Evolving Organizational Growth through Information Technology

Evolving Organizational Growth Through Information Technology

Ira Yermish

Idea Publishing Group

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g n i h s i l Evolving Organizational Growth b u P p u o r Through Information Technology G a e Id t h g i r y Cop g n i h s i l b u P p u o r G a e d I t h g i r y p o Executive C Summary g n i h s i l b u P p u o r G a e d I t h g i r y p g o n i C h s i l b u P up o r G a e d I t h g i r y Background p o C Ira Yermish St. Joseph’s University

Dr. Ira Yermish is currently an Assistant Professor of Management and Information Systems at St. Joseph’s University in Philadelphia. His teaching and research areas include systems analysis and design, data base management, data communications, information resource management, decision support and expert systems, and business policy and strategic management. In addition to designing the undergraduate and graduate curricula in Management Information Systems he has been active in the executive MBA program and the executive programs in Food Marketing and Pharmaceutical Marketing. He was the designer of the College of Business microcomputer network and has provided continuing technical support for microcomputer applications in the College. in wholesale-distribution and manufacturing systems.

The Service Employees International Union, Local 36 Benefits Office, provides service to over 3,500 union members in the Delaware Valley area. In addition to managing the collection of dues and other funds through employers, the Benefits Office administers several insurance programs and funds. From 1979 until 1996, this office has grown in sophistication and service efficiency primarily through the leadership efforts of Joseph M. Courtney, its only Administrator during this period. Starting with an organization with no technical sophistication, Courtney identified critical areas where technology could make a difference in service levels to the Local membership. This case study describes the gradual evolution of the use of information technology, first to support basic transaction processing, and ultimately to support the strategic issues that such an operation faces. Through the careful use of a number of outside vendors and consultants, and through the slow growth of internal talent, Courtney was able to shepherd the operation from a purely manual system to one where every employee has a PC workstation connected to a network of internal servers and external services. Issues that will be raised in this case include questions of internal versus external development of applications, the relationships among various vendors and consultants, and the growth of internal expertise without significant information technology staff. As the case closes, a new Administrator, Michael Ragan, looks at the operation and considers alternatives. He is very much concerned that their primary vendor, Benefit Systems, is no longer responsive to Local 36’s needs.

As March 1996 comes to a close, Joseph M. Courtney looks back on his twenty years as the Administrator of the Benefits Office of the Service Employees International Union (SEIU) Local 36. Copyright © Idea Group Publishing. Copying without written permission of Idea Group Publishing is prohibited.

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Retirement approaches and this former steam–fitter can look back with pride on his accomplishments and the services that been extended to the members of the Union. From a completely manual operation, the Benefit Funds office has been transformed into an efficient operation using multiple computer systems to perform the various operations on behalf of the membership.

g n i h s i l b u P p u The Local o r G a e Id t h g i r y p g o n C i h s i l b u P p u o r G a e d I t h g i r y p o g C n i h s i l b u P p u o r G a e d I t h g i r y p g o n C i h s i l b u P up o r G a e d I t h g i r y p o C The Local 36 Benefits Office provides a number of services to over 3,500 active union members and 2,000 pensioners in the Delaware Valley area. Of primary importance is the collection of dues through the member’s employers. What makes this so much of a challenge is the nature of this union. The Union represents janitorial, window cleaning and maintenance workers, many of whom are on the bottom of the economic ladder and who frequently do not speak English. Exhibit 1 shows the relationship of the Benefit Office to the Local. In addition to being responsible to the Union, which is part of the International Union, two boards of trustees are responsible for oversight of the two major Funds managed by the Benefits Office: Building Operators Labor Relations, Inc. (BOLR) and the Building Maintenance Contractors Association (BMCA). These two funds represent different contracts and groups of employers. The two contracts have different characteristics and benefits, the results of separate collective bargaining agreements. Exhibit 2 shows the organization structure of the Union and the Benefits Office. Exhibit 3 contains an excerpt and the contents of the BOLR collective bargaining agreement. The Benefits Office must provide services to the members that have been negotiated for in the agreements. In addition, the Trustees of the Funds must be convinced of the fiscal soundness of the operations and their ability to supply the services to the members. Clearly, there are a number of

Exhibit 1: Organizational Relationships

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pressures that the Benefits Office must face. First, they are responsible for collecting dues and fees from the Employers (contractors). Employers are responsible for identifying new employees, making dues and other payments. Given the nature of the industry, there are many opportunities for abuse. The Benefits Office is responsible for identifying these abuses and making sure that all members have been properly identified and that the moneys have been collected. On the other side of the operation, the Benefits Office is responsible for administering the various insurance programs and pension plans. There are questions of eligibility and abuse by service providers and members. Contractual relationships between these providers, e.g. Blue Cross, is based upon utilization. The Benefits office must be sure that the services provided are appropriate and cost effective. The rapid growth in health care costs affectsits members more severely than many other cohorts. The Funds represent large sums of money maintained on behalf of the membership. Some of these funds provide for self–insurance coverage for some of the benefits. These funds must be tracked and analyzed to be sure that the investments are safe and meeting the needs of the membership. Exhibit 4 outlines most of the major functions of the Benefits Office. Activities on behalf of the members and their direct employer relationship are handled by the Union Office. The Union Office is responsible for organization and contractor–member conflict resolution. Looking back on his tenure as Administrator, Courtney realizes how important information technology was to making the Benefits Office a model of responsible and fiscally sound operation, recognized by others as forward thinking and creative.

g n i h s i l b u P p u o r G a e Id t h g i r y Cop g n i h s i l b u P p u o r G a e d I t h g i r y p o C Information Technology in the Benefits Office ing Developing h s i l b u P p u o r G a e d I t h g i r y p g o n i C h s i l b u P up o r G a e d I t h g i r y p o C The history of information technology in the Benefits Office tracks the use of technology in other organizations. First, basic transaction processing is automated. Next, tactical management issues are addressed and finally, strategic planning issues are attacked. A timeline of hardware and software developments are summarized in Exhibit 5. Exhibit 6 describes the current hardware configuration and Exhibit 7 outlines the distribution of applications on the various hardware platforms. In 1979, a consulting company, MagnaSystems, Inc., was asked to review a contract for a new software system to be installed at the Benefits Office. Up until that point, the office had been completely manual, with file cabinets full of documents, slow processing and meager services. They were swamped and were looking forward to getting out from under the piles of paper. They had looked at a number of software systems and had identified a package appropriate for managing union benefits operations. The vendor, Benefit Systems, Inc., was located in Baltimore and had already installed their software at a number of offices, one of which was in the Philadelphia area. Given that the Benefits Office had no experience whatsoever with information technology, it was important that they install a system that did not require in–house expertise. The staff did not include any college graduates, but given the leadership of the Administrator, they were loyal and willing to move forward. After some negotiations and plans for some modifications to meet the specific needs of Local 36, the contract for a mini–computer based system was awarded and work started on building the database of membership, contractor and contributions. Within a very short period of time it became evident that they had made the right decision. The tedium of tracking thousands of contribution records was handled well by the system. Courtney had gambled that the technology would work and he was right. Contributionswere processed more efficiently, benefits were distributed more rapidly. After a year or so of operation, getting the initial bugs out of the system, and making it meet the Local’s specific needs, he identified another area where the technology could be of some help. It was well known that the contractors could

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g n i h s i l b u P p u o r G a e Id t h g i r y p g o n C i h s i l b u P p u o r G a e d I t h g i r y p o g C n i h s i l b u P p u o r G a e d I t h g i r y p g o n C i h s i l b u P up o r G a e d I t h g i r y p o C Exhibit 2: Organization Charts

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Agreement (Office Buildings)

g n i h s i l b u P p u o r G a e Id t h g i r y Cop g n i h s i l b u P p u o r G a e d I t h g i r y p o C g n i h s i l b u P p u o r G a e d I t h g i r y p g o n i C h s i l b u P up o r G a e d I t h g i r y p o C This Multi–Employer Agreement, entered into the first day of November, 1993, by and between BUILDING OPERATORS LABOR RELATIONS, INC. (hereinafter called the “Corporation”), acting for and on behalf of such of its Member Buildings as are listed in Schedule “A” attached hereto (each of whom is hereafter referred to as “Employer”), on the on hand, and SERVICE EMPLOYEES INTERNATIONAL UNION, Local #36, AFL–CIO (hereinafter called the “Union”), on the other hand. ARTICLE I

RECOGNITION

Section 1. The Employer recognizes the Union as the sole and exclusive agent for the purpose of collective bargaining and for those of its employees in the following classifications: Janitorial Employee, Class 1 Janitorial Employee, Class 1 (Day Matron/Day Attendant) Janitorial Employee, Class 2 Janitorial Employee, Class 2 (Lobby Attendant) Elevator Operator Elevator Starter Combination Elevator Operator and Job Class No. 2 Cleaner Foreperson Mechanics and Maintenance Workers Licenses Engineers and Operating Engineers

Such definition shall exclude supervisors, clerical employees, confidential employees and armed guards as defined in the National Labor Relations Act, and whose operating engineers and maintenance mechanics who are covered under a separate collective bargaining agreement. Whenever the word “employee” is used herein, it refers only to those employees for whom the Union is the recognized bargaining agent.

Section 2. The Employer Shall have the right to hire new employees from any source whatsoever. All new employees shall be on probation for ninety (90) days after employment and during such probationary period the Employer shall be the judge as to whether or not such new employee is qualified to continue in its employ and the Employer may discharge such employee for any reason at its discretion. Employees hired on or after November 1, 1993, shall not be entitled to holiday pay, paid funeral leave or jury duty benefits during their probationary period. ARTICLES

II III IV V VI VII VIII IX X XI XII XIII XIV XV

XVI XVII XVIII XIX

UNION SECURITY AND CHECK–OFF RIGHTS OF MANAGEMENT NO DISCRIMINATION WAGES AND OVERTIME HOLIDAYS VACATIONS CONVERSION AND SEVERANCE PAY FUNERAL LEAVE JURY DUTY PAY UNIFORMS TEMPERATURE WORKING CONDITIONS HEALTH AND WELFARE PLAN PENSION PLAN FAILURE TO REMIT DUES OR TRANSMIT WELFARE AND PENSION CONTRIBUTIONS INDUSTRY PROMOTION FUND SENIORITY DISCHARGE AND DISCIPLINE UNION ACTIVITIES IN BUILDINGS

XX XXI

XXII XXIII

XXIV XXV XXVI XXVII XXIX XXX XXXI XXXII XXXIII XXXIV XXXV XXXVI

Exhibit 3: BOLR Collective Bargaining Agreement (excerpt)

SPLIT SHIFTS AND ASSIGNMENTS GRIEVANCE AND ARBITRATION PROCEDURE GOVERNMENT CONTRACTS SUBCONTRACTING AND REDUCTION OF FORCE NO STRIKES OR LOCKOUTS OTHER LEGAL ENTITIES MOST FAVORED EMPLOYER INSPECTION OF RECORDS SAFETY SEPARABILITY HOURS PREPAID LEGAL SERVICES PLAN BREAKS JOB POSTING TOOLS TERMS OF AGREEMENT

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g n i h s i l b u P p u o r G a e Id t h g i r y p g o n C i h s i l b u P p u o r G a e d I t h g i r y p o g C n i h s i l b u P p u o r G a e d I t h g i r y p g o n C i h s i l b u P up o r G a e d I t h g i r y p o C Dues and Contribution Collection Each month the bookkeeping department sends a remittance form to each of the contractors, showing all of the known members and the required dues and fund contributions. The contractors are responsible for remitting the appropriate funds which they are responsible for and the funds that are supposed to come out of the employee’s pay. They are also responsible to update the list with terminations and new hires. The remittance form is then processed into the transaction processing system to maintain a complete record of all fund contributions which is used for benefits eligibility. Insurance and Benefits Claims Processing The major function of the Benefits Office is to coordinate the member insurance and benefits services. Some of the insurance services are provided by third party insurance carriers such as Blue Cross and Blue Shield. Other services are provided through self–insurance programs that are funded by the members’ contributions and administered by the Benefits Office. The Claims processing operation is responsible for determining eligibility and appropriateness of benefits. Each month the office sends out checks to providers and members for benefits not covered through the third party insurance providers.

Coordination of Benefits Processing (COBRA) Occasionally, a member may have other insurance outside of the Union plans. Furthermore, the insurance must be provided for a period of time after a member leaves the employ of a contractor in the system. Pension and Disability Processing At this time, the Benefits Office keeps track of those members on pension and disability but contracts out to a bank for the processing and distribution of the monthly checks. Pension benefits must be determined for members and surviving spouses. Investment Tracking Millions of dollars of member’s funds are invested to provide the long–term viability of the welfare and pension funds. The funds are also managed by outside investment firms, but it is the primary responsibility of the Administrator to see that these funds are invested wisely and in a way that will make it possible to improve the benefit packages to the members. Bookkeeping and Fund Accounting This activity coordinates each of the above to keep track of all of the transactions and fund balances.

Contractor Audits It is important to make sure that each of the contractors is making the appropriate payments to the Benefits Office on behalf of the membership. There are many opportunities for fraud and for honest mistakes. This activity attempts to match up the actual payroll records at the contractor sites with the records processed by the Dues and Contributions activity described above.

Provider Audits Third party insurance carriers are responsible for checking the validity of claims submitted by hospitals, physicians and other service providers. However, there are many opportunities for abuse. One of the Bookkeeping Department’s functions is to audit the activity in these areas to determine if duplicate payments have been made or if inappropriate services are provided. Since the costs if insurance are directly determined from actual usage, it is important to keep the costs as low as possible by the constant audit of actual service. Once offending institutions and providers are identified, it is possible to automatically monitor these for subsequent problems. Planning and Negotiation As each collective bargaining agreement nears its end, the process of renegotiating on behalf of the membership begins. The Union constantly strives to enhance the pay and benefits to for its members. The Contractors try to keep their costs down through pay and benefits reductions. One of the planning functions of the Benefits Office is to determine the impact of possible benefit changes on fund viability. Given the complex relationship that exists between the Union, the Contractors, the Fund Trustees and the Benefits Office, these negotiations can be quite complex. The Benefits Office has developed the tools to test the effects of changes in benefits over time to determine the changes in employee or employer contributions needed.

Exhibit 4: Benefit Office Operations Summary

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exploit the system because of the nature of the workforce and the kinds of work involved. It was not unusual for contractors to hide workers in their payrolls and thus avoid some of the employer based contributions. It was also possible for employers to pocket contributions from members and not forward them in a timely fashion to the Union. The system was based upon the good faith of the employers to provide the information and contributions in a timely and accurate fashion; a dubious assumption if there ever was one. Courtney saw the volumes of data on contributions that were accumulating and wondered whether this data could also be used to improve the collection process. In other words, could the data be matched against actual employer records to confirm that all contributions were accurate? He was faced, however, with a problem. Who could do these audits and with what tools? It was 1983 and the IBM PC and its most interesting competitor, the COMPAQ portable, were just starting to make their presence felt in industry. The consultant was asked to examine the feasibility of using these tools in conjunction with the minicomputer to provide an audit capability. Certainly, it was technically feasible, but who would do the work? No one in the organization had any experience with personal computers or the new software technology: spreadsheets. For the first time, the Benefits Office hired a college graduate with accounting and computer background to perform the audits. A special program was supplied by Benefit Systems to download contractor data to a COMPAQ portable, and the consultant wrote a Lotus 1–2–3 macro to transform the downloaded contribution data into a standardized spreadsheet format. With these software tools and the “portable” computer, the auditor started visiting contractors, causing quite a stir. It wasn’t long before the Benefits Office was able to recoup its investment with adjustments and settlements. In 1995, for example, there were thirty–six audits resolved, with a total of nearly $200,000 recovered. One audit alone was resolved for a total of $87,000. Recent years were even more dramatic:

g n i h s i l b u P p u o r G a e Id t h g i r y Cop g n i h s i l b u P p u o r G a e d I t h g i r y p o C g n i h s i l b u P p u o r G a e d I t h g i r y p g o n i C h s i l b u P up o r G a e d I t h g i r y p o C Year 1990 1991 1992 1993 1994 1995

Audit Resolution $182,832 $113,650 $435,863 $310,410 $359,887 $199,008

Today, the audit professional staff includes a manager and two auditors who, using notebook computers continue to guarantee that the contractors are meeting their obligations. All of the contractors are visited on a regular basis. Young college graduates with MIS or accounting degrees have filled these positions admirably over the years, some moving on to other areas where their acquired expertise has been valued. However, it has been clear to Courtney that these young people have provided a significant path of professional growth for the organization and its relationship with the contractors and service providers. The initial hardware and software investment has paid for itself many times over. The next several years saw a continued dependence on the technology. After about seven years with the initial system, a major CPU upgrade was required. The platform on which the software was running (McDonnell–Douglass minicomputer with the Pick Operating System) was well suited to meet the needs of the basic centralized processing environment. Using the built–in report writer, ENGLISH, it was possible for at least one of the Local 36 staff to generate specialized management reports. The hardware and software were not inexpensive, but could be justified on the basis of their cost–effectiveness. There were concerns, however about the proprietary nature of this environment. At that time, given the software involved and the lack of real alternatives, the upgrade was made but

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g n i h s i l b u P p u o r G a e Id t h g i r y p g o n C i h s i l b u P p u o r G a e d I t h g i r y p o g C n i h s i l b u P p u o r G a e d I t h g i r y p g o n C i h s i l b u P up o r G a e d I t h g i r y p o C 1979 Initial Hardware/Software Installation A Microdata minicomputer was purchased to run the standard union office package supplied by Benefit Systems., Inc. (now BASYS). This system handled the processing of dues collection, fund tracking, benefit eligibility and claims processing. The software was written in a business dialect of BASIC and included some report writing capabilities.

1983 COMPAQ Portable and Contractor Audit Software A transportable computer was purchased to be used by the first payroll auditor hired by the Benefits Office. Benefits Systems provided some customized software to permit the downloading of contribution data to the portable computer through a direct serial port connection. A consultant developed a series of data translation programs and LOTUS spreadsheets to assist in the preparation of the audits. 1987 Minicomputer Upgrade As additional services were provided to the membership, the original system became inadequate to meet the needs of the Benefits Office. More terminals were required and additional storage was required to maintain the growing historical database of fund contributions. A McDonnell–Douglas system based on the PICK operating system was purchased and the existing software and databases were ported to the new environment with little problem. The vendor, Benefit Systems, Inc. provided the necessary support for this transition.

1988 Planning Model Development The Administrator with the help of the consultant, developed a planning model for the larger fund (BOLR). The model was implemented in LOTUS 1–2–3 and installed on a 386. There was extensive testing of the model before its acceptance by the Union as part of the negotiation process. A model of the smaller, but more complicated fund, BMCA quickly followed.

1989 Insurance Subrogation Tracking System Another standalone PC system was purchased and database software (using Foxpro) was developed to handle the Insurance Subrogation Tracking function of the Claims Department. 1990 Provider Audit Software Another standalone PC system was purchased and software was developed to provide more extensive analysis of the claims handled by the minicomputer system. A procedure to transfer the Blue Cross claims information from the minicomputer to the PC was implemented. Subsequent software was developed to analyze the Prescription claims and the Blue Shield claims. 1993 PC Network As the number of standalone PCs grew, it made sense to connect them with a Novell network. The installation of the network coincided with a move to new, expanded quarters. The planning model, subrogation system, provider audit software, contractor audit software and standardized word processing and spreadsheet software were installed on the network.

1994 Sun SparcServer Upgrade Again, to meet the growing needs of the base contribution and claims processing system, the centralized minicomputer was upgraded to a Sun SparcServer. The software was directly ported to the new environment. Unlike the prior systems, this system used the UNIX operating system which promised more flexibility.

1995 Network Integration Using the TCP/IP options of the Sun SparcServer, the Novell network was integrated with the BASYS applications software. Dedicated terminals were eliminated in favor of PC workstations connected to both systems for transaction processing, word processing and other functions. Using Windows 3.1, clerks could process data on the transaction processing system, use the network word processor, or perform other complex reports using the data warehouse functions available on the Novell network.

Exhibit 5: System Implementation Timeline

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with the concern that we would monitor the environment carefully for changes. Adding to this concern a problem arose that frequently plagues users of vendor supplied application software. The vendor wants to keep each of its customers happy, but there is also the pressure to maintain a standardized, maintainable package. Each of the vendor’s customers may see its case as being unique even though, in this case, they are all Taft–Hartley union operations supporting benefit operations. The vendor is responsible to maintain the software in light of changing government regulations and passing these changes to the customers in a timely fashion. But how do these changes get installed when many of the users have requested and gotten special modifications to the software? As a vendor grows, each of the customers becomes a smaller share of its business and apparently less critical for the vendor’s survival. This may translate to a perception of indifference and alienation. On the other hand, the vendor is critical to the success of the customer, having become strategically dependent on that vendor for its basic operations. At that time (1988), there didn’t seem to be any other reasonable choice. It often took a long time to get specialized reports programmed. The programming charge for these reports and updates required hard negotiations. The “captive audience” expressed concern but could do nothing but maintain vigilance. Around this time, Courtney also began to address other strategic issues. One of his primary responsibilities at contract negotiation time was to determine the feasibility of new benefits and contribution structures. These were often complex negotiations where fund viability could be jeopardized by an overaggressive negotiator. The fund trustees were often faced with emotional decisions and could not see the financial implications. Courtney came to the consultant with the idea for a planning tool that could be used directly in the negotiation process. He wanted to be able to play “what if” games to determine the effects and contribution requirements of the decisions. A 386 PC was purchased and a planning model was developed for the BOLR fund. This model forecasted the results of decisions based upon the actuarial forecasts of expense changes and contribution commitments. Fund balances were displayed and presented. The model was very effective in negotiations and planning. Over the year the model was updated on a quarterly basis with actual results. This helped spot possible expense trouble spots before they could become a real problem. After the BOLR model was tested and used successfully for a year, a similar model was built for the smaller, but more complicated BMCA fund. This planning model operates as a central repository for the operations staff to record quarterly summaries of operations. Exhibit 8 contains a summary of the Benefit Offices welfare operations and forecast as extracted from the planning models.

g n i h s i l b u P p u o r G a e Id t h g i r y Cop g n i h s i l b u P p u o r G a e d I t h g i r y p o C g n i h s i l b u P p u o r G a e d I t h g i r y p g Evolving Information Technology o n i C h s i l b u P up o r G a e d I t h g i r y p o C In 1988 Courtney looked carefully at his operations, trying to identify where information technology could further enhance his operations. The terminals attached to the mini–computer were doing the routine transaction processing, posting collections, identifying eligibility, processing insurance claims. One of the first additional applications that he saw involved the tracking of insurance subrogation cases. In these cases where a member may have been involved in an accident, claims against other parties must be tracked. Some of these cases involved very large insurance claims that could severely impact the rates paid to Blue Cross and Blue Shield. Of primary concern was the exposure for not being able to collect the funds from other insurance carriers. The manual system previously maintained by Linda McColllough, the Administrative Assistant for the Claims operations, was unable to generate timely status reports. Several choices for this system were identified. The primary vendor, Benefit Systems proposed a solution to be integrated with the mini–computer system. However, the consultant pointed out that there was really little connection between the data tracked in that system and the requirements for the application. Instead, the

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g n i h s i l b u P p u o r G a e Id t h g i r y p g o n C i h s i l b u P p u o r G a e d I t h g i r y p o g C n i h s i l b u P p u o r G a e d I t h g i r y p g o n C i h s i l b u P up o r G a e d I t h g i r y p o C Exhibit 6: Current Network Configuration

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g n i h s i l b u P p u o r G a e Id t h g i r y Cop g n i h s i l b u P p u o r G a e d I t h g i r y p o C g n i h s i l b u P p u o r G a e d I t h g i r y p g o n i C h s i l b u P up o r G a e d I t h g i r y p o C Exhibit 7: Current Software Configuration

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ing lish Pub roup ea G ht Id yrig Cop ing lish Pub roup ea G ht Id yrig Cop ing lish Pub roup ea G ht Id yrig Cop ing lish Pub roup ea G ht Id yrig Cop Exhibit 8: Summary of Benefits Operations (Welfare Only)

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consultant developed a stand-alone PC based application (using the Foxpro database application language) to track these cases. A PC was purchased for McCollough and the database application was developed and operational within a few months. In this time frame, the actuarial consultants and auditors, the Wyatt Company, provided two other stand-alone applications to support the Benefit Office. The first of these helped Sally Condon, the Pension Supervisor, track the status of pensions. This is critical for testing the viability of the pension funds. Identifying the ages and status of the pensioners determines the funding requirements for the pension funds. Chrissy Kobrin, Bookkeeper, was a heavy user of the Benefit Systems transaction processing system. Her department was responsible for the processing of dues and fund contribution collection. She developed the skills to generate special reports from the mini–computer system using the ENGLISH report writing language. In addition, she was given a PC and some basic accounting software (Quicken) to track some of the funds. Furthermore, her department’s responsibilities included the tracking of the coordination of benefits (COBRA). The Wyatt Company provided a stand–alone PC application for the tracking of these cases. Another major responsibility that Kobryn’s department has is the identification of insurance claims problems. In essence, they were also responsible for the auditing of the third party carriers and the service providers themselves. For example, hospital billing departments would submit the same claim more than once which might not be picked up by Blue Cross. A physician might submit a claim based upon a diagnosis that was unacceptable to the plan which might not be identified by Blue Shield. At first, Benefit Systems provided a number of reports to assist in this process, but they lacked the flexibility needed to meet their needs. The ENGLISH report writer was too difficult to use for the current staff. Benefit Systems was reluctant to provide changes to their basic system. Given the proprietary nature of their software and the operating system, Courtney expressed concerns about the future of the operations, particularly with respect to the flexibility needed. In 1990, Courtney met with the consultant to explore the possibilities. The information industry pressure was away from proprietary minicomputer platforms and towards industry standard platforms based upon UNIX. Unfortunately, Benefit Systems could make no commitments that they would “port” their system to this platform. Furthermore, the sharing of applications and data via PC local area networks had become routine. The Audit Department manager at that time, John Matekovic, had an undergraduate degree in Management Information Systems. Perhaps his background could be used to support additional internal development to meet the long–range needs of Local 36’s operations. It was agreed that it was too early develop a complete operational system in–house. The costs would be too great and the expertise was not there. However, to meet the needs for the third party audit operations, a large amount of the data captured on the minicomputer system needed to be processed. The most critical area was in identifying problems with Blue Cross payments which were being loaded monthly onto the minicomputer system from tapes supplied by Blue Cross. Benefit Systems was asked to provide software to extract this data from their system and supply it in a form that could be loaded directly onto a PC. This became the first step in a possible transition to a completely home–grown operations system. At this time the design was to include the capabilities for multi–user processing. Matekovic, Kobryn and her assistants, helped prepare a list of the kinds of functions and reports neededto improve their operations. Given the years of experience they had gained with the minicomputer system and their familiarity with more current, mouse driven, PC based software, they were quite efficient and doing this design work. The consultant developed a standalone PC application (in Foxpro again) to provide for the much more powerful and user–friendly analysis programs needed for the third–party audits. This system would be flexible enough to provide for the audit of other insurance providers such as Blue Shield and Prescription Claim Services (PCS).

g n i h s i l b u P p u o r G a e Id t h g i r y Cop g n i h s i l b u P p u o r G a e d I t h g i r y p o C g n i h s i l b u P p u o r G a e d I t h g i r y p g o n i C h s i l b u P up o r G a e d I t h g i r y p o C

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g n i h s i l b u P p u o r G a e Id t h g i r y p g o n C i h s i l b u P p u o r G a e d I t h g i r y p o g C n i h s i l b u P p u o r Future Growth and Development G a e d I t h g i r y p g o n C i h s i l b u P up o r G a e d I Epilogue and Lessons Learned t h g i r y p o C The Third Generation of Information Technology Growth

In 1993, the Benefits Office was contemplating a move to new, larger quarters. As part of this move, the technology issues were identified. Though they had not done so yet, it was clear that additional networking capabilities would be desirable. However, they were faced with a problem, the need to provide the cabling for the minicomputer system as well as a possible PC network. The consultant recommended a parallel path. Both serial (RS–232) cables would be run to meet the needs of the minicomputer system and twisted–pair (10BaseT Ethernet) cabling would be run for the PC network. Most of the workstations were “dumb” terminals for claims processing and bookkeeping. Other stations would be PCs with both a direct serial connection to the minicomputer and a LAN connection to the PC network. At this point, a user could, within the Windows 3.1 environment, have a terminal connection to Benefit Systems software and connections to the PC LAN software. Finally, recognizing the industry trends, Benefit Systems implemented their software on a Sun SparcServer using Solaris, the Sun version of UNIX. This opened up a number of interesting opportunities. First of all, it was possible to eliminate the serial connections and provide all of the terminal TCP/IP connections from the PCs to the Sun and the PC network. This notably improved the terminal response time. It also simplified the connections to the systems. Finally, it improved dramatically, the connection abilities for transferring data between the Benefit Systems software and the PC network applications. Through 1994 and 1995, additional applications were installed on the network and others contemplated. At his retirement banquet at the end of 1995, Joe Courtney was able to look back with pride on his accomplishments and the growth his organization. Much of the success he attributed to information technology. Only one member of his senior management was not with him at the beginning of this growth back in 1979. Each of his staff was routinely using the technology for reporting and analysis purposes as well as standard word processing. New applications for pension processing and for investment tracking were on the boards. Fund balances were well under control and the relationships with other organizations were strong.

As Michael Ragan, the new administrator sits in his office, his PC connected both internally to the computer networks and externally to data information services, he could foresee many ways to improve the operation and gain further control. He expresses concern over the unresponsive character of their primary information technology vendor and is looking at alternatives. His strong educational background and experience as Administrator of the Operating Engineers gives him some confidence to take additional steps. In his former position he led the way for the internal development of operating software over which he had complete control. He looks forward to the possibility of developing more efficient claims processing software, of building stronger relationships with vendors via information links, and perhaps, developing more internal information systems expertise. Looking down Chestnut Street there are many avenues open and potholes to contend with.

The Union Benefits operation continues to operate efficiently using the technologies that it has acquired over the period described in the case. There is special emphasis in improving the access to the claims data supplied by the insurance providers (Blue Cross, Blue Shield, and PCS). There is also

Evolving Organizational Growth

15

a serious consideration for switching primary software vendors based upon the high cost for custom software modifications and the lack of responsiveness. This step, however, must be taken very carefully because of the tremendous economic and operational impact it would involve. The staff has grown comfortable with the Windows 3.1/Netware/Unix environment, switching easily between applications running on the Netware fileserver and the Unix server. CD–ROM databases are being used for research and external access to the service providers is improving. Throughout the case, the consultant and management were careful to implement software and hardware tools gradually. Each incremental step has met with little resistance because the normal flow of work was not changed significantly, though over time, the changes have been dramatic. Within the staff, the skills needed to use the new tools were acquired as they were needed to assure productivity. For example, when a switch from Word Perfect for DOS to Windows was made, staff were given the opportunity to take courses on the software during work hours. The technology provided the basis for organizational improvement, but it was the management style that encouraged the growth of the staff’s use of that technology that has been instrumental in the success of this operation.

g n i h s i l b u P p u o r G a e Id t h g i r y Cop g n i h s i l b u P p u o r Questions for Discussion G a e d I t h g i r y p o C g n i h s i l b u P p u o r G a e d I t h g i r y p g o n i C h s i l b u P up o r G a e d I t h g i r y p o C 1. What are the similarities and differences that organizations such as the Benefits Office face compared to typical for–profit operations? What forms of executive motivation are appropriate for an organization like the Local 36 Benefits Office? 2. In this case, how has productivity been affected by the growing information technologies? How should this productivity be measured? 3. Up to the end of the case the Benefits Office has not had a formal internal information systems staff, though most of the Audit Department has some MIS education. From both the organization and the individual perspective what would be the advantages and disadvantages of such a staff? When, if ever, should such a staff be developed? 4. Consider the dual role that the consultant took, both as an expert to help identify and evaluate alternatives and as a supplier of some of the software and hardware solutions. What are the operational and ethical considerations of such a relationship? 5. What are the pressures on the primary software vendor who develops “vertical market” applications? How does the relationship between vendor and customer change over time? Consider the relative growth rates of the vendor and its clients. 6. What direction should the new Administrator take to assure continued organizational growth? To what extent should he institute changes to demonstrate his own talents and experience?

References

Fitzsimmons, J. A., and M. J. Fitzsimmons, Service Management for Competitive Advantage, McGraw– Hill, New York, 1994. Inmon, W. H., and R. D. Hackathorn, Using the Data Warehouse, John Wiley & Sons, New York, 1994. Keen, P. G. W., Shaping the Future, Business Design through Information Technology, Harvard Business School Press, Cambridge, MA, 1991.