Optimizing Human Capital



Information and communication technology (ICT) has evolved to where geographic location is no longer important. Virtual offices (defined as work sites situated outside traditional offices where people still perform traditional administrative services supported by ICT) are on the rise. In a recent research project, the significant advantages of flexible work options (FWO) were found to impact on the management environment, improve work and personal life experiences and improve environmental and social circumstances.

Given the nature of the business of shared services on both the transactional and transformational fronts, FWO has proved to be of great assistance to us in ensuring we have a flexible employment value proposition to cater for work/life balance issues. This has enabled us to appoint the right people focused on output of deliverables which, in turn, has driven productivity levels up.

Introduction

Between 1997 and 2000, a commissioned research project led by Professor Esther Hoffmann (Vaal University of Technology) investigated the concept of VOs and concluded that a new concept of work exists which epitomizes a virtual office: telework.

A paper was subsequently presented at an industry conference attended by a contingent of business leaders from South Africa. One of the delegates, Mr. Dennis Farrell, General Manager, People Management Shared Services at Absa headquarters in Johannesburg, subsequently launched an investigation within Absa to determine the viability of introducing a telework program within the group. This paper focuses only on selected aspects of the completed research project, namely, the human capital factor (HR) which impacts on FWO in countries where ICT was found to effectively sustain such initiatives, with specific reference to implementation in Absa. The holistic investigation took as a point of departure the generic enterprise, comprising the generally accepted eight business functions, and focused on the administrative function, also referred to as business administration, computer support or information administration. This is the one function that permeates the entire enterprise, and the investigation progressed into the dimension of VOs or FWOs that resulted from the influence of ICT impacting the seventeen areas indicated.

A 2003 map of the ICT sector in South Africa, released by World Wide Worx, shows that the country is fast becoming the ICT gateway to Africa. The sector emerged from 2002 with 77 percent of the 40 ICT companies reporting an operating profit, thus portraying a broadly healthy and profitable mainstream ICT sector.

Research Methodology

The focus of this research was on the domicile at which the administrative function was traditionally performed and which is rapidly disappearing from the corporate arena accompanied by an information revolution generated by ICT innovations. The investigation included primary statistics (an empirical investigation undertaken in South Africa) and secondary statistics (from a pilot study conducted in the U.S. and U.K. involving semi-structured interviews and case studies). The empirical investigation conducted in South Africa included three samples: administrative staff; employers/managers; and lecturers in Business Administration (BA) and Information Administration (IA) at 15 universities of technology in South Africa. It covered all provinces in the country as well as Namibia and Lesotho.

Professor Hoffmann screened 70 South African companies in the course of this research, which commenced with a benchmarking investigation in South Africa in order to obtain a baseline. A sample of 14 companies was selected and telephone interviews conducted to establish whether they were familiar with any of the FWO concepts and were applying telework. After a cryptic explanation of the concept, 12 of the 14 companies refused to allow the distribution of questionnaires, indicating that this might raise unrealistic expectations within their HR corps. Of the 14 companies, only two indicated that they were familiar with the concept. However, on further investigation it turned out that there was a certain amount of confusion as to whether telework referred to the outsourcing of certain organizational functions.

The second phase of this article includes the resulting implementation of telework within Absa, initiated by Dennis Farrell and based primarily on the findings from the research published by Hoffmann in 2000.

Conceptual Framework

The traditional corporate environment historically comprised participants involved in administrative activities who worked according to a set routine and were geographically centered in the traditional office. These administrators had their own physical space, furniture and equipment provided by the employer. Operations in trade and industry are generally based on eight business functions of which the administrative/information function/computer support forms the quintessential foundation for information upon which all the other functions rest. However, during the past few years, the emergence of ICT has transformed this traditional office space into a new, dynamic cyberspace, progressing via innovations of laser technology, digital geniuses, creative software with supporting hardware, etc. ICT has created a situation whereby space and geographical locations are no longer important, involving global computerized interconnection via networks which have access to the same information space. This phenomenon is referred to as VOs, telework, telecommute or FWO (telemeaning distance, combined with -work, implying work that is executed away from the traditional office.)

A teleworker is defined as an employee who works at home or at a VO apart from the corporate office one or more days per week or month while still maintaining the status of full-time corporate employee. The quantum leap in the office environment is based on an increase in government regulations, a larger and more diverse workforce, a growing economy and the development of ICT. The one-department office concept is gradually giving way to a broader, company-wide information management concept whereby the role of office manager is expanding to all the vital areas of work, and a paradigm shift results as to HR's involvement in administrative activities. The driving forces of telework are specified as the environment, economic forces and changing social values. A pilot study carried out in the U.S. found that approximately half the domestic teleworkers (±3.2 million) are employed by small businesses with fewer than 100 employees, while about 1.8 million (24 percent) are estimated to work for large companies with 1,000 or more employees. According to a study of 305 North American business executives of companies of varying sizes, 42 percent of these have telework arrangements. This figure represents an increase of 33 percent over previous figures.

Results

Hoffmann found that 50 percent of the South African executive sample reported that their companies comprised 500+ employees; 51.4 percent of the same sample indicated that their companies employed an administrative employee corps of more than 50. This represents a correlation of 1:10, clearly indicating the importance of the administrative function in industry. A significant 77.1 percent of South African managers believe that some administrative activities could be performed at other locations apart from corporate offices. In addition, a significant cumulative 96 percent of employees are in favor of telework, leaving no doubt as to the possibilities of FWO in South Africa. However, only one-quarter of the employee sample was found to be familiar with FWO terminologies. In the BA/IA group, this number was one-third. Overall, less than half of the South African executive sample were found to be familiar with FWO terminologies.

The following five management barriers were identified as possibly obstructing the successful implementation of telework initiatives within companies:

  • lack of government policies and national infrastructures to support telework
  • lack of cognizance of the FWO phenomenon and return on investment
  • time constraints and resistance by executives
  • ignorance and lack of facilitation of the implementation process
  • lack of knowledge on how to manage and evaluate teleworker performance
  • lack of funds for a telework program

Implementation Case Study: Absa Bank 

Absa's research into telework options emerged as a result of pressure to retain key staff specifically in the ICT sector during the hype of the Y2K era. A 1998 study conducted by the Corporate Leadership Council, "Crafting a Compelling Offer," analyzed four criteria in retaining and attracting high potential individuals in organizations: compensation and benefits, work environment, work-life balance and organizational environment. Absa's investigation was based on Hoffmann's generic Cost Benefit Analysis Worksheet which showed that little needed to be done to change the existing architectural blueprint of Absa. The performance management system in Absa was found to be adequate to accommodate telework options, but the implementation of performance management was lacking and participating managers would need to be trained in adopting and applying the principles of FWO.

The benefits to the organization became evident when evaluating the financial and real estate impact as the cost of equipping one employee in the Johannesburg offices of Absa is estimated at 38,262 Rand (±US$6,377 calculated at $US1:6 Rand exchange rate). Real estate cost is expected to decrease gradually as participating areas were initially locked into fixed contracts. It is also not realistic to project the full savings of staff working remotely as space needs to be retained for hot-desking or hotelling scenarios.

With regard to equipping offices, it was also assumed that existing assets would be reutilized for hotelling or alternative purposes such as equipping home offices. What was important was that the purchase of new assets would diminish. Executives in Absa agreed that the company identified with the above criteria and that the contemporary approach to FWO could add value in order to maintain Absa's competitive edge in the global marketplace. Although Farrell found that flexitime and telework options were found to be of the lowest attributes contributing towards a compelling offer in Absa, (ranking in positions 26/25 and 28/26 out of 30, respectively) they were nevertheless pursued because telework was, at the time, not part of the employee value proposition offered by Absa. Farrell aligned the research of the Corporate Leadership Council and the information presented at the conference previously mentioned and developed a case including a driver model which was presented to Absa's Group ICT executives for consideration and approval. The value-adding requirements focused on investigating the bottom-up determinants that focused on the human capacities Absa required from telework:

  • the key organizational outputs Absa requires from telework
  • the expected value telework must add in order to create stakeholder value for Absa
  • how Absa plans to ensure optimal value and return on investment after implementation of telework.

Absa executives initially perceived this initiative as a threat, as the culture of "out-of-sight, out-of-mind" still prevailed, but approval was granted to pursue the investigation. This subsequently focused on determining the architectural blueprint, financial impact, impact analysis on real estate, performance management implementation and change management support to both management and implicated staff.

Hoffmann conducted a pre-telework survey in July 2001 which included selected potential teleworkers and executives. Quantitative measurement was applied and questionnaires distributed, completed and circumstances, parking arrangements and expenses, private ownership of electronic equipment and access to the internet, the frequency of taking work home and working after hours and expectations and perceptions regarding the possibilities and implications of telework. The results of the survey indicated an eagerness by employees to embark on a telework program but were contrasted by a sense of skepticism by executives. However, management agreed to the establishment of a project team in September 2001 and Hoffmann was contracted to assist in the design of an initial investigation process and to help develop a telework policy for Absa.

Implementation Model and Procedures

Hoffmann's holistic implementation model comprises three phases with documentation and strategies as follows:

Phase 1: The pre-implementation phase, where a cost-benefit analysis and organizational readiness assessment for the company is done. Management is informed of the possibilities, and employees and line managers are screened to test attitudes. Teleworkers and line managers involved in the pilot project are trained and guided. The selection process can be facilitated by a personal telework screener allowing the employee to evaluate him- or herself and present an individual business case to the line manager for review. An experimental group is selected according to specified criteria.

Phase 2: The in-progress phase, where line managers and teleworkers in the pilot study are screened again to test successes and failures. Attention to detail, such as a telework policy for the company and a teleworker agreement, tax and insurance implications, attitudes of unions and safety and security regulations, should be considered. Should the pilot project prove to be successful, employees are advised by management of the intention to implement telework, and the same procedures are followed. Prospective teleworkers can complete a flexible work option request form and the same selection criteria are applied.

Phase 3: Post-implementation, where a productivity results measurement may be used and processes are re-aligned according to the findings of the previous phase. The company may now be self-reliant and only use a consultant intermittently. The implementation model followed in Absa focused on procedural strategies including the following progressive steps as part of Phase 1:

  1. informative presentation to executives by consultant
  2. cost benefit analysis conducted
  3. presentation of results to executives and contracting of consultant
  4. determining relevant target groups and survey conducted by consultant
  5. written report on results of the survey submitted by consultant
  6. driver model designed (by Farrell) to motivate executive implementation
  7. telework policy developed for the company
  8. implementation launched

A key challenge in Absa's case was, to ensure a smooth transition process, a comprehensive change management toolkit and policy first had to be designed and then implemented. This was completed in July 2002, at which stage it was decided to pilot telework in Group People Management (involving 22 participants). The pilot proved successful in the following respects:

  • a fixed budgeted cost reduction in real estate of 6,384 Rand (±US$1,064) per annum per participant
  • net fixed asset cost reduction of 5,848 Rand (±US$975) per participant due to home offices
  • performance management received a new focus on both the teleworkers and other non-participating staff as an outcomes-based focus became prevalent
  • participating teleworkers have indicated that the transition was more difficult than expected (the company did not request or arrange for participants to be formally introduced, prepared and guided for the change), but once they had established the discipline, they found that their work/life balance improved considerably
  • feedback from line management was in support of the concept as they experienced that participating teleworkers were more readily available to them and that their productivity levels increased
  • set-up cost for a teleworker increased the communication cost by approximately 350 Rand (±US$58) per participant due to increased mobile phones and Internet protocol connectivity from their homes
    Conclusions and Recommendations

This article contains only very limited statistics extracted from the research project to prove that telework has been tried, tested and implemented globally and to demonstrate that telework figures are soaring. The failure rate, indicated in the vicinity of 50 percent in the U.S. for first-time teleworkers, has been ascribed to lack of management support, poor planning and monitoring and lack of policies and procedures. Telework is often confused with outsourcing, whereby specified core functions of the company are contracted out to private entrepreneurs. Telework, however, is a work option that allows corporate employees to work where and when they perform best and as agreed with their employers.

Financial benefits should not be measured as short-term; telework leads to a decrease in some types of corporate expenses but creates cost increases in other areas. Reductions are caused by use of less office space, less energy consumption for airconditioning and heating, a reduced need for janitorial services, less absenteeism, a reduced need for parking facilities and decreased employee turnover. Cost increases could be experienced with regard to computer hardware and software, office supplies and equipment, maintenance and technical support, telecommunications, additional insurance and training.

The findings of the investigation and resulting implementation in Absa prove that South Africa has embraced this promising concept in order to join the mainstream of global competitiveness and establish itself as the economic giant in Africa. Telework facilitates a quantum shift from manufacturing society to one based on information processing, which can comfortably be performed in a FWO environment. Technical and other staff to support a company's teleworker needs should mark a turnkey strategy for successful implementation. Companies should create effective communication strategies, e.g., intranet sites, for teleworkers to obtain the latest corporate information and to connect to colleagues to share experiences and solve problems. The most crucial aspect for successful telework implementation lies in getting leadership to introduce good governance in policy and procedures and output-based performance management.

Corporate transparency is essential and legal, financial, tax and ergonomic implications should be taken into account. In order to succeed, relevant research into and facilitation of pre-implementation, inprogress and post-implementation should be a priority for companies.

Management may consider a pilot project specifying a number of possible telework candidates according to criteria such as number of years with the company, above average track record in job performance, not required on site at all times and willingness to participate in a FWO program.

Summary

The phasing out of excessive office space represents a tremendous opportunity if Africa is to escape its poverty and create new ways of conducting business. The role of ICT is not to replace or minimize human involvement but to provide more flexibility, efficiency and cost effectiveness. At the user's end of the ICT spectrum, successful implementation lies in the output of the model in terms of its usefulness, timeliness, relevance and responsible planning and facilitation of the entire process. Our experience as described above has created a renewed focus on encouraging the practice of FWO in the shared services arena and has also helped us to focus our attention on the management and leading of people working remotely. The challenge does not lie in the concept of FWO but in how we change our leadership approach to managing the outcomes we expect of people to deliver.

 

About the Authors

Dennis Farrell
General Manager, People Management Shared Services
Absa
email:
 dennisf@absa.co.za

Dennis has 23 years of service with Absa, both business and HR (People Management) related. Over the past 10 years, his focus has been on strategic HR Management and the positioning of People Management as a world class HR organization. Dennis has now implemented an internal People Management shared services function within Absa, which allows for flexibility to adapt to change and be positioned to embrace external business opportunities.

Prof. Esther Hoffmann
Principal Lecturer,
Vaal University of Technology
Vanderbijlpark

Esther Hoffmann's research, involvement and expertise in the telework field has opened up a contemporary work option that promises exciting opportunities and benefits to employers, employees, industries and the economy in South Africa, as supported by the findings of her international investigation.