This article is the second in a two-part series detailing benefit managers' struggles to contain costs while effectively maintaining benefits, based on survey results from the Aberdeen Group. The first article, in the November EBN, is available online at ebn.benefitnews.com.

As human resources director for the town of Cary, N.C., Dale Johnson prefers that the things that occupy his day be simple and cooperative. That includes the technology system that he relies on to help manage the town's various employee benefits offerings.

"I like the fact that it's simple, easy to use and talks to all relevant carriers," Johnson says of the town's benefits management system. That ability to "talk" to a variety of benefit service carriers is an important feature of the system, since the town receives those services from a host of vendors - from medical coverage, to dental, to retirement services, to life insurance, disability insurance and others.

As with many HR professionals these days, Johnson is taking greater interest in benefits management systems and their ability to integrate with other critical HR systems. A well-automated, well-integrated total rewards system that can increase efficiencies and reduce the administrative burden on the HR/benefits department would be an invaluable holiday gift for any benefits professional. Workforce management applications are being viewed as critical tools in the effort to monitor and manage benefits in an effective and affordable manner.

Leveraging management tools to offset health cost increases

A competitive employee benefits program is crucial to attract and retain skilled workers, but the ability to manage such programs is getting increasingly difficult, according to data from the Aberdeen Group benchmark report, "Taming the Benefits Management Beast: Driving Costs Down and Satisfaction Up," published in July. The primary reason should come as no surprise: the rapidly rising cost of providing health care and related coverage to workers.

In response, the survey reveals that organizations are looking for ways to reduce the cost through a larger effort at involving employees in their own plan management, and making more aggressive investments in technology, to:

• Provide complete information on individual benefit plan offerings and enrollment criteria.
• Track employee activity in each plan offering, including enrollment, profile changes and use of benefit provider services.
• Enable employees to have full, real-time, online access to their individual benefits plan information.
• Provide a feedback vehicle to employees to comment on the benefits menu.
• Enable the company to financially model various benefit program offering scenarios before investing in specific items.

The last point is especially important, since both anecdotal and survey data reveal that companies are struggling with how to determine return-on-value of a benefits management program. That is the case at Vision Service Plan, at Rancho Cordova, Calif. According to HR director April Bettencourt, program administrators lack total visibility into the benefits program due to integration and measurement limitations.

"The drawbacks are with the lack of integration with other workforce and company systems - recruiting, training, finance, supply chain, etc. - and the ability to measure benefits costs and program changes against productivity and our revenue," Bettencourt says.

Measuring return on investment

Measuring ROI on a benefits management system need not be elusive. Indeed, Aberdeen used four key performance indicators to measure success with investments in benefits management programs. How well organizations are able to show improvement in these areas determined whether they were viewed as Best-in-Class (the top 20% of aggregate scorers), Industry Average (the middle 50%), or Laggard (the bottom 30%).

The good news is that Best-in-Class organizations are making significant investments in benefits management programs, and the systems to manage those programs, and they are seeing dramatic returns for their efforts:

• 66% of Best-in-Class employers improved employee retention.
• 65% increased employee job satisfaction.
• 59% reduced benefit costs per employee.
• 44% reduced the administrative burden on HR.

Aberdeen surveyed organizations on 10 separate key performance indicators to determine the levels of performance and bottom-line gains from benefits management programs. Respondents identified the ones they use most often to determine program success.

Steps toward improvement

Survey data clearly reveal that employee recruitment and retention are the top two pressures driving organizations to invest in benefits management programs. But the actions that organizations are taking in response to these pressures can vary dramatically.

Data show investments in benefits management technology and communication will help employers reduce program costs while increasing employee satisfaction:

• Automate benefits management. A top goal cited with benefits management investments is to reduce the administrative burden on Human Resources. The most immediate way to do this is to automate benefits program enrollment and administration as much as possible. Among Laggard organizations, only 7% have fully automated benefits data collection, while 55% have partially automated the process.
• Standardize data collection. Significant gains in controlling benefit program costs can be realized by automating and integrating benefits data collection. But the process begins by ensuring that everyone involved is capturing and reporting benefits data under a standardized process, with data collection procedures clearly defined.
• Communicate the plan. Among the top challenges cited by Industry Average organizations in regard to managing a benefits program are lack of visibility into the overall benefits program (cited by 18%) and lack of knowledge regarding benefit plan specifics (cited by 8%). Clearly there are major communication problems at play. Employers need to do a better job of reviewing what the various plan offerings are, who they impact, and what individual employees need to do to take advantage of each.

David Weldon is a professional writer who covers topics related to business, technology and careers. He served as a research analyst at Aberdeen Group and as author of the survey report.