Question
Philip: Many businesses jump to a PEO to not have to deal with employee-related HR issues, but with limited access to HR, can this negatively impact culture, morale, and engagement?
My Answer
Is a PEO the right choice for your business? Probably not. I know, I know…it’s self-serving for me to say this. But for those of you who have been on a PEO, as I previously was at two different companies, you’ll know that PEOs overpromise and underdeliver except in terms of costs and fees. We know PEOs can’t scale with your business in a way that makes any financial sense. But I’d like to discuss some other attributes of PEO failings, some of those subtler strategic failings that employers should be keenly sensitive to.
When PEOs are the nexus between businesses and their workers, businesses won’t have direct control over how culture develops. A dependency builds between employees and PEO that causes morale to suffer the more problems go unanswered, and high employee engagement is almost impossible to achieve in all the confusion. With PEOs there’s never one person who is accountable for advancing your cultural goals, solving problems, reinforcing your values – strategically, for your employee AND your business.
There are multiple stakeholders in the culture value-chain. And PEOs do disservice to all of them. To start, leaders have reduced visibility into their workforce because their workers technically belong to the PEO, reporting is typically limited, and employee complaints go through what is essentially a third-party and may not escalate internally as needed to make real systemic changes.
Employees are disserved, too, because they’re paid through the PEO. And worse – after employees are funneled through a canned, impersonal process for remedies to concerns, their problems that are culturally embedded at their organization, go unaddressed and unchanged.
So what?
A Harvard professor wrote in a case that I was required to read in grad school, that culture is a product of how businesses solve problems. He elaborated to discuss how cultures usually develop organically, for better or worse, as a result of how leaders allow employees to work through problems, how they react when mistakes are made, etc. How on earth can a PEO work in concert with employers to ensure a strong culture when their interests are not the employer’s interests? Fundamentally, PEOs are incentivized to bill the most for the lowest cost services, this means less time devoted to employer-clients, less effort expended to solve problems, and effectively mitigating risk by foisting responsibility for common and real problems on employers. It’s astounding to me that they ever make a winning case to employers, when, if you follow the money, you will see there is fundamental dissonance between their motives and your needs.
If you’re on a PEO, and feeling out to sea without any real mooring, you need to speak with our experts. We can help you analyze intentionally vague fees from your PEO. Our real value to you as a partner in your business begins when we help you reconceptualize how you do business—where you have more control over the things that add up to business outcomes, like Employee Engagement, Risk Management, Benefits – Rewards and Recognition. Bringing together a coalition of expert services, like benefits and retirement brokers who cater to businesses of your industry and size, rather than a one-size-fits-all approach common with PEOs.
PHILIP CARRILLO, MBA, SHRM-SCP
Director, HR Services
Philip began his 12-year Human Resource career in HR Project Management and Recruiting in the legal tech sector, working for startups that were listed among Forbes Fastest Growing Companies. Philip has managed human capital operations in almost all 50 states and in parts of Europe. His experience ranges from compliance to leadership coaching. After achieving his MBA from Tulane University in 2019, Philip transitioned from in-house Director to consulting, where he focuses on helping leaders understand, document, and improve productivity and visibility through Performance Management, Mission Vision and Values integration, and Professional Development. Compliance remains a cornerstone of his strategic assistance to companies that want to scale carefully and smartly.
Philip believes that every employer can methodically create an attractive and inspiring Employer Brand and Human Capital strategy. “Every challenge can become the building block of a breakthrough opportunity through a dynamic HR strategy.”
