Ready to Grow

Ready to Grow

COMPANIES by Janet Leiser | Senior Editor

Advantec expands it niche and triples its sales staff to grab more of the domestic human resources outsourcing market projected by one research firm to reach $42 billion next year.

West Coast native Dianna Sheppard backpacked across Europe and bought two waterfront acres on the coast of Sonora, Mexico, where she and her husband plan to open a Margarita bar.

She was about halfway through a one-year sabbatical after more than two decades as an executive at a large corporation when former colleague Pat Goepel began calling and e-mailing.

Goepel, known for turning around companies, wanted Sheppard to join him at Tampa's Advantec, a human resources outsourcing company with more than 20,000 worksite employees. For eight years, they'd worked together at Ceridian Corp. in California, where Sheppard oversaw 1,000 employees and a $400 million budget.

"He really needed somebody who was going to roll up their sleeves and get it done, as well as keep people motivated," says Sheppard, who accepted the challenge in October, not long before Goepel left for Fidelity Employer Services.

Sheppard takes over Advantec, which has 200 employees of its own, at a critical juncture.

Millions were spent in the last year or so updating Advantec's technology and more than tripling the in-house sales force from eight to 26. The company is diversifying. It's transitioning from primarily a professional employer organization (PEO), also known as employee co-leasing, to a human resources outsourcing (HRO) and administrative services outsourcer (ASO), a new niche for Advantec.

Advantec, like many other companies, hopes to become a dominant player in ASO/HRO, a business segment that Sheppard says is fairly new and still growing, morphing.

In addition to projected revenue growth of as much as 27% this year, double-digit growth is projected for Advantec for the next few years. And Sheppard says a top priority is to make Advantec one of Florida's best employers (see sidebar).

That's a lofty goal for a business that has had three leaders in two years and whose retention rate is nothing to brag about. But Sheppard, 52, says she isn't one to give up easily and her expertise is in establishing efficient business processes.

"You can get people all pumped up and excited, but without the tools and processes to do their job right, they fail and then they feel bad," Sheppard says. "You have to bring all those components of running a business together."

Foundation building

She says Goepel, who remains an adviser to Advantec's board, left the company in good shape after his year or so there.

"Really the foundation is pretty solid, it's just getting into this direct sales force," says Sheppard, who declined to release specific revenue figures.

"Our retention rate needs to be better," she adds. "We need to keep our employees. When you have three presidents in two years, it's rough. Even the most solid of employees, when there's that much change, they feel uneasy."

The company was called AdvanTech Solutions when entrepreneurs Charles Davis and Lowry Baldwin created it in the late 1990s. The insurance moguls had sold what was then Florida's largest private insurance broker, DavisBaldwin Insurance, to Wachovia Corp. prior to starting the PEO.

In 2004, venture capital firm Trident Capital invested $20.2 million in the company and became the majority owner. Trident managing partner Venetia Kontogouris sits on Advantec's board, while Davis remains chairman of the board.

Since its founding, Advantec stood apart from its competitors in that it relied on independent agents, called agency partners, to sell its services, primarily throughout the Southeast. The company still has those partners, but it also now has its own sales agents who work from virtual offices in Florida, Texas, Chicago, the Carolinas and the Northeast.

"It's a long-term investment in a direct sales force, and also taking care of our agency partners at the same time so we have multiple channels coming in," Sheppard says. "They've invested a lot of money in the people, processes and implementation and service infrastructure so they're ready."

"Employers want more and more to outsource more of their business because they're not specialists in COBRA and those kinds of things," Sheppard says "They want more and more administrative tasks taken off them so the traditional service companies are saying, 'How can we do this administrative stuff for our clients and at what price-point?' "

The new segment entails much more work than the traditional PEO, where the average client has 30 employees, or even typical HR outsourcing, she says, adding: "It requires intense knowledge of the client. You have to understand their benefit policies. You have to understand their culture ... As you move up market, well, understanding that culture and all those nuances in a 400- or 500-man company is a lot different proposition."

Advantec has about 700 corporate clients, but it's presently acting as the HRO manager for only about 11 companies.

"We don't want to take on so many clients that we don't get the model right," Sheppard says. "We're cleaning up our processes, getting everything worked out, and we have PeopleSoft as a platform."

Industry challenges

Like other companies involved in the human resources segment, Advantec faces pressure to lower client costs as other companies offshore to lower prices.

"We want to keep employees here in Tampa," she says. "We want to keep as much work as possible here. It's one of our values."

It becomes a more pressing challenge as employee benefits costs rise, she says, adding, "We're constantly working to keep those costs down."

To reduce health insurance premiums, more clients are offering plans with higher deductibles, anywhere from $1,000 to $4,000, she says. Employees pay more upfront for medical care, but the cost to employers is reduced.

"It puts more responsibility for non-critical health care back in the hands of the employees," she says. "When your employer pays everything you'll go to an emergency room for a cold. It's considered free."

A long-term goal for Sheppard is to ensure the company will one day run smoothly without her.

"The goal of every executive should be if they disappear tomorrow it's not a blip on the radar," Sheppard says. "Your service to the company is to make that company so well run and the people so strong it happens without you. If you're desperately needed then you're not doing your job or you're on a journey to get there.

"The best thing that could ever happen is you leave and they hardly ever notice."

Still, Sheppard, whose family is relocating to Tampa from California next month, says she doesn't plan on leaving Advantec, at least not for 10 years.

Then she says she plans to head off to Sonora, to the Margarita stand.

But if she has her way, you won't notice her departure.

REVIEW SUMMARY

Company. Advantec

Industry. Human resources outsourcing

Key. Advantec is going after the small- to medium-size companies that larger competitors pass up. The company no longer relies only on agency partners for its growth.

Becoming the best employer

One of Advantec President Dianna Sheppard's goals is to make the company the best place to work.

But how does an executive do that?

"You have to have programs that are quantifiable," says Sheppard, a graduate of the University of California, Berkeley. "It's easy to say I want to be the best place to work and then not take it down to the specifics of what it means and what programs do we have and how do we accomplish that."

She says employees must have variety in their jobs, an identity in what they do and they should feel they impact the organization.

"You can measure those things and have programs around them," she says. "You have to have it front of mind all the time."

Micromanagement is definitely out. Empowerment is in.

Advantec offers flex hours to employees, if needed.

"If someone is going to be working long hours, then we put them up in the hotel overnight so they don't have to commute on top of it," she says.

To start off each work week on a good note, associates are provided breakfast every Monday.

As for don'ts, she says, the company doesn't make process changes without input from cross-functional teams or allow one person to create service-level agreements and throw it over the cubicle to another.

Each employee, including Sheppard, decides what the five vital items are for their job.

"We call them that because we measure and do things every day," she says. "There are a lot of things that have to get done, but they're not vital."

She concedes it's difficult to determine the most vital part of your job and to measure whether it's getting done.

"My first thing I'm doing is working with people," she says. "How do you determine vital from trivial? How do you measure? How do you coach? How do you hold these meetings? You have to have a cadence of communication in your company so people always know where they belong and how your vitals support my vitals."

A peer group reviews an employee's vitals monthly and decides whether he passes or fails.

But Sheppard emphasizes the focus is on the company's processes, not individual employees.

"We don't react to people, we react to process," she says. "So when something goes wrong, we back up and look at the process. Is it documented adequately? Was it the right thing to do?"

- Janet Leiser

Human resource industry terminology

PEO: A professional employer organization that supports businesses through co-employment, also called employee leasing.

ASO: In administrative services outsourcing, companies take on more responsibility. But they still outsource transactional items such as payroll, benefits and employee data management.

HRO: With human resources outsourcing, a firm such as Advantec provides the people, process and technology needed to perform human resource duties.