By Russ Banham

Ciba Specialty Chemicals Corp. is a midsize diversified chemical provider that, in 1997, employed some 75 people in its HR department to service the diverse payroll, benefits, relocation and staffing needs of its 2,700 employees. At last count, the HR staff was down to 15 people.

While this stalwart group still manages payroll functions, Ciba’s employees’ health, welfare and defined benefits administration now falls to Mellon HR Solutions, a Fort Lee, N.J.-based outsourcing service provider. The tradeoff: 10,000 phone calls a year that used to light up the switchboard at HR offices in Ciba’s six locations. “It had become impossible,” says Miriam Soave, benefits manager at the Tarrytown, N.Y.-based company.

“Today, if an employee has a question about his or her 401 (k) plan, they simply call an 800 number at a service center that Mellon maintains. They’re the master puppeteer now. We’ve put away our strings.”

Not that Ciba didn’t give close scrutiny to continuing to provide employee benefits services. Upon its divestiture from Novartis Inc. in 1996, Ciba mulled whether to invest in technology and build new business processes to manage employee benefits internally. “Novartis had the infrastructure to do this in-house, and since we would now be on our own we had to make a decision to either build our own infrastructure or to outsource benefits to a specialist,” Soave recalls.

Three factors convinced Ciba to outsource – the high cost of the technology required to perform the function internally, its desire to move to a paperless benefits environment and single source of information via the Web, and its belief that HR must partner with the business segments to play a strategic role in their objectives.

There are six business units within Ciba, each focused on a different market, such as its pigments and paints unit, focused on the automotive market, and its antioxidant unit, geared toward the plastics market. “We wanted to help the various unit managers think through things like management development and employee training, but we needed freedom from administrative tasks to do that,” Soave says.

The more mundane service functions now fall to Mellon and are managed by so-called “relationship managers.” Gina Diamond is the relationship manager at Mellon for Ciba. “My life is my clients and I only have seven of them,” Diamond says. “They trust me to be their partner in the truest sense of that word. We’ve got the technology and staff here who are experts in the functions that Ciba now outsources to us – services that Ciba frankly could not provide on its own at the same level and cost.”

Soave agrees. “We recently introduced a pension estimator using Mellon technology on our intranet site to help employees calculate instantaneously the value of their pension–something we could not have provided on our own,” she says. “Mellon also links employees via the site to the medical providers we contract with, such as Aetna, for issues like claims adjudication.”

Diamond and Soave say the key to establishing an HR outsourcing relationship is buy-in from both senior management and the rank and file. Employee input is critical in an outsourcing strategy, given the sensitivity to issues like pension and 401(k) investments, health care and pay. “We had a strong change management and communications program that showed employees explicitly how the call center would work,” Soave says.

The program featured a feedback forum, in which employees provided their opinions of the services provided. Mellon HR Solutions continues to survey employees on the outsourcing arrangement and how other vendors (like Aetna) are doing, providing this information to Ciba on a quarterly basis. “So far, we’ve received only high marks,” Soave says.

The data run the gamut from how many calls the center receives to what the calls were about, how quickly phones were answered and how long each call took. “We get wide-ranging metrics, for example, on how employees are reacting to pension plan changes or short-term disability issues,” Soave says. “The partnership with Mellon is so close that I often feel they are part of our HR department.”

She adds, “The only way this relationship could be any better is if they sat down by us or we by them.” Diamond concurs: “I’m at Ciba so often it sometimes feels like this is where I work.”