Mike Burnett: Hello, this is Mike Burnett, partner and co-leader of the business and financial services practice here at the Alexander Group. Today I’m joined by my colleague Elena Ryan, Director out of the Alexander Group, to talk about the HR and human capital services space. Elena, thanks so much for joining.
Elena Ryan: Nice to be here.
Mike Burnett: Excellent. So maybe I’ll set the backdrop for the audience when we talk about HR and Human Capital Services, we’re talking about an array of companies that all force that really focus around helping organizations optimize their workforce. So services can range from recruiting and staffing talent to helping with administration of payroll and benefits. It can also include traditional HR consulting services. One of the newer offerings and newer players that have entered the space are what we call PEOs or EORs, or employees of record who actually help with taking on the management and hiring and back office, if you will, associated with standing up new employees for businesses. Typically, this space tends to reflect how the job market is performing, labor shortages, fluctuations in terms of hiring cycles. It’s very cyclical. And these organizations have to grapple and navigate some challenging environments, which we’ve certainly seen in the past few years. Now, within the diverse array of players we just described, there are folks who tend to have lower mid to single digit growth. Some of the larger tech enabled players, which Elena, I know is where you’ve had a lot of experience, tend to experience higher or higher growth rates compared to their peers in this space. So what I’d love to do today is pick your brain in terms of one of some of the things that you’re seeing players in the space really grapple with and see if there’s any trends that you would like to shine a light on from a go to market standpoint. So with that, I’d love to turn it over to you, Elena, what are some of the things you’re seeing in this space? And what are some of the challenges that organizations you’ve worked with are trying to really grapple?
Elena Ryan: Yeah. So, I think the top three things I’m really observing in this space is first, companies are really shifting from offering a single core product to really building out more of a multi-service ecosystem and platform. So, I’d say first and foremost that trend there. The second one, and you touched upon it as well, is the space is becoming increasingly crowded and there are so many new companies popping up or so many companies adding this service offering to their overall portfolio. So, these vendors are really needing to figure out how to differentiate themselves from their peers. Lastly, like you said, managing employment in volatile times, both in the highs and the lows, figuring out how to manage that volatility.
Mike Burnett: Great. So let’s click into that first point, which I think is something I’ve certainly seen as well, where a lot of these organizations start as a single service provider or nurse player or specialist, but then they look to add additional service lines. What do you think is driving that, and then what are some of the challenges or things that you’re seeing organizations try to do in order to make that transformation successful?
Elena Ryan: I’m finding that this expansion is really often fueled by additional functionality that really complements their foundational platform. So as a result, many providers are evolving into full-service hubs, with some even functioning as managed service providers to meet their growing customer demand for vendor consolidation, simplified procurement, as well as favorable pricing. So, buyers are really signaling a clear preference for one-stop shop solutions, seeking fewer contracts and a more integrated and cohesive experience. However, this diversification introduces operational complexity, right? Particularly how to structure the sales execution within their go-to-market strategy. Industry leaders are grappling with whether to deploy specialized sales teams for each of their offerings or have a platform seller that represents the full portfolio, which really raises the questions about scalability, seller depth versus breadth. And, ultimately, how do customers want to engage with vendors?
Mike Burnett: Yeah. And to your point, there’s the structure element. There’s also our folks actually able to successfully sell all of these offerings. So there’s a huge training question that typically comes up as well in terms of how to enable sellers to be able to cover this much broader portfolio.
Mike Burnett: Let’s move on to the second topic. So, you talked about consulting services and bringing more subject matter expertise to really bundle and surround their offerings. What are some of the things you’re seeing there?
Elena Ryan: In this increasingly crowded landscape, companies in the HR and tech and services space are really being forced to reevaluate what truly sets them apart. So with so many players offering overlapping capabilities, the question is no longer just what you sell. It’s really how you sell it and why it matters for the customer. So enterprise buyers in particular are really gravitating towards providers who can act as strategic partners and not just transactional vendors. And the fifth is really about elevating the importance of vendor services and subject matter expertise. So it’s no longer enough to just offer a product. Companies must be able to guide their clients through complex decision making around workforce planning and their overall human capital strategy. And so to your earlier point that means sellers need to evolve, because the expectation is now for sellers to deliver consultative selling, really not just pushing features. And so to support this evolution, organizations are investing in training and enablement that arm their sales teams with that industry knowledge, business acumen and solution fluency.
Mike Burnett: I think it also it also puts a lot more onus on marketing. And the way we position ourselves in the market is critical in order to be successful in this new space and this new world. It really forces you to reevaluate, to your point, your identity moving forward, which I think is something that it’s not on the sellers to figure out. It’s something on the entire organization to really embrace.
Mike Burnett: Let’s talk about the last point and something that’s not going to go away for this space ever in terms of how do you navigate some volatility in the market, especially around the labor market?
Elena Ryan: As we’ve seen time and time again, industry growth doesn’t always follow a nice, straight linear path. There’s always surges and stalls and contractions. And this boom-bust dynamic isn’t unique. In fact roughly half of sellers, give or take operate in industries that are inherently cyclical. It’s a pattern that we’ve seen time and time again and one of the most common questions we hear from our clients is how do you adjust employment strategies to survive the lows without missing out on the highs? And the answer isn’t really about outsmarting the cycle, right? It’s really about learning to ride it. And we find that businesses that really thrive and sustain growth over time are the ones that align their workforce planning with those macroeconomic trends. So this means building flexibility into hiring models, investing in scalable talent strategies and ultimately preparing for the inevitable shift.
Mike Burnett: Let’s ask the question we always get. In a down year, how do we handle compensation in an up year? How do we handle compensation? We have big misses on either end of the revenue target. What’s your advice to folks in terms of how do you think about sales compensation plans given any time there’s uncertainty in the market?
Elena Ryan: I would advise against making short-term, short-sighted plan changes or decisions. Right? It’s really making sure you’ve got a plan that sustains the path of time and give it a little bit of time and things to work out and don’t be short shifted and start throwing in spice or add-ons and contests or making changes to adapt to the short-term needs.
Mike Burnett: Yeah, it makes sense. CEO I was working with recently in the space said it’s part of the territory. If it’s not for you, then the industry probably isn’t for you. So I think sage words of wisdom there and good advice from your standpoint. With that, Elena, thank you so much for the perspective. Appreciate the time. Folks, if you’re curious to learn more, please visit us at AlexanderGroup.com. And please reach out if you have any questions. We’d love to schedule time. Thanks again.
