Best Practices: Shifting HR Resources from Records Management to Strategic Initiatives
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1 WHITE PAPER Best Practices: Shifting HR Resources from Records Management to Strategic Initiatives Executive Summary The challenging economic environment both in terms of pressures to cut costs and increasing workforce transformations has put Human Resource (HR) departments in the corporate spotlight. Steadily increasing state, federal, and international workplace laws and privacy regulations are putting additional demands on HR professionals. Increasing regulatory requirements are causing the number and variety of mandatory active Human Resources records to skyrocket. These, in turn, feed burgeoning inactive HR record back-files especially for multi-location and multinational companies. Rapid access to comprehensive HR records goes hand in hand with compliance audits and workforce transformations, as well as responding to legal challenges such as ediscovery. Cost containment, compliance regulations, and accessibility are the key drivers accelerating the adoption of digital HR records management solutions. But creating a fully digital HR records management environment can be a monumental and expensive undertaking. In fact, it has been estimated that a typical 19,000-employee company handles more than one million employee related transactions a year, at a cost of between $10 and $50 each. 1 A hybrid approach to managing physical and digital HR records is far more practical and economical for most HR organizations. Many HR organizations find it extremely challenging to create in-house operations that can achieve their goals in labor and real estate cost containment, efficiency (distributed access), and security (controlled access). More and more companies are turning to experts who have invested in the latest digital technology and facilities in fact, many have a global footprint and may already be storing a company s physical HR records to provide highly efficient, cost-effective HR record-keeping operations. 1 Mullers-Patel, Katharina, PhD., Human Capital Management: How Top Organizations Drive Company Profits Efficiently, 2007 ASUG/SAP Benchmarking Study. US-DMS-WP (800) 899-IRON
2 Table of Contents I. Introduction 3 II. The Increasing Costs of HR Records Management 3 A. More Regulatory Requirements Means More Costs 5 B. Costs Considerations in Distributed and Centralized Records Management 5 C. Controlled and Authorized Access 7 III. Converting HR Records into Digital Format 7 IV. Partnering with Experts in Hybrid HR Records Management 10 A. Approaches to Hybrid HR Records Solutions 10 B. Key Characteristics of Hybrid Records Management Services 11 C. Representative Solutions 11 V. Choosing a Hybrid Records Management Service Provider 12 VI. Summary 14 (800) 899-IRON 2
3 I. Introduction Human Resource departments are under increasing pressure to accomplish more with less, frequently measured through key performance indicators (KPIs). This includes becoming more efficient handling HR records and employee transactions, and accelerating service center solutions. In today s global business environment, HR can be responsible for talent management worldwide, meeting the challenge of changing staffing levels and other complex workforce transformation issues. This is in addition to more stringent regulatory reporting obligations, especially as they relate to employee records and compliance with broader business continuity and disaster recovery requirements. More workforce regulations, state and federal, as well as international in scope, are increasing the number and variety of mandatory active HR records. These requirements also feed burgeoning inactive HR back-files especially for multi-location and multinational companies. Hand in hand with compliance audits and workforce transformations, as well as responding to legal challenges such as ediscovery, is rapid access to comprehensive HR records. II. The Increasing Costs of HR Records Management Most HR departments are well aware of the productivity and cost challenges presented by HR records management. Consider the sheer quantity and different types of documents typically generated for an employee (not including benefits documents) during his or her tenure with the company. Table 1. Sample of an HR Records Topology 2 Employee Screening and selection On-boarding General employment records Separation records Other, e.g. Claims, litigation Recruitment documents Resumes and applications Interview records Pre-employment testing Verification and reference checks Government forms e.g., I-9, W-4 Benefit forms Emergency notification forms Wage and salary information Wage garnishments Performance appraisals Promotions and transfers Formal discipline Job-related medical records Exit interviews Separation checklists COBRA notices Correspondence Reference statements Unemployment Worker s comp. State or EEO OSHA Affirmative action Records for litigation 2 Suggested by Philip Deming, Safeguarding HR Records, posted on SHRM at 3
4 Each of these types of records comprises multiple pages, all part of an employee s file, increasing costs. Table 2. Page Averages for Selected Types of Documents in an Employee File 3 Document Type Employee Application Resume Confidentiality Agreement Non-Disclosure Agreement Signed Offer Letter Stock Letter Proprietary Information Obligation Checklist Electronic Signature Consent Agreement Employee and Temporary Work Adult Content Liability Other Internal Administrative Tracking Forms Total Pages Average number of pages Multiply this by the number of active employees for which these records (still predominantly paper) need to be generated, stored as active, maintained, and archived by the larger enterprise, and it is easy to understand why HR records management is a major challenge to the productivity of any HR department. One must add to this the real-estate (and labor) involved in maintaining back-files of information on former employees. Space required to store back-files can entail increased cost in leasing additional space or take up valuable real estate that could be used for revenue-generating functions. The influx of records added to back-files can be unpredictable, resulting in underutilized staff when file volume decreases or diversion of staff from other key assignments when volume increases. Many of these business process and cost challenges are not adequately addressed by existing, conventional physical HR records management processes, even by technology that once seemed state of the art. Challenge: aging equipment can t keep up with increased records activity As Baby-Boomer generation employees approached retirement in a large technology company, large numbers of HR records had to be reactivated. The company s aging microfiche records system was experiencing downtime that caused response times for records to stretch into days. For the solution, see section IV, Partnering with Hybrid Records Management Experts. And it s not just the records themselves. It has been estimated that a typical 10,000 employee company handles more than 1 million employee related transactions a year, at a cost of between $10 and $50 each. Most if not all of these transactions likely involve an HR record. Just as importantly, an HR environment which is highly transactional diverts HR resources away from becoming more aligned with the strategic business goals of attracting and retaining top talent and making the company profitable. The cost requirements of managing large volumes of HR records are only exacerbated by more regulations (increasing record volume, type, and access requirements), in many cases distributed record locations and the concurrent need for controlled, authorized access. 3 Iron Mountain Document Management Solutions (800) 899-IRON 4
5 A. More Regulatory Requirements Means More Costs Human Resource documents contain some of an organization s most sensitive and vulnerable information, including many private employee data protected by state and federal legislation. Different employee files fall under an array of federal, state, and in the case of multi-national companies, different national privacy regulations governing their retention and secure access. These regulations apply not only to protecting physical records but also to electronic records. 4 Many regulations specify the type of records that must be kept as well as how long they are to be stored (and available for access). For example, the Fair Labor Standards Act (FLSA) and Equal Pay Act (EPA) require employment contracts be kept for three years. Many regulations specify that records involved in litigation, e.g. ediscovery records placed on legal hold, or enforcement actions be kept until final disposition. In some cases, medical records, INS I-9 forms, Equal Employment Opportunity (EEO) records and other categories of information must be kept in separate files. 5 Simply navigating the myriad and overlapping HR records requirements can be intimidating. Information Privacy Center Regulations Within the US FMLA FSLA ADEA ERISA ADA EEO Title VII COBRA HIPAA SOX IRCA OSHA Outside of the US Directive 95/46/EC or the Data Privacy Directive (EU) Data Protection Act 1998 (UK) Privacy Act 1988 (AUS) PIPEDA (Canada) Personal Data (Privacy) Ordinance (Hong Kong) The growing volume (and complexity) of HR documents drives up the costs of managing active HR records. And more active records also generate more inactive HR back-files especially for multi-location and multi-national companies. To the cost-conscious HR professional, increased regulation means escalating costs. And these costs do not account for the risk of penalties for non-compliance nor breaches in employee privacy. B. Costs Considerations in Distributed and Centralized Records Management By their very nature, HR records are often created, managed, and stored in distributed locations. This is certainly true for multi-national organizations undergoing global expansion, opening new offices in different regions. Mergers and acquisitions also entail the incorporation of distributed HR records, both active and inactive. 4 In the United States the validity of electronic signatures is specified in the Uniform Electronic Transactions Act (UETA), but the privacy and retention obligations are also spelled out in many individual regulations as well. 5 BLR Audio Conference, Electronic Recordkeeping: What to Keep, What to Toss, What to Scan and Where to Store it, March 17,
6 Challenge: Managing HR Records during Global Expansion A rapidly-growing financial service company based in the US was opening branches in Asia, having successfully established its EMEA operations. The challenge was evolving a paper-based records management process to a consistent, and cost-effective international model for accessing HR records (requiring over a hundred thousand transactions per year). While local storage may be efficient for an individual department or remote office, it introduces additional costs for the HR department as a whole. There are greater communication costs in a distributed HR records environment: inefficient mailing/faxing can result in inadvertent disclosures and/or lost documents. The time spent simply locating a document is time lost for more strategic HR functions. There is a far greater likelihood of redundant records in different systems, e.g. payroll, and maintaining accuracy across these systems can cost time and money not only in HR. Frequent auditing and reporting are required to ensure accurate and current HR documentation is on file, further increasing costs and diverting resources from more strategic HR functions. Establishing and enforcing standardized access controls across geographic and organizational boundaries can be expensive. How does one guarantee that privacy rules are being applied consistently on a company-wide basis in terms of controlled access, secure record handling, proper retention, and secure destruction? As the volume and complexity of centralized, onsite HR records increases so do the costs of indexing, retrieval, and storage. Maintaining large, onsite file rooms that occupy expensive real-estate is cost-prohibitive. Many HR organizations have already chosen to outsource back-files records management, shifting their focus from transactions to strategic initiatives. (800) 899-IRON 6
7 Challenge: Managing Distributed HR Records from an Acquisition Acquisition of a large regional brand required a major restaurant chain to consolidate and integrate a sprawling, distributed system of HR records. The goal was to achieve uniform HR administration across their expanded enterprise, all in the face of 100% staff turnover. In either scenario, controlled access to HR records is a critical requirement. While rapid access to the appropriate HR records is necessary for compliance audits and internal reports to management, ensuring authorized access is critical for the protection of private employee data. Let s look more closely at these somewhat contradictory attributes of controlled access. C. Controlled and Authorized Access Regardless of where they are located, HR records need to be made available to users with distinct access and security requirements. Depending on their needs, managers and employees will have varying requirements for self-service access to HR records ranging from one document type to all, active files to back-files, and authorization to read, edit or add records. Most organizations have different personnel managing components of the employee file such as benefits, payroll, and the federally regulated I-9. Corporate HR managers are responsible for managing risk to employee records, no matter where they are located or in what format they are stored. Large volumes of HR records containing private and other sensitive data require rigorous and consistent controls. Implementing a system that is efficient without compromising security (risking non-compliance penalties) is difficult for HR departments to achieve in a distributed HR records environment. Transporting them by fax or courier can result in inadvertent disclosures and/or lost documents along what should be a controlled chain of custody. III. Converting HR Records into Digital Format For many companies, the solution to managing any large store of sensitive information is to move to a digital system. Cost containment, compliance regulations, and rapid, secure accessibility are the key drivers accelerating the adoption of digital HR records management solutions. In 2007, the Association for Information and Image Management (AIIM) surveyed businesses as to the prime drivers for moving towards a physical to digital conversion. Efficiency and productivity, followed by concerns about compliance, were the two strongest motivators. Reasons to Implement Electronic Records Management Increased Profitability Faster Turn Reduce Costs Customer Service 6% 15% 18% 18% Risk Management Efficency & Productivity Leadership 37% 60% Compliance 50% Source: AIIM 0% 10% 20% 30% 40% 50% 60% 70% Note: All figures are rounded Figure 1. From Controlling Costs and Risk through Outsourced Document Management, Frost and Sullivan,
8 In theory, a fully digital HR records management system could deliver benefits such as: Labor savings in physical record management Real estate savings for physical records storage Access anywhere, anytime through an Internet browser Centralized control through rules that automatically define authorized access, retention periods, and secure destruction Rigorous chain of custody control Simplified audit and reporting on records access and usage HQ Regions Branch HR HR HR Physical Records Storage Digital Conversion Digital Records Archive Secure Access User User User Figure 2. Distributed Access, Centralized Control In reality, creating a fully digital HR records management environment is an expensive undertaking for any company further diverting valuable HR expertise and resources. Any fully digital HR record solution would require a significant capital outlay for image storage and retrieval components: to house the archive and provide access. Some form of Web-based access would have to be developed or more likely acquired. (And any system would involve on-going support and maintenance costs.) In addition, a fully digital system would entail not only conversion of active records but of the library of back-files. (Whether currently inactive or not who s to say when you will need a record?) (800) 899-IRON 8
9 When contemplating a fully digital HR records management environment, consider the processes involved in digital conversion: Defined Processes and Proven Consistency Drive Total Customer Satisfaction! Inbound of Materials Customized Workflow Implementation Review Detailed Job Specifications Document Preparation Define File Breaks, Remove Fasteners Quality Assurance Document Scanning Standard Size Documents, Large Format Documents and Micrographics Text Extraction Bar Code, OCR, OMR Continuous Quality Control Checkpoints Occur Every Step of the Way Figure 3. Document Conversion Processes Indexing Validation/Verification Index Information Keyed and/or Extracted From a Database Imaging Output Hosted Image Archive, FTP, , Media Costs are also an important decision factor: Back-file conversion can cost $ per storage box, producing about 2,500 images 20,000 digital images require about 1GB of digital storage As compared to typical costs of physical records storage about 2,000 pages of documents per storage box at $5 per year for storage and a low level of file retrieval It must be recognized that most of the records in an HR back-file will not be used on a regular basis. It is also important to bear in mind that, for some time to come, certain types of paper documents will remain part of the record process, despite the implementation of a digital solution. For these reasons, a hybrid approach accommodating both physical and digital HR records together is a far more practical and economical solution, especially for multi-location companies. A hybrid approach can leverage the cost-effectiveness of physical storage (predominantly back-files) with the convenience and control of digital access (accommodating distributed users). 9
10 IV. Partnering with Experts in Hybrid HR Records Management Hybrid records management services require expertise in both physical and digital records management with best practices in making the two disciplines work together. Many HR organizations find it extremely challenging to create in-house operations that can achieve their goals in labor and real estate cost containment, efficiency (distributed access), and security (controlled access). More and more, HR needs to stay focused on its strategic mission, rather than transactional record-keeping. Given the complexity of creating and managing a hybrid system, outsourcing the effort to an expert in both physical and digital HR records may prove the most cost-effective. More and more companies are turning to experts who have invested in the latest digital technology and facilities in fact, many have a global footprint and may already be storing a company s physical HR records and can provide highly efficient HR record-keeping operations. Equally important, these experts can help companies adopt best practices for HR records management and demonstrate consistent, standardized records management processes when required. A. Approaches to Hybrid HR Records Solutions The experienced service provider can design a comprehensive, economical program for HR records management combining the right physical records storage and management services with specific, targeted document conversion services that meet the HR department s secure access requirements. With one provider responsible for both physical back-files and active file management, there are significant efficiencies that translate into savings for the customer. If the provider has a multi-national footprint, standard operating procedures can ensure consistent best records management practices across the distributed enterprise. The provider analyzes the types of records where conversion is most cost-effective for the company. There are a number of scanning conversion strategies described below, but the rule of thumb should be: scan what you need only when you need it. Some will choose to scan comprehensive segments of their HR records back-file, based on their unique business requirements and cost structure. The experienced provider can also offer important selective document conversion strategies. Image on demand: Scan records as they are requested Selective scanning: Using predictive tools, scan records with a high likelihood of retrieval Abstract scanning: Scan a small subset of high value images within a larger record Full digital conversion: Categories of back-file records that need to be stored in their entirety In addition to helping HR departments find the right approach to back-file conversion, the service provider should also help the customer right-size the process for active file scanning and storage in a day-forward conversion. High Full Digital Conversion Cost of Activity Abstract & Selective Scanning Image on Demand Low Low % of document scanned High Figure 4. Scan only what you need, only when you need it (800) 899-IRON 10
11 In some situations, active records can remain onsite at company headquarters allowing remote access over the Internet (and, presumably, backed up by the IT department as part of the company s overall business continuity and disaster recovery strategy). Alternatively, records can be stored in the service provider's hosted digital document repository with anytime, anywhere access over the Internet. More comprehensive service providers also offer temporary or permanent hands-on assistance for special requirements for offsite active file management services and, conversely, onsite records management programs. B. Key Characteristics of Hybrid Records Management Services Both physical and digital records management services should feature some key characteristics that work in an integrated fashion in adherence to the requirements of the customer: Centralized, tightly managed operations that feature best practices in security and management for both physical and digital records, with rigorous chain of custody control Ongoing investments in industry-leading digital technology and physical facilities Multi-user, multi-location access via secure Internet connection Access to appropriate records restricted to authorized employees regardless of location Tracking tools that allow customers to control and monitor access, as well to conduct accurate auditing and reporting Customer-specific rules for retention, auditing and reporting, secure and accurate maintenance, as well as secure destruction C. Representative Solutions Below are some illustrations of how hybrid HR records solutions worked for the challenges presented earlier in this paper. These scenarios are examples of how they were able to contain mounting costs with a unique program designed, implemented, and maintained by a hybrid service provider. Solution: Aging Equipment Can t Keep Up with Increased Records Activity Rather than spend the capital to replace the old microfiche system with a new imaging system, the technology company chose to outsource the storage of microfiche with a service provider who scanned them on demand and also converted all new HR records upon receipt and stored them in a digital archive accessible to all HR and Benefits staff from their desktops Solution: Managing HR Records During Global Expansion By outsourcing to an expert in physical and digital records management, the company was able to move to a new file-indexing model for better access and security; adopt a hybrid solution: back-file, day-forward and on-demand; and retrieve images from a highly secure digital records center that was expandable globally within the company. Solution: Managing Distributed HR Records from an Acquisition By outsourcing to an expert in on-demand digital imaging, they could convert all of their active HR records and store the large volume of inactive records created by the turnover rate. These could be digitally converted and electronically delivered for events like employment verification, pay and benefits issues, or litigation. 11
12 V. Choosing a Hybrid Records Management Service Provider Based on a company s specific requirements, these experts can provide guidance on a solution which can optimize business efficiency, reduce costs, and ensure a smooth operation going forward that enables compliance. With changing staffing levels and the need to do more with less, relying on a partner to share best practices and provide creative solutions to records challenges frees HR departments to manage complex workforce issues. By asking hybrid records management service providers the right questions up-front, companies can ensure that the solution they choose will deliver the level of compliance risk management and the ROI their company demands. How long have you offered physical records management services? Document conversion services? Where are your facilities located? Locally, regionally, nationally, globally? What process do you use to analyze an existing HR records management operation in order to propose an outsourced operation? How do your document conversion services work with your physical records management services? What are the options offered? What link would there be between our physical records and our digital ones? Do you offer a centralized image repository? What if we choose to use our own image repository? How would you provide distributed access to the records you store for us and what features control that access? What kinds of auditing and reporting capabilities do your services support? What controls do you have in place to enable your customers compliance with information privacy regulations? Do you offer services that could provide more specialized assistance, like offsite active file management services or onsite records management programs? (800) 899-IRON 12
13 Traditional HR Solution HQ Regions Branch HR HR HR User User User Iron Mountain HR Solution HQ Regions Branch HR HR HR Iron Mountain Records Center Digital Conversion Iron Mountain Digital Record Center for Images Secure Access User User User 13
14 VI. Summary Moving to a digital HR records solution provides undeniable cost and productivity benefits. Yet a fully digital solution, incorporating volumes of back-files and the continuing use of paper documents in various HR processes, is prohibitive and not in the strategic repertoire of most HR departments. Outsourcing hybrid records management to experienced service providers frees HR resources to manage complex, transformational workforce issues (e.g., planning for and meeting the demands of changing staffing levels). A vendor experienced in hybrid solutions, with investments in physical facilities and digital systems, can provide: Reduced costs: Central management of the physical records leverages outsourcing expertise and lower-cost realestate Optimized productivity: Faster access to employee files, especially for organizations with distributed offices, by imaging records as required and providing controlled access on a Web-based platform Consistent, standard business practices: Auditable regulatory compliance and secure disaster recovery, and business continuity A comprehensive, hybrid records management program allows companies to gain more control over their transactional costs. HR can focus on issues like attracting and retaining top talent, reporting on Key Performance Indicators (KPIs), and promoting profitability. By asking potential service providers the right questions up-front, companies can ensure that the solution they choose will deliver the return on investment and level of compliance risk management their company demands. (800) 899-IRON 14
15 ABOUT IRON MOUNTAIN DOCUMENT MANAGEMENT SOLUTIONS Iron Mountain Document Management Solutions help organizations create a comprehensive, fully integrated document management program that provides complete visibility and access to all business records where and when they are needed. Organizations can become more effective and efficient managing employee information, supplier agreements, contracts, customer relationships, and more. Our enhanced access and control can speed business processes and decision-making, improve customer service, and support compliance requirements. For more information on Iron Mountain s Document Management Solutions visit Iron Mountain Incorporated. All rights reserved. Iron Mountain and the design of the mountain are registered trademarks of Iron Mountain Incorporated. All other trademarks used or mentioned herein belong to their respective owners. 745 Atlantic Avenue Boston, Massachusetts (800) 899-IRON Iron Mountain operates in major markets worldwide, serving thousands of customers throughout North America, Europe, Latin America, and Asia Pacific. For more information, visit our Web site at US-DMS-WP (800) 899-IRON
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