Fierce business entrepreneur Karen Paterson, CEO of Patersons Global HR & Payroll, brings speed and scale to a growing, global industry.
By Andy Teng
As most historians know, the Brits were good at empire building. Karen Paterson exemplifies this. But unlike her fellow countrymen, Paterson is building an empire not with military might but with technology and strategic partnerships. And she’s got her sights set on an empire even more expansive than the one on which the sun never set.
As the CEO of Patersons Global HR & Payroll, Paterson doesn’t come off like the typical corporate chieftain. But don’t let the affable, disarming, and engagingly gabby demeanor fool you. Paterson is a well-trained, sharply focused executive whose indisputable expertise in HR services has put her company on a direct collision course with behemoth competitors such as ADP and Ceridian. It’s a path she relishes.
“If you are an entrepreneur, you have to be fearless because there are so many challenges. You have to be creative, be someone who is a bit disruptive. You have to be a risk taker, and you, have to be a mover and shaker who wants to go out into the marketplace and be willing to make change,” Paterson, 49, said.
As an upstart in the outsourced payroll business—even though it offers additional HR services, Patersons is best known for its global payroll competency—the Salisbury, U.K.-based company in the past year has made significant inroads into the U.S. and Asian markets, where it is gaining a bigger share. Its success has come mostly because of Paterson’s legwork in the past 13 years to create a payroll solution that the company says is now capable of delivering services in more than 160 countries.
Every business needs a differentiator, and in Patersons’ case, it’s the proprietary global on-demand platform, which the founder spent years building. Because it offers a SaaS-based solution that can scale up as well as scale down—Paterson argued that her platform is much more efficient at processing payroll for a handful of employees in remote locations than many ERP systems—the company’s marketing pitch is resonating well with companies across the globe. Furthermore, the provider is offering its platform as the HR management system of record free of charge, another appealing facet that has caught the attention of some organizations.
“We feel we are in the right market with the right product at the right time,” Paterson said. “Our niche in the market is global payroll, and everyone wants this at the moment.”
Indeed, global payroll is gaining momentum. According to Everest Research, multi-country payroll deals (defined as those covering at least 3,000 employees on two or more continents), are increasing their market share compared with regional, single-continent contracts. As of 2006, multi-continent deals accounted for only 34 percent of payroll implementations for organizations with more than 3,000 workers; at the end of 2008, they were 44 percent. Even as the market is moving away from multi-process global HRO, it is embracing global payroll because it tends to be less complex and far less costly than end-to-end HRO.
That’s good news to Paterson, who boasted that her business was the 27th fastest-growing in the U.K. last year and had posted 300-percent growth from 2005 to 2007. And despite the weak economy, Paterson claimed that the business has continued to see a growth rate of 60 to 70 percent annually. Although the company is nowhere near the size of competitors such as ADP or Ceridian or technology giants such as SAP, which typically expect single-digit hikes in sales, it nevertheless has caught the attention of industry observers with its wildfire growth.
You can credit this success to Paterson’s experience as a journeyman in the back-office services business. Starting her career in the financial services field, she realized institutional biases against women then limited her potential, and the only way around it was to carve out her own path. That led to a career as a business consultant.
“In the 1980s, when I was in banking, it was awful,” she recalled. “Part of what led me to go out on my own was that I got sick of seeing these morons half as good as me being promoted over me.”
While working as a tax consultant for Virgin Interactive Entertainment, a fortuitous run-in with the company’s HR director became the proverbial knock of opportunity. On Paterson’s way out following a meeting, the HR executive pulled her aside for help with payroll. The executive was at wit’s end because no one internally or externally could help address the company’s difficulty in providing payroll for its 2,800 employees in eight countries. The problem was that HR had no visibility or control over headcount or accountability. Paterson was able to come up with a solution for Virgin, and she then realized many other organizations were experiencing the same difficulties.
“The problem still exists today,” she said. “I was lucky enough to come across a problem, find a solution, and model it.”
But as any leader knows, building a great organization is not a solitary exercise; it requires contributions and expertise from critical team members. In Paterson’s case, she understood the business challenge but lacked the technical know-how to assemble the company’s signature SaaS platform. She found that expertise in John Hollis, a former video game programmer turned business entrepreneur. Each brought strengths to the new venture; he taught her technology and she shared her knowledge of finance. Today, he continues to guide the development of Patersons’ platform as chief technology officer.
Since the company’s humble beginnings, Paterson said being diligent in growing the business was a survival requirement. The reason: limited resources. That meant the company had to execute more efficiently to catch the coattails of its larger competitors.
“When you’re quite poor, you can’t afford to be wrong often,” she stressed.
Being cautious has its drawbacks too. Although the company was started in 1996, growth only began to accelerate in recent years. That’s because Paterson said she was careful to focus on outlining the company’s global footprint first, engaging in partnerships, and making sure she had the right leaders supporting her efforts. This ensured the company didn’t take on too much debt or work before it was ready; at the same time, it limited its trajectory. Still, she noted, it gave her time to put a strong team in place.
To do that, she needed managers who really understood the plight of HR executives, and she found them in former customers such as Martin Stockton, the group vice president of business development. He had been one of the Patersons’ clients while at Towers Perrin and at Siemens before being recruited by the company.
“I’ve got a fantastic management team from different industry backgrounds. We just function really well together as a team,” she said, adding that her ideal managers are those who are flexible, mentally agile, and can work outside of silos.
With her management team in place, Paterson is now shifting her attention to empire building around the world. The company recently expanded significantly its Salisbury headquarters. To further make inroads in Asia, it moved into new offices in Singapore and has hired a new staff in Hong Kong. Patersons added that she is also planning on opening an office in Russia as part of the growth plan. In the U.S., the company has expanded staff and is more aggressively pursuing global customers with headquarters in North America, where 80 percent of clients originate. Its momentum is aided by anchor customers such as Wachovia, the banking giant acquired by Wells Fargo last year (see HRO Today’s March 2009 cover story).
Paterson said she believes the company’s SaaS offering is the right prescription for a lot of the global payroll woes customers and prospects complain about. As HR leaders grapple with tax compliance and cost reporting for employees in remote locations, they need systems that offer transparency and are SAS-70 compliant. She added that the industry has also warmed up to SaaS in a big way, which has led to wholesale changes in the way HR services are delivered. And with all stakeholders now supporting on-demand services, the path to growth is much clearer.
“Two years ago we saw a lot of opposition from internal IT departments to the SaaS model, particularly outside America, but that attitude has totally changed. Executives are saying, ‘Let them focus on where they can best use their resources,’” she added.
With her company positioned as both a technology and services provider, Paterson is setting her sights on not just traditional payroll providers but also larger ERP companies. Because many HR departments still struggle with delivering payroll around the world through their ERP systems, an on-demand option is resonating with some buyers. These types of opportunities are keeping Paterson bullish on predictions that her company will continue to grow at double-digit rates despite the weak economy.
Still, she has no illusions that her business will displace current leaders in the payroll market; rather, Paterson is honing in on the niches that these competitors struggle with—administering payroll for small groups of employees in various locations.
“What we’re finding is that the break-off point is 5,000 employees to make it cost effective to use an ERP system. That will not enable companies to deal with two people in Japan, 10 in China, one person in Thailand, and 2,000 in the U.K.,” Paterson said.
Founder of a New British Empire
