Transcript
Mark:
Welcome to PeopleTech, the podcast of the HCM Technology Report. I’m Mark Feffer.
My guest today is Anthony Tavolacci, the Senior Vice President of HR Sales Strategy Channels and comprehensive services for ADP. We’re going to talk about HR outsourcing and how employers work with vendors, why even small businesses need data. Technology’s role in keeping everybody happy and where the business is going, all on this edition of PeopleTech. Hey Anthony.
So Anthony, we’re going to talk about HR outsourcing today, and I wanted to try and zero in on technology’s role in it, what it has to do a customers are looking for it to do, but could we set the stage? Could you tell me about HR outsourcing and kind of what’s going on in that part of the industry right now?
Anthony:
Yeah, for sure. HR outsourcing is really dynamic, and when you think about the challenges that small, medium-sized businesses face today from the very beginning of their life cycle of the employee and finding them and trying to make the right decisions on who to hire, all the way to job separation, there is just an enormous amount of administrative pressure, liability pressure, and quite frankly, performance pressure that exists on that spectrum. And because of that, when you think about macroeconomic events, when you think about the fact that employees are the largest expense, the largest asset, and quite frankly, the foundational key to the success of any organization, the HCM industry is booming. There’s so many different solutions across a spectrum of offerings from an HR outsourcing perspective to help support small, medium, medium-sized companies in just about any way that you would want to be supported relative to two things.
One, where are you in the journey of managing human capital? And then two, what are you trying to solve for? So you see a lot of PE investment, you see a lot of innovation, you see a lot of startup activity because the demands that are put on practitioners and owners of companies is just so high that there’s just a ask for a lot of things, and it just doesn’t stop there. You can get the tool, but then how do you use it? How do you get the ROI? How do you make decisions off of that? Definitely a complicated thing for a lot of businesses to navigate, and the optionality is endless at this point.
Mark:
So what are businesses usually thinking about when ADP first hears from them? Have they become overwhelmed because of growth or are they just finding things like compliance are more complicated that they’d anticipated?
Anthony:
Yeah. Yeah, Mark, I think it comes from a lot of different places that can kind of stimulate a company’s interest in wanting to evaluate their human capital structure. So I think you hit on one of them, right? If there’s some kind of financial event that’s going on in the company, if they’re acquiring, if they’re merging, if they’re divesting in a lot of those cases, they want to make sure that they have infrastructure scalable things that can grow and contract with them, help them be able to focus on key activities in an organization. That’s one of them. I think that fundamental changes in an organization also create some challenges there as well. So if you have change in leadership or change in philosophy about how the human capital is run or practitioner changes, those are also things where people are looking for resources and things to step into.
And then you just have a kind of reaction to, I’ll call it macroeconomic events like the great resignation or the war on talent or just the record-low unemployment, things that create tension and burden on the employee, the employer’s ability to staff and be able to have the highest quality employees and just wanting to be best in class from a employer perspective, those are things that kind of stimulate people’s interest and say, these are reasons why we need to think about what are our options to address these changes because it is critical when you think about the expense and the necessity of getting an ROI and quite frankly, the impact that manager your people effectively have on your P&L in so many different ways.
Mark:
So let’s talk specifically about technology. If I think about HR outsourcing and how it uses technology, I am thinking of things that are probably pretty obvious, data analysis and all of that kind of thing. But what else is going on? And not only what else is going on from the customer’s viewpoint, but what’s happening under the hood? What kind of platform are you using to serve all these people?
Anthony:
So I think it’s really interesting when we think about technology because of no shortage of applications or tools to be able to use. What we find is there’s a spectrum that business owners are looking at in terms of how to deploy technology from an HR perspective. So you have your typical SaaS products, which enable them to have some software that will give them some solution-oriented output and solutions for some of their challenges.
But as you go across the HR spectrum, you have things like managed and shared services, which allow smaller companies to either fully outsource or share in resources to take on very complicated or highly administrative things. And then you have completely outsourced HR platforms that tie in shared liability and enables companies to offload a lot of the financial and fiduciary risk of being an employer. And I think what happens is companies need to take a look and understand across that spectrum what they’re trying to achieve. And as a byproduct of that, they have to think about two things.
One, you could have the tools and you could have the technology, but you’ve got to be able to execute and deploy it. And you need resources to be able to figure out how to align whatever the data insights you’re looking for into practical executable strategies that drive a company towards its strategic objectives. And when you think about technology, I think about not just the tools underneath it, but I think about what in the HR outsourcing space, what more is being asked of these organizations. And I see more and more that employee self-service is something that drives a lot of interest because if you think about this Amazon world that we live in that if I wake up and I say, I want this thing, I could have it by the end of the day by just going through a few clicks, that transcends into the employer-employee relationship.
If I want to look at what my benefits are or if I want to look at what my paycheck was or if I want to look at my W2 or get my W2 from a few years ago, these are all technologies that are required for a lot of businesses to be able to provide that level of interaction with their employees that they want. And for small and medium-sized businesses, that’s not easy to get. So being able to tie into those platforms. And then when you think about under the hood, you have to think about two things, right? There’s just a ton of data, there’s a ton of resources, there’s a ton of information that’s out there. What’s the credibility of the information, the volume, how is it managed, and then how is it interpreted.
I think from an HR perspective and from an HR outsourcing, you want to pull together that sort of trifecta of the right technology with the right suite of solutions that really drive the engagement of your employees. But then you have to have the right resources and interpreters to be able to help your organization no matter how staffed or how rich your organization is from an infrastructure to figure out how to deploy whatever the strategies and resources and ideas and things that will drive a company forward. So I find that more and more businesses start with thinking about traditional software and then recognize that what they’re really looking for in a lot of cases is expertise, support, insights, and then quite frankly, how to get from point A to point B while at the same time providing an environment that gives employees access to information that they need to be effective, not just in their day-to-day lives as it relates to being an employee, but even in their job policies, procedures, HR support, things of that nature.
Mark:
Now, small businesses are interesting because the owner or the leaders of the small business, usually, they’re really industry experts in whatever business they happen to be in, but they’re not always so expert on the support functions like HR or technology for that matter. So what are your customers like in terms of communication with you? How do you have to talk with them? Are you having to do a lot of education? Do you need to explain why some of the things you’ve got are valuable in the first place, or are people more or less up to speed on the things they really need to know about?
Anthony:
Yeah, it varies so much by two factors, the time and resources a company has to make sure that they’ve got their arms around that part of the business. And then I think number two is just the time that they have to spend in managing that part of the business. I think our clients want to be communicated with digitally, so if there’s information that could be pushed through them, I think that’s important to them. I think that they want quick responses when it’s really just transactional information about what is this or how do I kind of stuff. But what I find with a lot of the clients is they may on a day to day want to leverage some of those more transactional things. I think the thing that’s really special about HR outsourcing is putting in the support of an HR business partner that could provide strategic guidance for them and really think through not only how to get to where the company wants to go from an HR perspective or from managing their human capital, but just the challenges that they face along the way.
And I think that the dynamics of being an employer has evolved so fast over the last few years where now you have smaller and smaller companies that are now staffed with people across state lines because of work from home and virtual and the digital environment. So the complexities of doing that has become even more of a burden with businesses just from a regulatory perspective to things like offering benefits and aligning that kind of stuff. And then just the communication as a whole. So what they’re looking for is proactive communication about the big things, quick response, easy to access information on the transactional things and lots of resources for their employees.
Think of it this way, if you had a 20 employee company that was in the business service realm and you only have so many hours in the day, it’d be so much better if the employees could go onto a mobile app or call into My Life advisor, which is sort of a service we provide to our clients’ employees. That could just answer basic questions for them and take that out of the C-suite or the director of HR where they might be more focused or want to engage on things that are more strategic. So there’s so much agility now that needs to be in play for the HR service provider for the clients because you got to meet them where they are. And it’s not even just as a norm. Sometimes it’s just based on the circumstances. So I think that’s the cool thing about outsourcing HR in a more comprehensive manner.
Mark:
One of the things that people always talk about when they talk about HR is data. And these small businesses going beyond what we just talked about with HR, do they have the skills that they need to take advantage of data? And I mean, are they inclined to use it in the first place?
Anthony:
So it depends on to what end, right? So when you think about a small company, it’s who they’re competing against. So having insights to wages and benefits and total compensation, really important, how to package that to things like, if I want to grow the company into different markets, what does that dynamic look like and all of that other kind of stuff that goes into that. So the short answer is yes, they absolutely have the capacity to see it, and most of the folks that start companies or own companies, they have the capacity. I just think what they’re looking for is expertise to be able to help them cut through some of the noise that surrounds that to help them make good decisions. And I think that that’s the essence of data in HR. Can I get the information? Can I understand how it aligns to the strategic business objectives I have?
And then can I very simply put together a plan that gets me from A to B? Some of those are more complex than others. And I think what happens in a lot of cases with small businesses is that it can be pushed off or they could take a very smaller view because the resources are sometimes harder to get to. The practitioners will spend a lot of time having to focus on the things that are required, like the administrative stuff that companies have to get through from a human capital perspective. So it’s really about being able to have very quick access, but once you get the access, what do I do with it? How do I operationalize it? And then how do I put that into the business plan that’s going to help me grow my business or make it more profitable or retain my employees or address whatever concerns that the companies have.
So they have the capacity. I think it’s more just do they have the resources and the time. And that’s where HR outsourcing has a huge impact, especially in the SMB space, just the time savings, the strategic guidance on the whole people management part of the business. Those are all things that have a quantifiable impact on the success of an organization.
Mark:
So how has this all evolving? Are the demands from business people changing? Are you thinking you’re going to be having to offer some significant new products in the coming years? Where do you see the growth?
Anthony:
I see the growth in the fact that two things seem to be dynamic, and one is the access to information both at the employee and the employer level is just enormous. So the competitive landscape on talent, managing talent, employees understanding what is expected, what should be expected, the laws, the rules, everything that’s there. So as the regulatory environment either scales up or scales down, it changes and it vacillates the need for that guidance and support continues to be there. And I think that will always drive demand.
I think that as we continue to move forward, things like artificial intelligence and generative AI, stuff like that will provide more and more information quickly to employers. I think the reality is being able to have somebody in your organization that can take whatever those insights are and then turn them into actions and plans and execution is really going to continue to be things that I think our clients will continue to ask for us to be able to support and deliver, especially as that information becomes more fluid, more accessible, easier to get.
I think where HR Outsourcing is really going to have its impact, its getting it as one thing, using it and applying it is another. And I think that’s the exciting part from an HR perspective. And then I just think that as we’ve evolved over the last five years, we’ve just seen the employee having a very important seat at the table in terms of what’s important to them, how to maximize their engagement, how to get the best return on those folks. So I think that that’s going to continue to be a primary focus for businesses. It’s a very difficult thing to manage. There’s a lot of complexity and there’s a lot of different competing ideas out there, but I think it’s something that when you outsource and you have the resources to be able to interpret, guide and help you harvest that information, it’ll put you in a position to really drive success in your organization as it relates to the productivity of the people that work for you.
And I think that’s kind of been the underlying thing that’s driven the HR outsourcing success in the past. I think it is really going to be rocket fuel for why people are going to want to partner. Because when you think about HR outsourcing and you think about what really are the options of a business that want to address a concern or an opportunity in their HCM space, it’s really only three things. They can build it, which is highly labor-intensive and highly expensive and fuller risk.
They can buy it, but it’s the same thing. You can buy this stuff, you can buy the tools, but you have to learn how to use it. You got to deploy it or you can partner. And in partnering, you’re putting things in place with people that not only can help you with the technology and the tools, but provide those key insights that help you move your business. And as I’ve been in the industry for almost 30 years, that has probably been the biggest evolution, is sort of I know everything I need to know. Now it’s more, Hey, could you help me go faster? Could you help me drive more efficiency or effectiveness or scalability or do that while being more lean in the approach or help my key practitioners focus on core competencies versus all the administrative stuff. And I think that that’s really something that will continue to drive the industry.
Mark:
Anthony, thank you very much. It was great to meet you. Thanks for taking the time and talking to me, and I hope we’ll see each other again.
Anthony:
Thanks, Mark. It was a pleasure.
Mark:
My guest today has been ADP’s Anthony Tavolacci, and this has been PeopleTech, the podcast of the HCM Technology Report. We’re a publication of RecruitingDaily. We’re also a part of Evergreen Podcasts. To see all of their programs, visit www.evergreenpodcast.com. And to keep up with HR technology, visit the HCM technology report every day. We’re the most trusted source of news in the HR tech industry. Find us at www.hcmtechnologyreport.com. I’m Mark Feffer.
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