r e p r i n t

CONSTRUCTION FINANCIAL MANAGEMENT ASSOCIATIONT he S ource & Resource for Con st r uc t ion Financial P rofessional s

March-April 2011

HUMAN CAPITAL MANAGEMENT: The Heart of Your Company

In the past, contractors almost exclusivelyfocused on managing labor productionand its costs. However, with the recenteconomic challenges and ever-increasingregulations – including the enactment ofthe Patient Protection and AffordableCare Act (the “Health Care Reform Act”) –this practice is no longer sufficient forfuture growth and prosperity.

Companies are finding the need for amore well-rounded approach to humancapital management that will meet indus-try and government standards. This newapproach allows the focus to remain onthe bottom line.

In order to address this need and ensurethat managers, supervisors, and supportstaff have the most current and accurate in-formation, companies are turning to humancapital management solutions to record,track, and maintain employee data in cen-tralized, easily accessible systems.

SELECTING A SOLUTION

Selecting a solution that meets yourcompany’s needs can be difficult and time-consuming. Most solutions are either gen-eralized and designed to work across anumber of industries or so specialized thatthey fail to communicate with other keysystems that drive your company’s dailyprocesses.

With that in mind, it’s necessary thatCFMs become familiar with the availablesolutions and the impact implementationwill have on both their companies’ IT in-frastructure and employees.

Human capital is the heart of every company. Forcontractors, it’s one of the key elements that ensuresprojects are completed on time, within budget, and tothe highest possible standards.

However, managing human capital can be challenging,regardless of a company’s size, line of business, orlocation. Coupled with industry regulations and govern-ment standards, the process can be overwhelming.

BY VICTORIA SATRAN

CFMA BP March-April 2011

Laying the GroundworkIt’s important to start by identifying and addressing yourcompany’s specific needs to ensure that the ultimate solutionwill effectively and efficiently address those concerns. Bydoing so, the results will transform not only the HR strategy,but also the company as a whole.

Through research and discussions with leading commercialcontractors, we have identified six key areas that must beaddressed in any human capital management solution. Thisarticle identifies these areas of concern and demonstrates howthey have impacted various contractors and their search for asolution. The six key areas are:

1) Benefits management

2) Regulatory compliance

3) Employee development

4) Knowledge transfer

5) IT security and integration

6) Recruitment management

After you have addressed these areas, you can then develop aframework for evaluating and comparing different solutions tohelp select one that will serve your company for years to come.

BENEFITS MANAGEMENT

Maximizing employee benefit plans is a crucial element ofany human capital management program. To control costsand improve effectiveness, companies are turning to tech-nology for benefits administration solutions. Benefits admin-istration can be a very narrow or broad application, based onthe company’s perspective or need.

Benefits administration solutions automate business pro-cesses and reduce or eliminate costs from ineligible depend-ents, which cost American companies an estimated $22 billioneach year.1 They also:

• fully automate year-round benefit processes and communication;

• enforce a consistent set of benefit rules;

• produce accurate data and reports; and

• virtually eliminate HR staff intervention.

A recent study shows that 52% of employers surveyedsought greater use of employee self-service technologies rel-ative to restructuring the administration of some or allrewards programs.2 And, 70% of employees surveyed chose

to learn about their benefits from Web-based materials whenoffered.3

“The demand for comprehensive HR solutions that automatethe administration of personnel data and benefits informationhas increased over recent years, and there will be an evengreater need once the recently enacted Health Care ReformAct takes effect in 2014,” comments John Harvey, EmployeeBenefits Consultant, MJ Insurance, Inc., Phoenix, AZ.

Self-Service ApplicationsEmployee self-service applications allow individuals to up-date and maintain their own information through an easilyaccessible portal. Let’s take a look at three areas of benefitsmanagement where automation would be helpful.

Personnel Data

It’s important to have accurate and up-to-date addresses,qualifications and certifications, and emergency contactinformation. And, personnel data maintenance is essential toensure accurate payroll, tax forms, and financial reporting,as well as the matching of personnel to requirements forprojects and other open positions. However, maintaining thisdata can be a time-consuming challenge for HR and adminis-trative personnel.

According to Jeff Moryn, CIO of Parsons Electric, Minneapolis,MN, “Each year when we send out our W2s, it never fails thatwe experience approximately 10% of them being returnedbecause the address was incorrect.”

Employee Benefits

Employee self-service applications provide all employees,whether they’re remote or in the office, with the ability tomanage their health benefits, pension, and stock plans, andto access company information without having to involve theback-office administrative staff or HR teams. This can be aboon to productivity and make a significant difference forcompanies with large workforces, multiple offices, and/ormany projects across multiple states.

“Workers have the ability to manage their personal benefitstatements online, including benefits they are enrolled in aswell as how much both they and the company have spent onthese benefits during the year to date,” explains Todd Andrews,Assistant Treasurer at Moretrench in Rockaway, NJ.

“This information, along with the year-to-date cash compen-sation information, can provide employees a picture of theirentire compensation package. The employees can makechanges remotely, as allowed by the company, and plan forthe future.”

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March-April 2011 CFMA BP

Documentation Requests

When employees apply for a loan, file a tax return, or transferfrom one job or company to another, they need proper doc-umentation. Employee status updates that involve the addi-tion or removal of a dependent or a change in marital statusrequire immediate administrative action and must also bedocumented.

Without a self-service application, they need to contacttheir employer to obtain the necessary docu-ments, complete the forms, and file the infor-mation for action. However, with a self-serviceapplication to fulfill these tasks, the em-ployees fill out the necessary forms on theportal and, once they are submitted, theforms are automatically recorded androuted to the necessary people for appro-priate action.

If employees are empowered to manage theirown personnel data and benefits information,then there is no more chasing paperwork or one-timeadministrative requests.

Overall, employee self-service applications and similar HRportals benefit companies of any size. Enabling employees tomake necessary changes and corrections to their personaldata saves a significant amount of time for HR personnel andimproves accuracy by removing the need for double entry ofinformation and capturing data from handwritten forms.

“The closer the data entry and personnel data management isto the employee, the higher the accuracy,” says Tom Fluker, aconstruction IT consultant with Sentigy in Houston, TX. “Withtoday’s integrated mobile communication technologies, theseprocesses can be easily pushed down to the employee, as theyshould be.”

REGULATORY COMPLIANCE

The challenge of ensuring that HR practices comply with thenumerous and often complex laws and regulations can bedaunting, and it’s not going to get easier anytime soon.

There is an increased need to meet regulatory requirementsin order for contractors to bid on and successfully completeprojects. Ever-changing federal regulations, safety require-ments, the recent Health Care Reform Act, and employeeturnover compliance demand more administration andreporting.

Federal RegulationsGovernment projects introduce a set of complex and uniquerequirements and regulations. To be able to vie for govern-ment funds and engage in government projects, contractorsmust provide accurate and real-time reports on very specificdata.

So, federal contractors need the ability to conveniently pulltogether comprehensive reports. Without software

solutions to support the administration and re-porting of such information, this intricate pro-cess can cost significant staff time and, insome cases, lead to failed bids.

Safety Requirements“Every job requires safety measures. Thereare various standard formats on how con-tractors have to administer and comply with

these measures at the company, project, state,and federal levels,” says Fluker.

“Some projects require the completion of specific safetytraining programs for each employee. Contractors that en-gage in civil engineering, chemical engineering, building con-struction, demolition, and remodeling must perform extensivesafety training programs to prevent any exposure to envi-ronmental factors and job-related accidents.”

So, contractors must spend a significant amount of timeensuring that very specific labor requirements are met. Daysof IT and/or HR staff time can be saved if the information forcomprehensive labor reports for each project resides in a sin-gle, integrated solution.

Health Care Reform Act“The most frustrating thing with the newly enacted HealthCare Reform Act is not knowing what will change,” saysFluker. “It is unclear what parts of the reform have passed,and what items will be deductible and taxable. The unknowndoes not provide a lot of time or comfort for companies try-ing to plan ahead.”

Although it is too soon to tell the specific impact that theHealth Care Reform Act will have on construction compa-nies, one thing is certain: There will be more administration,documentation, and information tracking.

While companies can be penalized for not meeting specificrequirements, they can also benefit from being in total con-trol of worker and company data.

CFMA BP March-April 2011

Employee Turnover ComplianceDue to the economic downturn and resulting decrease inbacklog and project availability, contractors have experi-enced increased employee turnover. If these processes arenot carefully documented, then the possibility increases forformer employees to file claims and lawsuits.

As a result, many contractors either outsource these dutiesor have a full-time person on staff to maximize compliance ofrecruiting, hiring, and layoff procedures, and to ensure theiremployee handbooks are up to date.

(For more on hiring and firing, see Todd A. Jones’ article on“A CFM’s Legal Guide to Hiring & Firing” in the May/June2007 issue.)

EMPLOYEE DEVELOPMENT

Against the backdrop of the recent recession, many contrac-tors have diversified their service offerings out of necessityby bidding for jobs outside of their immediate area of expert-ise or geographic location.

(For more information on performing work in new geo-graphic locations, be sure to read “Leaving Your Home State:Communication Is Key” by Gretchen J. Kelly in the January/February 2011 issue.)

If a contractor wins a bid outside its region or area of expert-ise, then it must have the labor force needed to deliver on theproject. The more competitive or aggressive a bid, the moreimportant it is to hire the fewest possible workers with themost exact skill sets needed. Also, certifications are oftenrequired for certain projects and must be presented beforeproceeding with a job. In other words, when margins aretight, there is no room for error.

“We engage in a variety of complex and large specialty proj-ects. Therefore, the ability to know what our workforce lookslike – size, skill set, demographics, certifications, perform-ance, and other points of view – is probably one of the most

critical components of an HR solution. It helps us plan aheadand enroll into employee development programs to ensurethat we have the skill sets we need for the upcoming proj-ects,” explains Will Trujillo, HR Director, Schuff International(a large structural steel company based in Phoenix, AZ).

“It also works the other way around,” continues Trujillo. “If weknow that we have an abundance of labor in certain disciplineswhile we lack skill sets in others, then we can proactivelyretrain our employees and managers to respond to marketdemands and, if needed, enter into new market opportunities.”

KNOWLEDGE TRANSFER

An aging workforce creates additional reasons for effectiveemployee training programs, continued employee develop-ment, and corporate HR strategy. An integral part of thisstrategy must be the effective transfer of knowledge.

Succession planning, which often refers to a company’s exec-utive management, is equally important at lower levels toensure that the knowledge gained from years of experienceis not lost as employees retire. (For more on succession plan-ning for your company, see “The CFM’s Role in BusinesSuccession Planning” by Elaine J. Ervin and Dan Gaffney inMarch/April issue of this magazine.)

Through the use of an automated HR application, specificskill sets, knowledge, and certifications can be tracked alongwith employee ages and expected retirement dates. Planscan be made so that the most critical elements are passed onto the younger generation of employees to provide continu-ity within the organization.

IT SECURITY & INTEGRATION

As with direct access to any type of confidential information,personnel data made available through an HR portal requiresthat a company pay specific attention to its employees’ dataand transaction security to ensure accuracy and privacy.

. . . the ability to know what our workforce looks like –size, skill set, demographics, certifications, performance,

and other points of view – is probably one of the most critical components of an HR solution.

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March-April 2011 CFMA BP

For security reasons, many contractors opt to keep their criti-cal business operations and data in-house, and expect the HRmanagement component to be part of a financial managementsolution. But, financial applications are not always as efficientin managing critical personnel data.

Consider the recruitment-heavy nature of this industry:Contractors try to hire the right amount of people with theright skill set for each job. So, they are likely to gain consid-erable efficiencies by choosing an integrated software solu-tion that helps manage this highly repetitive process.

In addition, the construction industry’s high turnover raterequires a streamlined on-boarding and exit process, role-based security with restricted access to applications anddata, and predefined rules for what data is being displayed toemployees in the home office and the mobile workforce.These processes can be conveniently managed byan HR software application.

However, according to Fluker: “Since weare processing and accessing person-nel data in the field, we need toensure that the proper security con-trols are in place. HR solutions con-tain an enormous amount of confi-dential data about each person andthe company overall.

“Credit card and social security num-bers, dependents, payroll, bankaccounts, and other information are nowavailable over an Internet connection.Before implementing HR self-service portals andproviding remote access to a company’s HR, payroll, andfinancial management applications, a company must ensurethat certain business processes are established, in addition tothe detailed assessment of the solution’s security itself.”

RECRUITMENT MANAGEMENT

Contractors experience ongoing recruitment, hiring, and lay-offs�as adjustments are made to balance the available laborpool, needed skill sets, and active projects. While currentprojects and forecasted backlogs determine the mix of work-ers needed at any given time, the resource pool can be verydiverse to meet a company’s particular needs.

This can be further complicated by the combination of full-time and contract workers, union and nonunion employees,and the many different skill sets and classifications needed

for projects. In addition, these different groups of workersreceive different benefits and pay rates, and may be subjectto different regulations and standards.

All of this places a tremendous burden on the HR depart-ment, or in many cases, administrative personnel in lieu of adedicated HR department. Not only do these employeesneed to manage the information for current workers, butthey must also be constantly prepared to recruit new work-ers as projects are won and labor requirements shift.

Manual Process Issues

Regardless of who is managing this information, personneldata (from basic contact information to complex qualifica-tions and certifications) needs to be captured and main-tained to know what resources are available and needed, and

to match those resources to specific jobs and proj-ects. Without an automated HR solution in

place, the recruitment process can causemajor head-aches for all parties involved.

“I was working with a constructioncompany two years ago, when oneday 300-400 applicants were fillingout paperwork,” says Fluker. “I sawan immediate opportunity for busi-ness process improvement as Iwatched hundreds of forms be filledout by hand.

“I knew that the next step in the processwas the manual entry of the handwritten

information into a software solution by anadministrative person. The likelihood of making an

error and not being able to catch or correct it prior to bene-fits and payroll processing was very high, especially whenhundreds of applicants were being processed.”

The unfortunate fact is that the number of manual processesthat support HR administrations among construction compa-nies remains surprisingly high and can make it difficult toaddress the many challenges of daily operations.

When capturing information from a manual form, the appli-cant’s handwriting may be difficult to read, the answers tothe questions may be incomplete, and/or the incorrect formscould be used.

All of this leads to administrative errors as the information isentered into a database application, which leads to additionalman-hours spent making follow-up calls to get the needed

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information. Or, the applicant may have previously appliedfor a job or was employed by the company, leading to dupli-cate information being entered.

Applicant Tracking The ability to track the application process, the applicant’shistory with the company, his or her skill set, certifications,and other pertinent information are some of the things thatdeliver considerable efficiencies to contractors.

HR managers and PMs can benefit tremendously from thewealth of easily accessible information in an automated sys-tem as they open job requisitions and begin the recruitmentprocess. Applicants can be prescreened for specific qualifi-cations and the number of interviews required can bereduced to find the right applicant based on the readily avail-able information.

When recruitment management is part of a larger HR solu-tion, the benefits are enormous, as the information is easilytransitioned from applications to personnel files and thenmaintained over the course of employment with the company.

TURNING A PROBLEM INTO A SOLUTION

Workers are critical to construction companies, and theirdevelopment and management are directly linked to a com-pany’s overall performance. To sustain efficiency and gain acompetitive edge in today’s challenging marketplace, howthe vast amount of employee data is managed dictates a com-pany’s bottom-line success.

A technology solution that manages your company’s humancapital can alleviate much of the administrative burden thatcontractors face on a daily basis. A comprehensive solutionthat streamlines access to information can automate work-

flows and standardize processes, which can improve produc-tivity and overall operational efficiency.

In a world of tightened margins and increased regulation, asolution specifically designed for construction companiesthat fully integrates with other key enterprise applicationscan make the difference between success and failure. n

VICTORIA SATRAN is the Director of Marketing forComputer Guidance Corporation in Scottsdale, AZ, aprovider of construction financial and project manage-ment software for the commercial construction industry.

Victoria began her career at IKON Office Solutions, Inc.,where she served numerous project management roles forthe corporate marketing department. She was laterresponsible for business development, product strategy,and marketing communications for a division ofElectronics for Imaging, Inc., a California-based softwaredevelopment company. Most recently, Victoria was the VPof Marketing at MWA Intelligence, Inc., an entrepreneur-ial M2M software solutions provider in Scottsdale, AZ.

Victoria earned a BS in Business Administration andInternational Marketing from Northern Arizona University,Flagstaff, AZ. She continued her education at ThunderbirdAmerican Graduate School of International Managementin Glendale, AZ, where she received her Global Leader-ship Certificate. She is a member of CFMA’s Valley of theSun Chapter and the AGC.

Phone: 480-444-7028E-Mail: vsatran@computerguidance.comWebsite: www.computerguidance.com

Endnotes:

1. Ceridian, “Dependent Eligibility Audits Bring Employers

‘Immediate, Often Staggering’ Savings,” February 22, 2010.

2. Deloitte Consulting LLP and the International Society of

Certified Employee Benefit Specialists, “2010 Top Five Total

Rewards Priorities Survey,” 2010, an online survey of 292

employers jointly sponsored by Deloitte Consulting LLP and

the International Society of Certified Employee Benefit

Specialists.

For purposes of this survey, the phrase “total rewards” is

defined as all compensation, benefits, perquisites, and any

other direct or indirect payments to employees.

3. Unum, “Employee Education and Enrollment Survey,”

January 2010.

March-April 2011 CFMA BP

Copyright © 2011 by the Construction Financial Management Association. All rights reserved. This article first appeared in CFMA Building Profits.Reprinted with permission.