Administaff - Perspectives - Perspiration or Inspiration?

PEO Insider - December 1999/Janaury 2000

Perspectives

Perspiration or Inspiration?

By Richard G. Rawson

There are few businesses as challenging as the PEO business. Every day, managers of PEOs face the challenge of delivering perfect payroll, managing employment risks, addressing safety in the workplace, improving the quality of health benefits, and growing their businesses. The challenges never end. When one payroll cycle ends the process begins anew, over and over and over again. It is easy to get caught up in the perspiration of our industry.
However, our industry is not about perspiration. For a buck, anyone can contract out the perspiration of employment. There are bookkeepers and accountants on every corner who can deliver perfect payroll. Insurance agents can offer health insurance and there are lawyers, third-party administrators, and agents who can address the other employer burdens, responsibilities, and headaches.

Instead, it is the inspiration that makes our industry unique. Professional employer organizations are about delivering a new vision for America's small to mid-sized workplaces. At the beginning of the 20th century, Henry Ford changed America with his inspiration to "build a motor car for the great multitude." Unlike others in the automobile business who believed success would come by cutting corners, lowering margins, or repackaging existing ideas, Ford's vision was to create a new automobile. His vision changed America by combining the best materials with new engineering ideas and the very best workers. His assembly line forever changed manufacturing and attracted workers to America's urban areas. He changed the conventional thinking of wages by establishing profit sharing to attract the most talented workers. He challenged the wisdom that automobiles couldn't be mass marketed. Indeed, he transformed our lives, changed our thinking, and inspired our entrepreneurial spirit.

The lessons of Henry Ford should inspire our industry as we open the entrepreneurial doors for the 21st century. This issue of PEO Insider addresses PEO business models of the new millennium. There are many different PEO business models within our young, growing industry. Every PEO must define the right size and shape to fit its unique PEO business model. But first, it must be a PEO business model.

There has been some misguided talk within our industry about three categories of PEOs defined by a list of commodities and judged by a scorecard. While these categories are all represented by legitimate businesses, they are not all PEO business models. A business that only provides payroll, payroll tax administration, workers' comp, and reactive risk management is not a category I (low service) PEO. Rather, it is a basic payroll service. Similarly, a business with reactive HR services, reactive risk management, and limited loss control is not a category II (mid-service) PEO.

In this issue of PEO Insider, NAPEO takes a look at four genuine PEO business models. What sets them apart from simple payroll services and providers of low-cost insurance products is a sound business model built upon a platform of professional management of employer risks and human resources. A true PEO is proactive – not reactive – when it comes to meeting the employer needs of its worksite employees and client companies. From that platform, PEOs are delivering new and innovative human resources, value-added services, and a host of creative business products. Like Ford's 1903 motor car, PEO services are both inspirational and revolutionary.

As we begin the new millennium, let us use Buffet's advice for our industry. PEOs must focus on the competitive advantage of delivering a revolutionary change to the professional management of employer risks and human resources for America's entrepreneurs. This advantage will provide the timeless durability of PEOs for the 21st century.

Richard G. Rawson is president of the National Association of Professional Employer Organizations (NAPEO), and is executive vice president and chief financial officer at Administaff, Inc.