It happens all the time: A PEO client outgrows their need for a PEO partner and decides to bring their HR operations in-house. But just because they’ve decided to handle their own HR doesn’t mean you have to lose them as a client. A PEO’s knowledge of a client’s business and operational needs can be the golden thread that connects them in a new relationship.
That knowledge can make a PEO the preferred provider of the Human Capital Management software (HCM) that a company needs to compete in today’s business environment. PEOs that offer HCM alternatives can continue to enjoy revenue from their existing client base and do so with higher margin services.
A PEO’s Most Valuable Asset
It’s easy for successful PEOs to lose sight of their single most critical skill: business development. In the product world, cost of sales can be a significant line item on a balance sheet. But PEOs—built around developing and maintaining relationships with the principal players at their client companies—may not even think of those relationships as a financial asset.
If and when those clients determine it will make business sense to bring their HR in house, a PEO stands to lose more than just that revenue stream. They will possibly be losing years of investment in business development. Factor the time and the executive rate it costs a PEO to bring that client to that point, and that is the investment a PEO stands to lose.
However, if you act before a client has implemented their new plan, all the time invested in that relationship can return huge dividends for both companies.
The Myth of Self-Managed SMB HR
PEOs can become so focused on delivering services that they lose sight of the central role their software plays in their clients’ operations. Yes, clients can adopt new software platforms; in effect, that’s the decision a client makes when they decide to bring HR in-house.
But PEO-class software tends to be much more feature-rich than the general-purpose HR software most small and medium-sized businesses (SMBs) use on their own. More importantly, PEO software is built to scale in terms of added services and functionality. While there are many HR systems for SMBs that allow for integrations, these are almost always a collection of discreet tools that don’t truly interoperate. This is where true HCM software comes in.
PEOs offering HCM as a migration path from fully outsourced services to in-house client operations can offer a familiar software experience and level of functionality. This eliminates the steep learning curve that comes with adopting totally new software. This applies not only to the HR administration that the client must stand up, but also whatever employee portal they hope to use. This becomes even more critical when payroll gets figured into the mix.
And then there’s the matter of benefits. Depending on the packages offered through the PEO relationship, a full-featured HCM platform can enable the benefits programs that are crucial to employee satisfaction and retention. If a PEO can provision its client with the necessary HCM system, they are positioned to address that client’s needs for the related payroll, benefits, compliance, and other products and services a complete HR operation requires.
Extended Return on Investment
At the heart of successful business development is appreciation of a client’s true needs, an understanding of their in-house capabilities, and a trusting relationship with key decision-makers. Ending a PEO relationship is almost always a business decision, not a personal one. And clients are more likely than not to welcome a continued relationship with a trusted provider.
The necessary knowledge and trust become even more important in provisioning the core people management functions:
- Payroll and taxes
- Benefits selection and administration
- Regulatory awareness and compliance
- Employee engagement
While the products and services you offer clients may change, they are still built on the same relationship and knowledge base.
The years of client relationship, combined with the right software, can be the golden thread that ties a client to their HR solutions resource provider for years to come. And delivers all the financial rewards that go with it.
To learn more about Prism HCM and what it can do for your business, visit us at prismhr.com/software/hcm.
