I have written many articles and have spoken at many conferences about HR/Benefits/Payroll (HCM) technology and services and how the coming changes are going to impact the benefits business. I often have used a lawn tractor/landscaping analogy to make it easier for the audience to understand some of the key points in my position on the market. Yet, just the other day, a person who I have spoken to several times in the past, made a statement to one of my salespeople that would indicate that he really did not understand the concepts I was espousing. So I have decided to put these concepts in print so it is accessible at any time. If you have heard me speak before or read some of these blogs it may get redundant but at least I warned you. This may also get long but I do want to cover all the details.
One of my first articles around this concept was when I wrote an article about Zenefits titled, “If You Want Results Like Zenefits You Need to Mow the Lawn”. My key point was that I felt brokers were viewing the attraction of Zenefits the wrong way. On the surface it may appear the attraction was free HR Technology in exchange for the benefits business. When I looked at their marketing I concluded that what they were selling was the idea of making HR easier. They were promising “worry-free”. I like to say they were selling life preservers to people drowning in HR administration. And the analogy I used was that if I wanted to mow my lawn I could either buy a lawn tractor or lawn mower, or I could hire a landscaper. If I hired a landscaper I would go to work and then come home and my lawn would be done. A landscaper would sell me “worry free”. When I hire a landscaper I am buying a service, not technology. On the other hand, if I bought a lawn tractor I would need to fill it with gas, learn how to drive it, and mow my lawn once or twice a week. Lawn tractor is a technology purchase while landscaping is a service purchase.
In the HCM technology and administration market I think there are different types of buyers. There are those that want to buy technology to manage their HR and there are others that simply want someone else to do it. One may want a lawn tractor and the other wants a landscaper. Or you could be like me that uses a lawn tractor to mow my lawn but a landscaper to fertilize, do spring and fall clean-up, and plow my driveway in the winter. Employers may use technology for some things and want to outsource other services. Or they may mow their own lawn until they go on vacation and have someone mow it while away. Different people have different needs.
The comment the person made to my salesperson was that he thought at my company we only represented one technology vendor and he wanted to represent the market. I guess what he did not understand was that at HR Technology Advisors we provide different services. We have a technology consulting business, where we help employers find the best technology (find the best lawn tractor) but we also have a landscaping business. To stick with my analogy, if you were to have a landscaping business you would need lawn equipment. And you may need to choose between a John Deere, Toro, or whatever else is in the market. You may also have more than one. For larger lawns you use a John Deere commercial stand-behind 50-inch lawn tractor but for smaller lawns with tighter spaces you may use a Toro 20-inch push lawnmower.
Recently we launched a new business, ProHCM, to put the focus on the services. The best way I can describe it is that at HR Technology Advisors we helped over 1000 employers find the best lawn tractor (HCM Technology solution) through 40 different vendors. We have been agnostic. ProHCM is our landscaping business. If an employer simply wants someone to do the work, we can do it. We can manage their payroll, support HR, or do whatever it takes to help the employer in the HR area.
However, we also have a lawn equipment repair business. In the process of consulting employers on technology, one option is to fix what they have. So, we help employers fix their current technology. And if you were start a lawn equipment repair business it would be smart to learn how to fix the lawn tractor that is most widely used. You will get more customers that way. In our business that is ADP. When we fix ADP for an employer we aren’t helping ADP. We are helping the client who has already purchased ADP.
In the HCM technology space there is a big disconnect between the technology sellers and the buyers. The sellers are essentially selling technology with Payroll services but the buyers are thinking their getting a landscaper too. They think that they are buying services well beyond what is being sold. This has created another gap in the market that few are seeing. It is actually this gap that prompted the forming of ProHCM. So part of ProHCM is to provide services to fill the gap between what the client thought they bought and what they really bought.
I often show the example of how we add content to an employer’s HCM platform to help communicate benefits better to the employees. The HCM technology vendors provide benefits communication technology but they don’t provide the service of adding the content to the employer’s system. And they also don’t create the carriers content. So we have a service that adds benefits content onto the HCM platforms. It is a service. Once again, we aren’t helping the technology vendor, we are helping the employer communicate benefits to their employees.
Then there are the employers that have bought their lawn tractor (HCM Technology) but don’t know how to use it very well and need help. Recently we had an employer using ADP technology whose payroll person quit. They had the ADP lawn tractor but the person internally who mows the lawn quit. Our service supplies them with a person to process their payroll using their technology until they hire someone new to pick up the work again. They needed a landscaper to mow their lawn using the lawn equipment they already purchased. Once again, if you are going to provide the service of managing someone else’s payroll what system would you get to know first and best? You would know the one that more employers are using. If you were to write an app for a smartphone wouldn’t you write one for the iPhone? It would be smart. Apple has lots of customers.
The services under a landscaping business can vary tremendously. Some people just mow lawns. Others will edge, trim hedges, fertilize, and do fall clean-ups. Some will also handle sprinkler systems and others have landscape architects available to do design work.
In the HCM technology and services business the same is true. There are those who provide benefits outsourcing and others that provide HR outsourcing services and payroll too. Some like Zenefits, Gusto, Namely, and Paychex have added benefits advisory services to their menu. Smaller employers will more likely look for a single source for these services to make it easier, but also it is often cheaper to do it all under one roof too. Simpler and cheaper is often a popular formula for business success. It attracts lots of customers.
Some brokers don’t want to provide all the services. That is Ok, as long as it is Ok if a certain percentage of the market is no longer considered a prospect. I think more and more small to mid-sized employers will be looking for a single, or fewer sources, to manage their HR. And we all know that there are many larger employers who are understaffed and need help too. From my perspective, as the HR world gets more complex, the demand for these outsourced services will expand.
Some brokers have partnered with some payroll or HR company down the street. I think that there is a difference in how a buyer would perceive the value from a firm that brings in all kinds of third-party vendors from those that “own” the outcome. There is a difference in selling someone else’s stuff versus selling your own. I wrote about this in my article titled, “An Arms-length May be the Distance Between Winning and Losing”. First, there is the accountability thing. Second, it is often more expensive to buy these services in pieces versus buying them together. Many firms, and not just the Zenefits and Gusto’s of the world, provide lower prices for some products or services if the benefits BOR is included. Brokers have been doing this for years with benefit websites, HR Libraries, HR call centers, benefits enrollment systems and more. It is not Zenefits that created the great “giveaways” in the benefits business.
ProHCM provides the services that brokers may not want to provide such as answering a payroll question or providing an employee to manage their HCM technology when someone quits. There may be a time when the broker may need to provide a service more core to the benefits business that on their own can’t afford to provide such as a benefits call center on nights and weekends. I could go on and on with examples of services needed today or in the future that may require an investment and scale.
I guess the last point I will make is that selling lawn tractors is much different than selling landscaping. Think of what you say when selling me a lawn tractor versus selling me landscaping. Pause here and think about this. It is much different than selling landscaping. If you were to sell me landscaping would you take me out to the driveway and ask me to see your lawn tractor or to “demo’ it? No. They don’t care how you mow the lawn. They want it done right.
At ProHCM we have multiple lawn tractors for our landscaping business. One for smaller employers and another for larger ones. When someone hires us to find the best HCM technology we don’t show them our landscaping business. When someone wants landscaping we don’t demo lawns tractors. I don’t think there is a conflict. They are simply different. I don’t think someone who has a landscaping business thinks that someone who sells lawn tractors is a competitor or vice versa. They understand the difference.
I would contend that the biggest problem Zenefits had was that their sales pitch sounded like they were selling landscaping but they then delivered lawn tractors. Some people will accept and run their own technology but many others will need help. Those employers either not capable of running the technology and those expecting more services would not have been happy. Zenefits will get it right in time.
So when someone says that we favor ADP I would disagree. We provide services to help the client that may have the ADP lawn tractor. We help the employer, not ADP. We could help someone who has Kronos too, or Ultimate, or Ceridian. Though I am sure ADP others appreciate the fact that we help keep their customers happy. And if you were to start a service business to fix or support some technology it would be a sound business decision to provide a service around the technology that more employers are using. If you were to start a landscaping business, you would need to choose your equipment. If you choose to use a John Deere that would not make you a John Deere salesperson. You would be selling your landscaping.
When it comes to the next prospect meeting and technology comes up make sure you know whether they really want technology or if they want the services. Or maybe they want both. And it would be important to understand what services they need.
I hope this is helpful. This lawn tractor/landscaper analogy may not apply to every situation but it works for me.