Sometimes an outsourcing engagement seems like a good idea in the beginning. But later things don’t seem to work as they should. That’s when the partners can only find success by reminding themselves why they’re doing business together.
Such sober examination can inspire both to get things back on track. The buyer reminds itself of its valid reasons for outsourcing. The provider listens intently and then responds to what its customer really wants. And sometimes a provider that listens can learn a new trick that enhances its overall value.
Pinnacle Hotel Management of West Palm Beach, Florida, manages and develops hotels for the Marriott and Hilton brands in the sunshine state. It also owns hotels in Florida, Maryland, Connecticut, and California, employing almost 700 people.
When it was established 10 years ago, Pinnacle outsourced some of its HR functions, primarily payroll check processing, to a large firm. Then, over time, it added other professional employment organization (PEO) services to the engagement. But after a while, according to Felicia Matula, Pinnacle Hotel Management’s director of finance, the relationship with its incumbent provider had gotten “a bit stale. We needed a change,” she says.
Enter provider Gevity to help with HR administrative management, payroll processing, tax preparation, benefits enrollment, and management and workers’ compensation coverage.
The initial tipping point for Matula was when Pinnacle began its annual health insurance renewal with its former provider. “Gevity showed us a different plan,” she says. “But they also showed more value to our organization in other areas.”
Mark Hodges of EquaTerra notes that “many of these initial outsourcing engagements reflected the early growth pattern of the HRO industry – provide services with less emphasis on integration or focus on the employee experience.” He adds that newer transactions are more about quality of employee interaction and on life cycle events that drive multiple services. “New clients and those that revisit their up-for-renewal service agreements now focus on integration.”
Client shows provider the value of a different perspective
The first year of the engagement fulfilled Pinnacle’s initial service needs. But it was certainly not perfect according to Matula. She says the smoothness Pinnacle sought from its provider wasn’t quite there. The problem was the communication pipeline between the two partners. And for a time this underperforming communication process endangered the engagement. But then two things happened in quick succession that changed their shared course for the better.
Pinnacle first sought the advice of a consultant. According to Matula, the issue was, “Do we continue outsourcing this or bring it all in house?” She adds that many in the upper levels of Pinnacle’s executive and operational structure had deep HR backgrounds, so the idea of insourcing seemed worth consideration.
But Matula and her associates learned from the consultant that their new course with Gevity could be the better solution, “especially since it would have taken us five years before we even began to realize a return on our investment had we brought it in house.”
At the same time, Pinnacle and Gevity looked deeper into their engagement. The challenge — and solution — became clear, according to Gevity general manager Eddy Chandler.
“Up to that point we had a point of contact for each location for clients with multiple locations,” he says. “What Pinnacle suggested was a single point of contact with us rather than multiples.” He adds the reason for the suggestion was Pinnacle’s collective, highly-developed understanding of HR.
“We didn’t need to be educated nor have our hands held,” adds Matula. “We needed a provider that could save us time, money, and headaches. We needed someone that could simplify and streamline the process.”
So Gevity went back to the drawing board and submitted several single-point-of-contact candidates. Pinnacle chose one, and that’s when the rough seas began to calm.
“We primarily focus on small to medium-sized businesses (SMBs). There’s not always a buyer with refined understanding of HR that Pinnacle has,” adds Chandler.
The solution turned out to be a wake-up call for Gevity and a harbinger of opportunity because “we’ve applied it to another engagement with a different client with operations in 49 states,” says Chandler. “And we’re grateful to Pinnacle for helping us learn something about the services we provide and how to manage them.”
That behavior deeply impresses Matula. “It suggests a ‘solution-oriented’ provider rather than a ‘process-only’ one. To their credit, they embraced our suggestion to tailor their formula and allowed us to choose our primary contact. How could we not be impressed or reassured?”
Partners working together produce effective engagement
Now into the third year of the engagement, Pinnacle is reaping the full benefit. From help with hiring (including employment applications in both English and Spanish), drug testing, and background checks to information on employee counseling and separation, Gevity provides the solutions necessary for Pinnacle to manage its employees.
The two even updated the buyer’s employee handbook so it contains up-to-date, compliant policies. “They helped us put together addendums for each state, translate it into Spanish, and print it. That alone saves us countless dollars,” says Matula. “You may not think an employee handbook is that important, but when your business is as spread out as ours, with different types of employees, it’s critical to have consistency so you avoid potential problems.”
And when Matula has a question, she knows she can call her HR consultant who she says is “very flexible and pleasant to deal with. Even though Gevity pays her, we feel like she’s really our employee and advocate. She handles training issues and all the other things that our HR director would if we took this in house.”
But she adds the streamlining of administrative tasks is also important, and Gevity OnLineTM does exactly that.
“Gevity.com makes doing payroll easy,” says Matula. “It gives us access to performance appraisal tools, employee information, and HR-related news and information. We also use it as our intranet to post important company information.
Matula prefers to see the advantages of her PEO on a visceral basis. “Having access to the right resources when needed and saving my time are the areas I first think of,” she says. “It would be prohibitively time-consuming to bring all of this inside when the right provider can do it better and much cheaper.”
“In house it would cost a fortune,” she adds. “There is no way that I can quantify that. Some assets are so valuable that it is difficult to put a dollar value to them. All I know is this works. Our provider adjusted their ‘game’ to meet our needs; and when you put it all together, that’s tremendous worth. As long as I have anything to say about it, why change?”
Lessons from the Outsourcing Journal:
- When comparing the benefits of continued outsourcing or bringing it back in house, consider how many years it will take to realize a return on the significant investment of relative to remaining on the outsourcing path.
- Committed outsourcing partners can solve operational problems by communicating closely, thinking “out of the box,” and inspiring change in how one or the other partner approaches the engagement. Good partners learn from the other.
- As HRO and PEO engagements begin to expire, the issues of whether or not to renew, or change to another provider, are driven by quality of employee interaction and life cycle events that drive multiple services.