HRO and PEO Companies – Is Bigger Really Better

Does Size Matter When Considering a Professional Employer Organization?

A large NY insurance group invited me to give a seminar to their agents and brokers on HR outsourcing and the different models, administrative service organizations, employee leasing, and professional employer organizations. During the presentation I explained the  different options, covered the various services, levels of expertise, and the technology platforms that a business owner could expect to receive from each.

We compared the range of charges and identified the areas where their clients could realize significant savings, as well as the additional benefits their employees would receive. Having covered all of the pros and cons of HR outsourcing and professional employers organizations, I opened the discussion for questions and answers.

The questions came fast and furious. How many companies are there? Who are some of the companies? How many co-employees? How much payroll? Are HRO’s and PEO’s rated by AM Best or S&P? All great questions, in truth, most of the questions dealt with how much they would be paid, how soon, the sales cycle and a few questions I won’t repeat. Some of the questions dealt with healthcare reform. You could sense that some in the group were concerned about their future.

 

Looking Under The Bun …. Where’s the Beef?

wheres-the-beefMany of the agents where impressed with some of the industry names and statistics. Most were unaware that payroll giant ADP has a seperate PEO division called Totalsource,  as well as their nearest competitor Paychex. They marveled when told of the amazing growth rate of California-based TriNet, who had recently acquired Gevity HR, the nation’s largest professional employer and HR outsourcing organization.

One of the brokers in the back of the room wanted to know if any of the PEOs were public companies. I informed him that Administaff, symbol (ASF), based in Texas was the largest pure-play professional employerorganization trading today. When I mentioned that the company reported revenue last year of $1.6 billion dollars, the group really stood up and took notice.

Sitting on the plane returning to West Palm Beach, I was thinking about the presentation. I couldn’t get over how everyone in the room was impressed by the numbers. The amount of revenue generated,  the increase in sales by client and co-employees, and the total number of dollars spent every year on HR administration. Many in the room didn’t take notice until I mentioned household names like ADP and Paychex, who after all, are known for something else …. payroll. In fact, we find that in many areas of the country, their PEO divisions are a big secret to most small and midsize business owners.

I  began to focus on the fact that the people in the room, professional sales people, had placed such a high value on hearing big names and big numbers. It occurred to me, that if it was important to them, then it must be important to their clients as well. But, is this always the case, and should  a PEO ‘s size play a role in your decision making process? Follow along as we look into three areas of a professional employer’s value proposition. The Process – how they deliver their services. The People – the human side of HR, and Price – What are you paying and what are you really getting?