by Jay Whitehead

For HRO buyers and providers, hooking up is expensive. The numbers are way too large. Time to get cheaper.

Read these numbers and weep. It costs Gevity, the PEO, more than $1,250 per client employee to acquire a new customer. The pay back on that cost occurs during four years, since the company earns $300 per employee per year in EBITDA. Gevity’s competitor, Administaff, has even higher relative costs, and an effective pay back that appears to be five-plus years.

ProBusiness, before being bought by ADP, had never turned a full-year profit in its decade-plus in business due to high costs of customer acquisition. In fact, ProBusiness started reporting its results less these costs. Exult (soon to merge with Hewitt) was more efficient, but often reported that break-even on a new account was three-plus years, due to high mating costs. Other Tier 1 HRO providers are in the same boat as Exult. And pity the poor Tier 2 and 3 provider, whose enormous mating costs have a smaller revenue base over which to spread the burden.

To me, a (self-proclaimed) marketing and sales guru, these numbers say one thing: whoever cracks the code on relatively low-cost HRO mating will win big. These scary numbers show that HRO folks are great process engineers but tragically expensive dates.

The dating and mating process costs so much that it is retarding HRO industry growth. If human dating and mating were this expensive, the species would have died out 250 centuries ago. This problem belongs to all of us.

So let the thinking begin. To facilitate this brainstorm, I am putting on my industry gadfly hat, which allows me to think wacky thoughts without fear of embarrassment or corporate retribution. This is something you cannot do. You are a prisoner of an organization that enjoys torturing pioneers. In their rawest form, new thoughts are boardroom taboos. But I offer them anyway, because my life in the media has taught me that yesterday’s taboos (such as open-source software, affordable color desktop printing, and telecommuting) will be tomorrow’s household words.

IDEA 1: INFOMERCIALS

Why did Nautilus (the high-priced brand in its category) outsell virtually every exercise equipment manufacturer in the world last year? Cheap 30-minute TV commercials that reach affluent, time-constrained viewers, combined with a highly trained phone sales force that closes deals so well that they outsell retail salespeople selling the same products by five to one.

Why couldn’t a PEO, payroll company, or benefits administrator do the same thing? After all, you can buy 30-minute blocks of time on virtually any major broadcast or cable TV outlet for amazingly low prices. The best-kept secret in cable TV is that MSNBC, for example, makes more net money selling infomercials than it does during its regular programming hours. That’s because its approach is highly effective at reaching affluent, entrepreneurial, and corporate viewers. Fox News is amazingly cost-effective, albeit for a less affluent audience. The point is that by coupling a well produced, trust-conveying infomercial with expert phone and Web-based components, there is no reason that a Gevity could not reduce its cost from $1,250 to $300 per employee.

IDEA 2: SPEED DATING

Before I lay this one out, let me say that I love sourcing advisors. Everest, EquaTerra, TPI, Sonnenschein, Shaw Pittman, NeoIT, Milbank, Bierce Kenerson, and all the rest—you’re all great guys with a fine value proposition. That having been said, you are all really expensive and add megatons to the time and cost of mating. In my three favorite time-crunched cities, New York, San Francisco, and Paris, singles do speed dates. Sit at the table and take fifteen minutes to make a connection or move on. It saves on money and time. It is fun (or at least it looks fun… I’m married). And success rates are about the same as with regular dating. Why couldn’t we do this with HRO?

IDEA 3: SHORTER CONTRACTS

When people know that they are making marriage commitments for a lifetime, they take a long time to make a decision. Same with HRO contracts, most of which are running 7 to 10 years. What if the contracts termed-out at 12 months? Less risk, less cost, more fluidity—it all adds up to shorter dating cycles, lower costs of mating, and faster growth.

IDEA 4: MULTIPLE SPOUSES

No, sorry. Impractical. And illegal in most places. Please ignore it.