It has been a historic year for the PEO industry with the completion of the two largest transactions in the history of the industry. The two blockbuster transactions were the Paychex (NASDAQ: NYSE) acquisition of Oasis Outsourcing, Inc., which was announced in the fourth quarter of 2018, a deal purportedly valued at $1.2 billion, and the Aquiline Capital Partners acquisition of CoAdvantage from Morgan Stanley in a third quarter 2019 transaction, expected to be valued near $800 million, although that information was unavailable at the time of this writing.
For the past 35 years, I have been married to an advertising expert. Her area of expertise was media buying and I learned a ton from her about the right places to put your message and the most efficient—and effective—ways to have your message seen and heard. Retired for 10 years, she would also be the first one to tell you that everything she learned and applied for her media buys for 25 years is not the way to do it today. Some parts yes, but the vast majority of media options available today make the placement of your marketing and advertising message even more difficult to navigate without a proper roadmap. I won’t promise you a specific roadmap, but maybe I can lend some clarity to what options have worked for me the past 15 years and how to apply them to your own business marketing plan.
Over the past year, I’ve had conversations with a number of entrepreneurs in our space. I thought it might be interesting to share some of their questions and thoughts, and some perspectives I’ve gained throughout my career.
As the workforce continues to evolve, changing every aspect of how, when, and where we work, PEOs must further reevaluate their services to provide the greatest value for their clients’ needs today and in the future.
PEOs have both tracked and quickly embraced evolving technology and workplace culture shifts for their small to mid-size business clients, and developed their offerings and services accordingly.
The world of selling PEO services has changed. A decade ago, telling people I worked in the PEO industry was met with blank stares. Today, almost everyone I encounter is at least familiar with the term. They don’t always know exactly what a PEO does, but the level of recognition and acceptance has increased a great deal.
As a founder, owner, or CEO of a PEO, you become an expert about the day-to-day activities of your business, including payroll, benefits, workers’ compensation, and other strategic and operational responsibilities. However, as mergers and acquisitions (M&A) transactions and investments in the PEO space have gained significant momentum in the past few years, you might be curious about what such transactions entail, particularly deal terms and structure.
In my eyes, it seems my term as NAPEO chair has just begun and, yet, here I sit writing my last column. I truly appreciate the privilege of leading NAPEO this past year. I could not have made the desired impact if it wasn’t for the support of my family, my employees, NAPEO staff, and the Board of Directors. With everyone’s help, I think we will have left the place better than we found it!
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Over the past 12 months, Barron Guss, president of SimplicityHR By ALTRES, has served as chair of NAPEO’s Board of Directors. As chair, Barron encouraged fellow members to have meaningful, frank, and substantive discussions about the realities confronting the PEO industry and to explore ways the industry could respond. He also challenged colleagues to recognize the role PEOs play in communities and realize the potential they have to help others beyond delivering exceptional HR services.
Crafting a conservative hiring policy from the quiet confines of the HR department is a somewhat low-risk endeavor, insofar as employment laws are not generally at odds with other legal obligations. No one is getting sued for hiring too many deaf immigrant octogenarians.
Hiring successful salespeople is extremely difficult. According to a 2014 Harvard Business School U.S. Competitiveness Project, “Employers spent an average of 41 days trying to fill technical sales jobs, compared with an average of 33 days for all jobs for the 12-month period ending in September 2014, according to Burning Glass, a labor-market analysis firm that worked with Harvard Business School on the report.”
Customers are more sophisticated than they once were. The current customer is technology-based. This change in technological sophistication has shifted the way we have to market and service our clients. Customers want to be able to do everything online, from the sales process to onboarding.
Two important federal agencies are re-examining the joint employer standards they use to determine whether a PEO or any other business is a joint employer. The outcome should be good for PEOs. However, PEOs should closely monitor developments.
With unemployment so low, recruiting and retaining workers is more important than ever. Smart small business owners (SBOs) pay attention to trends affecting all aspects of the workforce. MetLife’s 2019 U.S. Employee Benefits Trend Study1 looks at how employers can attract, engage, and retain the best talent by helping employees thrive in work and in life. One significant trend to take into account is workplace flexibility.
Nextep released its mobile app in May of 2019. The My Nextep app allows business owners, administrators, and employees to manage their information at any time, anywhere, on any device. We saw this as an important step in serving our clients’ employees and giving them the power to manage their own info on-demand.
As a PEO, we understand that business owners can begin to feel overwhelmed by having to wear many hats, such as managing daily operations, finishing payroll on time (and correctly), and onboarding new employees, all while maintaining HR and compliance regulations on a daily basis. These tasks can be tedious and time-consuming, and any growing business could soon become unable to oversee these daily tasks themselves.
Did you read the NAPEO Pulse Survey for Q1 2019? If you didn’t, there are two unbelievable takeaways from the survey:
• One-third of PEOs responding to the survey said they had no growth or a decline in Q1 revenue; and
• Only 17 percent responded that they had experienced significant growth in revenue.
NAPEO’s 2019 NAPEO White Paper, “Calculating PEO Clients’ Return on Investment,” answers one of the most basic questions that prospective clients have when deciding whether or not to use a PEO: What is the return they can expect on their investment?
This year’s research yields a return on investment (ROI), conservatively estimated, of 27.2 percent per year.
Even though their growth has slowed slightly, PEOs are still very optimistic about the next 12 months, according to NAPEO’s PEO Pulse survey results for the second quarter of 2019.
You are holding in your hands the newly redesigned PEO Insider.® It’s been a while since we’ve done a redesign, and the last one certainly pre-dates my time here. It’s funny—you would think that in 2019, magazines would be fading in relevance and popularity. But not here. In every member survey we do, PEO Insider comes up as one of our most valuable services.