employees. While 94 percent ofShell U.S. employees currently are paid on a direct deposit basis,Fitzpatrick is sanguine that the new electronic pay strategy willentice many other Shell employees to follow suit. “This is all aboutputting our W-2 process, employment verification, and pay informationinto an electronic, online format that has now been outsourced,” hesays.
TAKING IT SLOWLY
Thegradual, phased-in outsourcing approach taken by Shell and TALXsolidifies relations between the outsourcer and the outsourcingprovider, and makes for an easier transition to the outsourcing modelfor employees. “We have found that when you are outsourcing functionsthat traditionally were handled by HR, it is best not to hit employeeswith too much at once,” says Smith from TALX. “Our focus is on stagingthings to manage client success through each phase. It is much better,in our view, to start with one or two things than a whole plethora ofservices at once.”
Even a gradual outsourcing approach willencounter some resistance. In introducing the new paperless pay stub toemployees within Shell Trading, for example, Fitzpatrick and Carterconcede there was some initial “noise,” although this has quickly dieddown. “Just this morning, I got my staff together and asked about thehallway talktheissues and problems they were hearing about the new functionality andoutsourcing strategy,” says Fitzpatrick. “They said the noise hadvirtually disappeared now that the system is online. More than 500employees have, in fact, logged on to ePay and started looking at theirpay information online.” Helping to ease the transition was Shellscommunications strategy about the new outsourcing endeavor. “We approachchange management very seriously here, and I believe our constant flowof reminders through e-mails, posters, and newsletters that this wascoming paved the way for a smoother introduction,” says Carter. “I’veheard that employees that have gone online and seen their paycheckswere surprised about the level of detail accorded various deductionfields. They are now believers, which will help us as we roll it outacross the rest of the organization.” (In some U.S. locations, Shellemployees are represented by organized labor, requiring the company tohold discussions with those groups before implementing the changes,Carter notes.)
Next on the drawing board for Shell and TALX isthe possibility of automating Shells required I-9 forms. All U.S.employers are responsible for completion and retention of Form I-9 foreach individual they hire for employment in the United States,including citizens and non-citizens. On the form, the employer mustverify the employment eligibility and identity documents presented bythe employee and record the document information on the form. Recently,the U.S. Congress passed a new law that allows the forms to be executedelectronically. “We just did a presentation to Shell on the I-9 service,which our client advisory board identified as a major problem foremployers,” says Sims.
Carter comments: “We have no specific plans yet on theI-9 outsourcing concept, but we’re definitely looking at it. TALX hasbeen a terrific company to partner with, right from the beginning. “