4 Ways PEOs Can Maintain Profitability Even in an Uncertain Economy

By Tim Pratte

Typing “Are we” into Google generated the response we were looking for off the bat: “Are we in a recession?” 

Oh, Google, you know us too well.

Recession, of course, depends on how you define it,” but many economists say we are not currently in a recession. Still, not to sound alarmist, some believe we are headed toward one, and a new economic downturn could look much different than the eight we’ve seen going back to 1969. That’s because the demand for labor is still strong and there are low levels of debt, which are factors you would normally see trending in the opposite direction during a recession.

For the record, the most recent recession (2020) lasted only two quarters because it was caused by the pandemic, but the Great Recession stayed around for seven quarters, which was the longest we’ve seen since 1969.

No one knows without certainty where our economy is truly headed, but there is always a light at the end of the tunnel for organizations that make smart business decisions.

Even with inflation finally slowing, interest rates rising and some banks teetering, there’s still plenty of opportunities for Professional Employer Organizations (PEOs)  and their small and medium-sized business (SMB) clients to excel even in these uncertain times.

At a NAPEO webinar in February, I moderated a First Friday* panel discussion titled “Managing Your PEO During Economic Uncertainty.” The panelists were Ray Dile, chief revenue officer at Pathway Strategies; Wendy Katz, chief financial officer at Questco; and Lisa Petrovich, director of payroll operations at InTandem Human Resources.

The following is a recap of the discussion with the quotes edited for length and clarity.

Lisa Petrovich
Lisa Petrovich

 Here are the key takeaways:

  • No. 1: Automating processes can help reduce manual tasks, increase efficiency and lower the cost of operating your business. Automation will never fully replace some manual processes, but integrating automation can make everyone’s job easier.

    As Lisa Petrovich said, “The more we can automate our system, the less manual processes that our current team members have to manage, and that frees them up to be able to devote more time to the client’s specific needs.”
Wendy Katz
Wendy Katz
  • No. 2: Lower-cost offshore or nearshore resources for back office activities can help offset rising costs of recruiting new talent. While we are not advocating for eliminating U.S. jobs by any means, for companies that need to scale quickly or keep costs down, PrismHR partner Solvo Global, for one, is doing an amazing job helping companies find talented people who can help right away. 

    As Wendy Katz explained, “Regardless of the size of your organization or the complexity and sophistication of your service delivery model, there most definitely are opportunities to look for ways to automate something that’s currently being done manually and/or to look for opportunities to either offshore or nearshore activities in an effort to identify a lower-cost resource to do some of the more standardized and routinized activities that are administrative in function.”
Ray Dile
Pathway Strategies
  • No. 3: Self-service and Artificial Intelligence (AI)-powered tools can deliver instant service and information to increase client satisfaction and reduce costs. We are excited about the possibility of bringing AI into the HR outsourcing space. Artificial intelligence can’t replace people, but it can help people do their jobs better, and we believe AI can help HR generate data insights quickly, too.

    As Ray Dile said, “I think, if we take a moment and look at how clients want to interact with us vs. how we want to interact with them, I think we’re very proud of our service models. I would argue that there are plenty of clients who would rather interact with you electronically, and that might be able to be automated, especially with some of the really cool, interesting AI stuff going on out there.”
  • No. 4: Hone in on your value proposition and don’t be a one-size-fits-all provider. Let’s face it: We need to adapt to our customers as much as we want them to adapt to us. A bakery in New York and a tech startup in Seattle are going to need very different approaches to helping them keep and retain talent.

    “You have to decide who you want to be in the marketplace. Scaling today is about serving a particular marketplace where you can differentiate. I know that it’s a tough conversation to have with your team or your organization, but I think the more you can listen to the right type of buyer, then they’ll actually help inform how you should evolve your organization.”

    —Ray Dile

    “If you aren’t looking at your performance metrics on a regular basis to better understand what’s driving both your top line and your bottom line, you’re missing out on opportunities to drive profitability. The key here is to re-evaluate your strategic plan regularly by monitoring where your business is going and take appropriate action to course correct when circumstances warrant.  Timely and informed decision-making is critical.”

    —Wendy Katz

    “We really have the one payroll specialist who services clients’ accounts from start to finish. They really are the expert all around, not only just for that particular client, they have the familiarity with all clients, they’re also experts within their field. We’re always encouraging continuing growth in their education and making sure that they’re comfortable in the whole process of compliance and everything else that we need to turn back to the clients.”

    —Lisa Petrovich

My Thoughts on How PEOs Can Succeed Even in a Tough Economy

The economic world is filled with uncertainty these days, but we know challenging times don’t last.

Even if we encounter that “R” word, there are strategies PEOs can take to prosper even during uncertain times. 

It all starts with technology. Incorporating automation will help PEOs create the operational excellence they’re looking for and help them scale their business while keeping costs down. That’s why PrismHR has focused its efforts on efficiency and analytics as we’ve seen with the release of the PrismHR Data Warehouse

This innovation will give you the power and tools you need to create valuable and unprecedented insights for your customers, and this is just the beginning. Being able to see where opportunities are developing, perhaps when a client has seen significant growth, offers huge advantages for PEOs to make better business decisions. 

Also, as we’ve seen in this blog, I’m excited to see a future that incorporates AI-powered and self-service tools to reduce the burden on PEOs. AI is eventually going to impact all of our businesses—and in many ways it already has—so there’s no time like the present to start dipping your toes in to see where it can help your company. 

As part of PrismHR’s strategy to help PEOs grow, we have also keyed in on creating the most robust Marketplace partner program in the industry. Having scores of options in the Marketplace gives your clients the competitive advantage they need to compete for talent while helping you grow your business as well. 

Despite all the economic uncertainty these days, PEOs and their clients can succeed and maintain profitability during economic challenges. And with these tips from our panel of experts, you won’t have to Google anything to find out how to do it. 

Want to learn more? Join me at PrismHR LIVE this summer (June 25-27); it doesn’t take place on a Friday, but we guarantee you’ll love it just the same. 

* OK, it was actually the second Friday in February.

Tim Pratte

Tim Pratte is president, HRO at PrismHR. For the past 26 years, Tim has helped thousands of business owners reduce overall labor costs and provide improved benefit options for their employees through innovative technology, multiple strategies, cost saving techniques, and expert advice to streamline business processes.

He graduated summa cum laude from the University of Tampa with a degree in Economics and previously served in executive level leadership positions at leading PEOs.