Contributors

Advice for Small Employers: There’s a Provider for You

As a small employer, make sure you’re not spinning your wheels with the wrong-sized vendor.

by Matt DeLuca

Almost two years ago, I had the opportunity to work with a publicly traded real estate management company with approximately 900 employees in 100 locations. By my standards, this was a medium-sized company. The reason management sought my assistance was to help them determine whether outsourcing any or all of HR would be an effective strategy for their organization.

To make the issue even more daunting, lower costs were to be an essential element of the results. They wanted me to take them through the discovery process so that they could determine the best decision for their unique circumstances—namely whether to outsource HR and, if so, which activities should be outsourced.

At the conclusion of the first phase, the CEO, CFO, and CHRO (actually, she was the VP of HR but certainly worthy of the “C” title) all agreed that they should proceed with outsourcing a portion of their HR function and benefits administration initially. Once they came to that conclusion, they asked me to identify appropriate suppliers/providers that offered the services they sought to outsource.

To ensure that they really had distinct alternatives, I set out to identify three kinds of providers: a representative from major national organizations, a major regional provider, and a smaller boutique.

In going through the screening process, I was amazed that organizations at both the national and regional levels really did not want the business since my client was not as large as they desired. As an HR professional who has spent most of his career with organizations of 1,000 workers or fewer, I don’t usually consider that pool unattractive. In fact, with the marketplace being what it is (and the Fortune 500 limited to, well, 500), the potential customer base is quite extensive (the U.S. Chamber of Commerce estimated that there are more than 11 million businesses in the U.S. the last time I checked). I also remember hearing a few of the larger players discussing the widening net of marketing efforts to include smaller and mid-sized organizations.

To make matters even more interesting, a major regional player interested in the deal bid for the business with a rather hefty premium, and a major national provider offered a dedicated person at its call center—something they thought I would love to hear but was actually concerned with (what happens, I asked, if the dedicated person quits, goes on vacation, or is out to lunch?).

The fact is the economies of scale just did not make that approach a quality-driven, customer-service approach. My corporate client agreed when I finally narrowed down the search to three organizations. The boutique firm located six hundred miles away won the contract. Last I heard, the relationship continues to be a well-regarded one by both sides. I still left shaking my head about the vendors that did not want to even bid on the business.

The other day, though, I had the opportunity to attend a public presentation sponsored by Gevity on the topic of providing outsourcing services for workers’ compensation. It reminded me that there are major organizations such as Gevity that see the potential in any HR outsourcing arrangement—regardless of an organization’s size—because their model favors a PEO arrangement. You may recall the brouhaha a few years ago when employee leasing became a great, cost-effective alternative for smaller companies to get economies-of-scale HR expertise that otherwise would not be accessible due to their limited needs and resources. PEOs are still out there and really are an attractive alternative for smaller organizations to consider if they want to take advantage of an outsourcing arrangement.

How do you find them? Get out and talk to your network. Visit shows such as the HRO World New York Conference and the SHRM gathering that will take place in Washington, D.C. this June.

The key point is that in this land of opportunity, there is someone who wants your business. Forget those who don’t, and put your time and energy into finding those who do. You will be so glad you did, and so will your employer.

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