Outsourcing HR to a PEO can put middle market companies in a stronger position for growth and investment by reducing risk, improving retention, and more.
Middle-market companies in growth mode ‒ especially those seeking to grow by acquisition or to grow and be acquired ‒ can face several challenges related to HR infrastructure. Hiring at scale, offering attractive benefits, maintaining the organization’s culture and complying with regulations all require more time, expertise and technology infrastructure as a company grows.
Let’s take a closer look at how a PEO can address those unique challenges through a more robust HR infrastructure.
How HR infrastructure supports rapid growth
As a company grows from a couple of hundred employees to thousands, its HR functions must grow along with it. Failure to do so can potentially divert resources from the core growth plan and create delays in scaling up while HR retools and expands to handle enterprise functions.
A PEO can save time by offering a customized service model that’s ready to scale seamlessly. This allows company leadership to focus on growth. Through a more robust HR infrastructure, the PEO can also help attract and retain stronger talent to the growing enterprise.
More resources for recruiting top talent
Hiring during phases of rapid growth can lead to poor outcomes if the HR team doesn’t have the resources to manage the process effectively. Successful recruiting starts with the application and interview process because savvy candidates will evaluate it as part of their assessment of the company.
For example, a company will be more appealing to top talent if the process involves:
- Clearly defined job descriptions so candidates understand the company’s expectations
- Skilled interviewers who are trained to ask the right questions and follow best practices for compliance
- High quality benefits packages that offer choice and flexibility at a competitive cost point
A PEO allows middle market companies to plug into a Fortune 500-level HR infrastructure for recruiting while allowing their employees to have access to Fortune 500-level benefits, something that many companies in the middle market don’t have access to on their own.
Better onboarding, better employee experience
The recruiting benefits of a PEO lead into an onboarding process that sets the stage for a good employee experience. If onboarding is disorganized or unsupportive, new employees may fear that their initial impression of the company was wrong and start to doubt their decision to sign on.
Rather than leaving new hires to navigate a stack of paperwork, many PEOs handle onboarding through a technology platform that creates a seamless, guided experience. By making the process simple and organized, the HR infrastructure can create a better first impression for new employees, which may solidify their decision to join the company.
HR support for company exit strategies
Companies that use a PEO as they work on their exit plan may make themselves more attractive to potential buyers. Instead of investing the time and resources to build and scale an internal HR system over the course of their multiyear plan, they can simply plug into the equivalent of an enterprise HR infrastructure.
A PEO can also help companies maintain HR continuity. Internal HR employees may only stay in their jobs for a few years, perhaps leaving the company as it prepares to sell, creating gaps in institutional knowledge and slowing down critical HR processes when everything needs to be in peak shape for buyers to review.
By reducing the likelihood of compliance issues that could undermine the value of the purchase, a PEO can also help reduce the risks for prospective buyers and investors.
HR support for M&A processes
For organizations looking to grow by acquiring other companies through mergers and acquisitions (M&A), a PEO offers some specific advantages that may be hard to develop in-house.
Before an acquisition, the PEO can help them with certain aspects of due diligence. When an acquisition is made, the PEO can onboard employees of the acquired company in a way that’s welcoming, organized and designed to retain that talent.
At onboarding and beyond, the PEO team can also help with change management. This can include training about the parent company’s mission, vision and values as well as programs to bring acquired employees into the existing company culture.
Long after the merger or acquisition is done, the PEO can still add value by helping with talent development, DEI programs and initiatives, employee engagement and succession planning. These HR practices are crucial during and after an acquisition because so much of the value of any company is its talent. When companies can retain the people who made their acquisition worthwhile, they get more value from the deal and are in a better position for more growth or an exit.
Summing it all up
Whatever the goals for your middle market company, a strong HR infrastructure is vital to long-term success. Learn more about how a PEO can help your business prepare for what’s next. Download our complimentary guide, HR outsourcing: An essential guide for middle market businesses.