Ask Steven Beauchamp and he’ll tell you that his job as CEO of Paylocity is a lifelong dream.
“I always wanted to be in payroll,” he told Investor’s Business Daily. And then he paused a beat and with professional-level timing added: “I’m kidding.”
Not that it makes a difference. Whether it was sheer luck or destiny, Beauchamp spent his entire career in the payroll industry, prior to taking the helm as CEO at Paylocity (PCTY) in 2007. The company provides payroll and other human resource software solutions for small to midsize companies.
It went public in March 2014 and Beauchamp led the company to uninterrupted 20%-plus annual growth in revenue and earnings since then. The company expects to keep growing at that pace and to double its revenue to about $1 billion in five years.
It’s been an amazing ride for investors, too. Paylocity’s shares soared more than 300% from the first day’s closing price, blowing away the S&P 500’s 60% gain during that time. The company is now valued north of $5 billion.
Target A Role, Not A Job
Beauchamp grew up in North Bay, Ontario, a town of roughly 50,000 people about three hours north of Toronto. He didn’t have a career goal in mind. But his father, who worked for a government funded agency and supervised 130 employees, inspired him.
No matter the business, “I knew I wanted to be in a leadership role,” he told IBD. “I love leading people. I wanted to be in the room where they make decisions.” And increasingly he was.
He started with payroll giant Automatic Data Processing (ADP) in his native Canada, shortly after graduating from Wilfrid Laurier University with a degree in business administration.
Three years later, he went back to school for an MBA from Queens University. Then he joined Payroll Central. He stayed with the company through consolidations including its purchase by Paychex (PAYX). He was that company’s VP of Product Management and a corporate officer when he was approached by Paylocity founder Steven Sarowitz about joining his firm.
Research Your Risks First
The move to join Paylocity seems like a no-brainer now. But Beauchamp wasn’t sure at the time. Paylocity was founded in 1997, and as he recalls, “It was still a relatively small company with no outside capital.” And the company had a regional client base largely in the Chicago and Milwaukee area.
Also, he was mindful of the difficulties faced by executives who take over from company founders. He and his wife had four children. At the time the oldest was only six. He didn’t move them to Chicagoland for three months after he started. “It was a big risk,” he recalled.
“But I spent some time with (Sarowitz) and he said he really wanted to transition out, and I believed him.” Also Beauchamp couldn’t help but notice the inroads Paylocity made in the upper Midwest, taking business from larger, more established competitors.
Prepare For Career Curves
Clearly it all worked out. He notes, “It wasn’t a straight line. He (Sarowitz) got involved in things I didn’t want him to get involved in and I’m sure he felt the same about me. He had some passion projects he wanted to finish.”
Beauchamp knew he needed to prepare, despite being in the industry a long time. I “knew a lot about the industry, so I spent some time (after arriving) meeting people,” he said. At the time, Paylocity had about 100 employees. “I would do hourlong sessions with them to see how things worked, what their priorities were and any problems they’ve seen coming up.”
That way when Sarowitz asked Beauchamp strategic questions, he was ready. And, yes, “There were some surprises. The founder felt some of the biggest challenges were operational, but felt sales was doing a good job. I thought the customers were satisfied, but the sales model at the time was not scalable.”
Flex Your Contact List
Beauchamp noticed the company had a small number of sales people, many who did not have much experience in the industry. “We needed to get experienced people in who knew the industry and (would) allow us to ramp up much faster,” he said.
He brought in a former Paychex colleague, Michael Haske, as senior vice president of sales and marketing — he’s currently Paylocity’s president — to recruit experienced sales personnel.
“Steve’s ability to recruit and retain executive talent has been incredible,” an early Paylocity investor, Jeff Diehl, said.
In 2008, Diehl, a partner in Adams Street Partners, became the first investor in Paylocity. He’d studied the company before backing it. And it’s not a coincidence that he bought in shortly after Beauchamp joined. In part, it was because Diehl, now a board member, was convinced this new hire had the skills to take a regional company national.
“He knew when the company grew faster than the (number of employees could comfortably handle) and there was a need to upgrade talent.”
To keep the pace of growth growing, additional sales people were hired. The number jumped 23% in the last year, from 310 to 382.
Structure Incentives So Employees Can Focus
Paylocity salespeople are largely compensated on the new business they bring in. Contact between them and existing customers is largely limited to about 20% of their time.
Why? It’s a function of the complexity of payroll and tax regulations in the U.S. and elsewhere. For example, if a company opens an office in a different state from where it normally does business, the HR department must deal with a completely different tax structure than what it is used to.
Paylocity’s software can handle this situation. The company assigns dedicated operations people to each client to guide them through these and any other hurdles that may arise.
“The client will get an expert who will actually help them,” Beauchamp said. “They have dedicated account managers who they can call and ask these complicated questions, people trained on the software and industry practices.”
This negates the need for constant contact between customers and sales reps, who are free to pursue new clients. The process clearly works since the company has a 92% employee retention rate and the sales people have a seemingly unending lists of potential customers to go after — any company with roughly 20 to 1,000 employees.
Bring Your Lessons To Your Customers
Beauchamp sees his job as helping clients let their employees do what they’re best at, too.
“You have a much younger workforce now for whom software is much more important,” Beauchamp said. “Everything that happens at a company needs to be automated. Automating work flow allows you to be more efficient and moves you from just shuffling forms to managing human capital.”
- Grow a company with a promising product but a small regional footprint.
- Overcame: Short staffing and need to hire quality, high-ethics employees.
- Lesson: Create a culture so good you win the prestigious Glassdoor Award (plus others in each of the last three years).
- “We’re an HR company and if we talk the talk we have to walk the walk. At the end of the day if this is a great place to work it will attract talented people.”
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