A 15-year outsourcing relationship is noteworthy. But when the engagement has been “month-to-month for 15 years,” that’s special.
“The HR outsourcing relationship with our provider, TriNet, has essentially been that since the day we started,” says David W. Dunlap, Vice President of Finance and Administration for Socket Communications, “because that’s how it began and neither of us see a need to redefine it.”
Founded in 1992 with only eight employees, Socket became a pioneer in mobile technology almost immediately when it created the first Ethernet card. Today, it develops and distributes a broad range of data collection and network connectivity products for mobile devices such as PDAs, Smartphones, and tablet computers by working collaboratively with integrators, third-party software developers, and OEMs.
But back in the beginning, Socket realized sooner than most why outsourcing more of its HR functions than just payroll would be critical in developing its place in the world of commercial technology.
Sockett originally went with TriNet’s Professional Employer Organization (PEO) model, “which is generally recognized today as the father of BPO,” says Lisa Rowan of IDC. PEOs essentially employ–and take HR responsibility for–the workers. “That’s an apple cart you don’t want to upset and is certainly a big, but not only reason, for this particular engagement’s longevity,” she adds, as opposed to the BPO HR model where the client simply outsources processes and services without the possibility of an intricate or messy disengagement one might find in a PEO.
Provider’s Formula Perfect for SMB Startup
Fifteen years ago, there were fewer HR service necessities for those first eight employees when Socket bought TriNet’s small-to-medium (SMB) PEO menu, which included payroll and benefits, HR policies and procedures, administration of employee information, and management support.
When Socket’s founders went looking for their HR solution, TriNet showed the manufacturer it wouldn’t need to expand its in-house HR infrastructure or purchase an HR information system (HRIS) because TriNet would provide these and other enterprise-level services to meet its needs and could handle Socket’s growth.
“One of their prime areas of expertise is cost efficiency,” suggests Dunlap, which is always important to a start-up and a benefit so we can focus on our core and not be diverted by daily HR distractions.” He adds that today’s sophisticated Web-hosted TriNet HR management portals for both his group and individual workers is “probably the most profound administration difference between then and now.”
“We’ve always catered to the SMB market and good start-ups are the best,” says TriNet’s Regional HR Director Greg Owens.
TriNet’s HR outsourcing service offerings have grown over the past 15 years, as has the number of services it provides to Socket. Today it involves more benefits and services for the almost 100 Socket workers in the US and abroad. Over the years, TriNet has added more sophisticated payroll services, a larger and more complete series of benefits, 401k and investment guidance, employee comp and liability insurance, and back-office HR support.
In many ways, TriNet’s service delivery has evolved over the years into what could now be considered a full-fledged HRO. According to Owens,TriNet targets a very specific niche. “We work almost solely with SMBs and focus our comprehensive HRO services on those that have highly compensated workforces such as technology, financial services, and professional service firms. This distinguishes us from the larger providers.”
Dunlap also agrees this relationship has undergone an interesting evolution from the early days when the services were less sophisticated.
For example, recently a growing number of workers began experiencing carpal tunnel symptoms. “TriNet not only worked with them on how to avoid the many discrete habits that can lead to this physical malady but also helped us solve equipment issues and other environmental challenges that contribute to this problem–not all of them obvious,” adds Dunlap
Long-Term Synergy Between Provider and Buyer
Over the course of a 15-year relationship, things never go perfectly all the time. But the way these partners deal with “ripples before they become waves” is a testament to the longevity of their association.
“You only have disputes if the thinking of two organizations is not aligned,” says Dunlap. “That hasn’t been the case. Our HR goals are identical. TriNet has been amenable in resolving differences before they become profound. If we’re less than pleased with an employee management or benefit issue, they quickly correct the problem or offer acceptable alternatives well before any dispute arises.”
Owens also notes that TriNet and its customers form a Customer Advisory Board that reviews and discusses service offerings–both existing and planned–gauging member feelings of how TriNet can make its services more responsive and better. “There’s a great deal of give-and-take between us and our customers,” adds Owens, “which is one reason for the positive interaction.”
He also suggests the inherently intimate culture and business practices of SMBs require greater, more-timely communication and attention to detail from TriNet. “This is one reason our services and practices parallel, in this case, Socket’s,” says Owens. “By definition, our ability to identify and prevent problems early must be part of our value. Our customers respond to these practices, and it certainly helps explain why we experience fewer negative events than one might typically anticipate in a long outsourcing relationship such as this.”
Continued Growth for HRO in many SMB Spaces
TriNet was also with Dunlap during the publicly traded firm’s initial Sarbanes-Oxley audit in 2005. Dealing with a publicly traded company and the things they go through was a new experience for TriNet as its SMB customer base began to mature. Most aren’t publicly traded, according to Owens. “Socket was our first foray into Sarbanes-Oxley. Not only did it come out just fine, but it was a learning experience for us and the SOX audits we’ve engaged in since.”
IDC’s Rowan observes that PEO providers are doing generally well in today’s HRO marketplace, especially those serving the 100 and under employee market. “There’s been a resurgence in that portion of the SMB space, as well as some, but not all, mid-markets.” she says.
Trinet’s focus on the SMB market is such a success that it enabled TriNet to attract private equity firm General-Atlantic, an investment underwriter, in 2005 even though Trinet is not under any obligation to limit its product offerings to its investors other HR-related properties under the General-Atlantic umbrella.
It’s about customer choice,” says Owens. “We can be a channel for some of the HR products and services General Atlantic’s group might offer if it’s what customers want.”
“We’ll probably see more strategic alignments like this; where larger service providers such as General Atlantic see these PEOs and HR BPOs that specialize in the SMB market as a logical penetration vehicle into these smaller markets,” continues Rowan.
As to the benefits to his firm, Dunlap says it’s more of a visceral topic for him.
“We’ve never felt the need to quantify the benefits because we’ve haven’t been inspired to look elsewhere, which is usually when companies do that,” he says. “Nor have we asked the hypothetical question if we would have been better off doing this internally. We already know that answer. The results have shaped a very smooth, productive HR environment for a long time.
“The employees are happy, which frees them to concentrate on getting our products into the market. No one has expressed dissatisfaction, which allows us to focus on our core and not worry about what could be a very complicated function,” he concludes.
Lessons from the Outsourcing Journal:
- An outsourced Professional Employer Organization (PEO) differs from HRO because PEOS directly hire and administer the customer’s workers while HRO involves outsourcing processes and services only, with the buyer retaining administrative control of its employees.
- Various niches of SMB HR outsourcing are becoming more active, especially in the 100-and-less-worker space.
- HR outsourcing engagements have a chance to last a long time if the thinking of both parties is closely aligned and based on responsive communication that anticipates problems before they can occur.