Mark Mackenzie Interview
[00:00:00] Welcome to The PEO Podcast, where we interview industry leaders to discuss all things PEOs from compliance to technology, to client relations, and everything between. I'm your host Andreas Deptolla.
Innovation is critical. I think that's pretty self-evident and actually timing's everything.
[00:00:23] But as, as we've seen this past year, you don't always have a choice when it comes to innovation. Sometimes necessity is what creates innovation as the mother of innovation. And we're certainly seeing that. Today we excited to have Mark McKenzie, PEO consultant at Oasis as our guest.
[00:00:41] He's author of the ABCs of PEOs. We'll be discussing his book and current trends in the PEO industry.
[00:00:54] Welcome to the show we are very excited to have you here. One of the things that I want to [00:01:00] start with today is I heard that on a personal note, you named all of your kids after presidents of the United States. Tell us more about that. Yeah like most of my life that was never the plan.
[00:01:13]But we had we had started out with a couple of names of that we really loved for for our boys and my daughter. And then at that point it was, we've already gotten too far. We couldn't turn back and we had to stick with that theme. So yeah the names are Jackson Carter, Madison Grant Lincoln and Ford.
[00:01:37]I'm not very political. I don't like to talk politics very much. So there's no political persuasion, but yeah, there's kind of something that that happened. Wasn't a plan, but but here we are with six kids presidents names, that's really unique. So what was your personal journey?
[00:01:55] Tell us a little bit about like how you landed in the PEO industry. What was your career path to enter here? Yeah, that's an interesting story. And I wish I could tell you that this was all part of my plan. But I'm big on setting goals and having plans. But sometimes those don't work out and that was certainly the case with how I ended up where I am today.
[00:02:19]But yeah I've always believed for every obstacle. There's always an equal. For greater opportunity. When there's any type of like destruction there's an opportunity to create. And so that was certainly the case with how I ended up with with being in that the PO industry I'd worked in the business insurance employee benefit risk management industry for nearly eight years for the same company and they were going through some changes.
[00:02:46]And I ended up being one of the casualties. And in hindsight getting, let go was probably the best career move that I never made. It just happened to [00:03:00] me. Of course it didn't feel like that at the time. But you adapt, you learn, you can reinvent yourself and you overcome it. You just, you find a way.
[00:03:13] And I was fortunate that I was able to apply a lot of what I learned over those eight years. And that skillset in my new career, in the PEO in HRO industry, you might, maybe you're familiar with Scott Adams, the creator of Dilbert. Does that sound familiar? Dilbert comic. Yeah. He has a fantastic book.
[00:03:36] And I just recently picked it up, but it's how to fail at almost everything and still win big. So it sounds like you're familiar with this. It's an incredible book. I encourage anybody listening to pick up a copy. I've read a lot of books and this one is it's right up there, in my opinion, should be required reading for anybody in high school or college.
[00:04:00] [00:03:59] I obviously I've discovered a little bit later in my life. But when the chapters, he discusses his success formula and it's essentially that for every skill you acquire, it doubles your odds of success and whether or not that's true or not, but that's his philosophy. And essentially you don't have to be an expert.
[00:04:19]And I'm certainly not. But by being competent and. Multiple disciplines. You can increase your odds of success. And it's a bit counterintuitive to our specialized economy today where everything is specialized, but that almost might be B the point is that sometimes it helps the Zig when everybody else is zagging.
[00:04:44]Looking back at what I learned in that industry and over that period of time, there's no question that the skills I learned really built the foundation for my new career and PEO and while, [00:05:00] PEO can be intricate and complex when you look at the value proposition of helping companies attract and retain quality employees and.
[00:05:11] Containing costs with benefits, covering their assets with, from a compliance perspective. I was already doing a lot of those things, but using different tools or using tools in a different way. And I feel pretty confident saying that had it not been. For that experience I certainly wouldn't be where I am today.
[00:05:31]You probably heard the term, failing forward. And so that was certainly the case with that experience. And you just going to use those lessons as fertilizer. For your next success. And so that's kind of how I ended up where I am today. Mike. Thanks a lot.
[00:05:47] Follow-up for the background here. Super interesting. And I will follow up with this for our audience, with another book recommendation based on what you just said. That really resonated with me, that this book out there called the obstacle is the way, [00:06:00] and that really also describes The philosophy that you outlined of looking at obstacles and the best opportunities.
[00:06:08]And and really focusing on the things, you, you mentioned earlier, I want to shift a little bit here specifically now to the context of the PR world. You mentioned earlier that you have your six kids, if you would have to explain to your kids what a PO is, ho what would you say?
[00:06:30]It's a great question. And they've asked me before, and as I mentioned, it is a, it's a very intricate and complex solution. There's a lot of moving parts and pieces. And I, and ultimately there's two ways to explain it. And one is what a PEO is. And you can certainly talk about all the moving parts with that and the core principles of it with payroll, [00:07:00] human resources, benefits and workers' compensation.
[00:07:05] So those are the four. Core principles of it. And obviously there's other things that you can plug and play into that solution, but, they don't care. And most businesses really don't care what it is. They want to know what does it do? What, what's the value proposition behind a PEO and that too can be a bit ambiguous or a deuce, but.
[00:07:28]I think the common denominator with the solution, the real value proposition was the impetus for the book, the ABCs, just keeping it really simple, but, companies want to better compete for top talent and keep the top talent that they have. They want to be able to offer a really robust benefit offering or strategy, and they want to be all contained costs with it.
[00:07:50]And they don't want to get sued. And so they want to insulate the business and to cover their assets and to be compliant and to make sure that they can [00:08:00] sustain a predictable income stream as much as they can. Obviously as we've seen this past year, there's going to be things you can't control, certainly, but there are things that you can control and that's true with everything in life.
[00:08:15] And so the PEO tries to control what you can control from a compliance perspective. And so I think that is probably the easiest way to look at a PEO is, you have, this is what it is, but really more importantly, and this is what actually does. And w what would you say is the ideal client profile of PEO, right?
[00:08:36] So which companies can typically really benefit from working with the PEO. Yeah. I get that question a lot and there, there really isn't any easy answer because every business is unique. I equate it to like a fingerprint. No two businesses are alike, [00:09:00] some are similar, but not identical, not necessarily identical.
[00:09:04]And so because of the uniqueness of. Each business in each industry, there are going to be unique needs at different places in time and in the business cycle. So I think on par there really isn't a business that could not benefit from a PEO partnership. That's just my opinion. A lot of it comes down to timing and I've seen that I've seen that a lot.
[00:09:34] Certainly from a, from an employee count kind of threshold, 50 employees is a magical number from a compliance perspective. Things change at 50 and usually not for the better. But even to that point, we've partnered with smaller businesses that have, 15, 20, 25 employees that maybe have needed more human resource infrastructure that are cost containment or.
[00:09:59] The ability [00:10:00] to better compete for talent. And we've partnered with larger companies as well. Surprisingly, you would think larger companies have better economies of scale and buying power for things like benefits and workers' compensation. And there's certainly some truth to that. But we've seen plenty of instances where, larger companies with, a hundred, 150, 200 employees that for whatever reason or maybe multiple reasons.
[00:10:25]Have had challenges with cost containment and operational expenses as it relates to their workforce. So it's really tough to the pigeon hole, any one specific industry or company size. I really think that as the economy continues to change and evolve the PEO partnership continues to provide more and more.
[00:10:49] Value to, to businesses. A lot of just comes down to timing, but I think the PEO partnership is a great fit for nearly every business and every industry. [00:11:00] At some point you mentioned Mac, you mentioned a couple of times something really interesting that I want to dive in a little bit deeper. You mentioned cost containment.
[00:11:10] What can a PEO do to help their clients to achieve the cost content cost containment? So cost containment. When you think about the expenses that a business has, certainly payroll is going to be one, the largest expenses, they have their workforce. And then when you expand upon their workforce and the additional expenses associated with it, medical benefits is certainly a big ticket item.
[00:11:40] And then depending on the industry workers' compensation, insurance. Again, depending on the industry can also be a massive expense, unemployment insurance, again, depending on the industry and depending on the time and place is also a variable expense. And even [00:12:00] things like 401k plans and the fees associated with 401k plans.
[00:12:05] So there are a lot of variable costs associated with having a workforce employee turnover is another variable cost, right? So there's a lot of variable costs. And again there's things that, that you can impact and there's things that you can't, but what the PEO does is provide additional economies of scale and buying power for small businesses.
[00:12:33] To contain those variable costs and provide insulation from shock. So to speak maybe a really poor worker's compensation renewal, or maybe a really bad claim or really frequent or bad medical claims. So it provides insulation, the type of installation that would be provided by having a larger workforce.
[00:12:58] And so the competitive [00:13:00] disadvantage. That small businesses have is they don't have the scale. So if you're a 25 person, small business, you certainly don't have the resources with the scale of the buying power of a 250 person company. And what the PEO does is it allows small businesses to aggregate their buying power and to better compete in regards to a cost containment perspective.
[00:13:30] With a lot of those variable costs. So it's just providing additional insulation for the unknown and better predictability and price stability moving forward. And again, if you're a business owner, you want predictability as much as you can, and you're an entrepreneur and you got into this because you're not completely risk adverse, but you also like to be able to predict with some degree of reliability.
[00:13:58] What costs are going to look like [00:14:00] from year to year. And the PEO is really good at doing that. You mentioned that the POS typically a good fit for many companies, right? Different sizes, different industries and whatnot. If you flip that, are there certain circumstances where you would say the PEO might not.
[00:14:18] Be the best solution, right? Whether that's a company of a certain size industry maybe a company wasn't an international focus. Where would you say instances where the PO might not be the best? Yeah, certainly international if a company has as international employees that's gonna limit the scope and the reach of a PEO.
[00:14:41]They can certainly provide the support and the solutions to the domestic employees. And there may be PEOs that maybe I'm not aware of it. But I'm not familiar with any PEO that can support foreign employees. So that, that certainly could be a company that, that may not be a fit. But again, I've [00:15:00] seen where they will go ahead and have their own human resource and payroll infrastructure for employees are working in different countries.
[00:15:07] And the ones that are domestic they'll use a PEO. So I have seen that work in regards to companies not being a fit, this is a solution about numbers, right? And there's fees associated within a lot of times it's going to be investment. Sometimes the savings that can be provided on benefits and workers' compensation can offset the investment in the infrastructure.
[00:15:33] But that's not always the case. And so there, there are times where a business will we'll have to make a decision as to whether or not the investment makes sense. One of the biggest value propositions with the PEO is human resource, the dedicated human resource support, and infrastructure that provides.
[00:15:51] And so if a company has that infrastructure already maybe they have a full-time human resource professional on staff. [00:16:00] And may the company has 25 employees. And right now there aren't problems with benefits or workers' compensation. Then maybe that would be something where it's just not a fit now, but maybe there's a company with 250 employees and they only have one full-time human resource generalist, and they don't have the bandwidth to support that type of workforce.
[00:16:23] Then again, that might be worth a conversation. I think the one thing that. Is easy to overlook with this solution. And I've made this comparison before, but it's a bit like buying life insurance. So with life insurance, you want to get it. You want to obtain it when you're young and healthy, because it's really affordable.
[00:16:46]If he ever tried to get life insurance when you're older or you have pre-existing conditions. It's really cost prohibitive. And the reason that analogy is relevant with the PEO name PEO stands for [00:17:00] professional employer organization, but you can also refer to it as a proactive employer organization and that you really want to proactively get the infrastructure in place.
[00:17:15] For things like medical benefits and workers' compensation and compliance and risk. You want to have the infrastructure in place now before you need it. You're the author of the book. The ABCs of PEOs. What was the inspiration for writing the book and why was it important that it was written? So obviously I can't speak for anybody else.
[00:17:41]But the reason why I think isn't important for the book to be written was I got the impression that the PEO industry and solution was in the witness protection program. And the PEOs have this incredible [00:18:00] low risk, high reward value proposition. But the overwhelming majority of business owners and CFOs and controllers are HR managers.
[00:18:13]I was meeting with had no idea what a PO even was. It was it's kinda like the 13th floor in a hotel. It's there, but you don't really know it's there. And so anybody in sales knows if you have to explain the product or service you are selling to a prospect. It can create the fun factor, fear, uncertainty and doubt.
[00:18:37] And when you come up against the fun factor the easy answer is always no, a confused mind says no, and I get it. I completely understand. So the inspiration was really twofold. First I wanted to promote the concept of the PEO and the PEO industry. I'm really passionate.
[00:18:57]About what I do. And I've always believed in the value [00:19:00] proposition. And now with the pandemic the impact that's had on small businesses and their employees with layoffs and furloughs and new legislation and PPP loans and COVID risk and safety and keeping their employees safe. The PEO as never been able to provide more value than it does right now.
[00:19:27]I want to get more exposure for the industry. And then the second thing is I wanted to try to attempt to simplify again, a pretty complex concept. The PEO solution would be pretty intimidating. If you're not introduced to the SU solution before, there's a lot of moving parts again, in payroll and medical benefits and human resources, workers' compensation, insurance, 401k, ancillary benefits are things like dental, vision, disability, insurance, employment practices, liability [00:20:00] insurance, employee assistance, program, time and attendance, applicant tracking.
[00:20:06]Tax credits like the work opportunity tax credit or the FICA tip tax credit. And then you have this new technology. And by the way, payroll is being processed under the PEO federal ID number. So there's a lot to unpack in a 60 minute business meeting. It's a lot to unpack. So I thought it would make sense to, to simplify, to try to simplify and focus on.
[00:20:33] Not just what a PEO is, but really more importantly what it does for a business, because nobody is going to want to partner with the PEO because of what it is. Nobody cares, like most people don't care but they're going to partner with a PO because of what it can do for their employees and their business.
[00:20:53] And it's I came up with the idea for the ABCs. A is for assets. Are your people, how do you [00:21:00] attract and engage and retain compete for top talent? B is again for the benefit strategy and cost containment and driving participation with your employees and the C again for covering everything, your assets and compliance.
[00:21:15]No employment practices, liability insurance. So things like wrongful termination, harassment, discrimination, want to make sure that your business is insulated from employee lawsuits, workers' compensation claims, and then that whole alphabet soup, government alphabet soup of ACA and the department of labor and Cobra and department of Homeland security and EEOC and FMLA and FLS a and OSHA.
[00:21:44] So you have all that compliance. And so I just wanted to try to simplify a lot of that and then really just say, Hey, look, this is the risks that are out there, and this is why the PEO can help insulate you from these piston. From that minefield you [00:22:00] outlined the ABCs. Let's dive in a little bit deeper into that.
[00:22:04] What can the reader specifically expect from the book, if you've ever seen the cover? It's a really easy read and that was my design. I wanted people to actually read and finish the book. I've no doubt that somebody could have, or will write, a longer book that would be more in depth and do a deeper dive on some of the nuances of PEOs.
[00:22:29]But I'm not convinced anyway, who wants to read something like that, except maybe me. And that, it's really not the audience that I was going after with the book. The book is really written with an audience of business owners or CFOs or controllers or HR managers.
[00:22:44] That's really the audience, but in terms of what the reader can expect. Yeah. I hope they learn something. I think that should be the goal of any book. If you're going to invest your money and time reading a book. I know my expectation is that I learned something. And hopefully you can [00:23:00] apply that knowledge to, to improve myself and my circumstances.
[00:23:05] I want that. In addition to the book, you have a small series of YouTube videos about the ins and outs of POS. What was the sort behind creating these videos? Yeah as I mentioned before whenever there's destruction there's always an equal. Or greater opportunity to create always sometimes it's hard to find, but if you look, you're going to find it.
[00:23:30] And so the thought behind putting together videos really came to me in the fog of war. So to speak of the pandemic in mid-March we were sent home by any reasonable expectation, we're going to be here awhile. And not surprisingly here we are a year later. And we're still here remote. So is, it was during the early months of working a hundred percent remote that I wanted to create something new anything really I just wanted to keep moving [00:24:00] forward, forward momentum.
[00:24:01]And so the thought was for me to keep my sanity with everything that was going on in the world I'll tell you on me. I had a hard time mentally early on with the pandemic and it was. It was shocking. And so for me is a bit of a coping mechanism. If I could just be honest with you. But again, the other part of the impetus to do those was I just saw an opportunity to use a new medium that I had not used before in the past to grow my business and help promote.
[00:24:32]The book. So I sort like to do more of this type of communication. I'm currently working on a new strategic partnership for an interview series with business owners and executives to talk about business insights, perspectives, best practices, building company culture that kind of be an extension of the book, but with different voices.
[00:24:54]And with people that know a lot more than I do to be honest. But yeah, that's how I came to the [00:25:00] idea of In the videos that aren't on YouTube. Mike, I want to dive a little bit more into what you mentioned about the pandemic, right? We have all seen initially an economic crisis.
[00:25:10] It became a mental health crisis for for many of us. And if you look at the PO industry a little more holistically from a macro economic perspective, what are you predicting will be the longterm effects that we will see as a pure industry from the COVID-19 crisis. Yeah. So I suppose the answer to that depends on what you think the future of COVID looks like.
[00:25:38] I don't know. I don't think anybody knows, but it seems. Probable that it's not going to disappear and I would love to be wrong. And I hope I'm wrong. But if you agree with the premise that this is in some way our new normal I think PEOs are uniquely positioned to support small [00:26:00] businesses moving forward and helping them navigate this type of new landscape.
[00:26:05]To that point, I think, it's reasonable consider that the PEOs will look to reevaluate how they underwrite and price risk. And he has to remember the PEO is providing the business with insulation, from workforce liability and volatility. And so things like medical benefits, workers' compensation insurance are likely to be impacted, not just by.
[00:26:34] COVID claims and utilization of those policies, but the other casualty, which I think hasn't made landfall yet. But it's going to is going to be interest rates. As rates are pegged at zero again that impacts the reserves of insurance carriers, insurance companies. They have, they're sitting on billions and reserves.
[00:26:59] And [00:27:00] so if insurance companies aren't getting the yield on their reserves that they would expect to, or anticipate to, or forecast that's going to force insurance premiums to, to increase. So I think PO underwriting will become a bit more restrictive. And insurance premiums may become a bit more prohibitive, both for medical and workers' compensation.
[00:27:25] Again I would love to be wrong. But I think ultimately that will create more demand for the PEO solution to help businesses better contain those costs. If they do start to feel pressure from low interest rates and from claims. Typically with every crisis there's opportunity. So what kind of trends do you see in the PR industry that might benefit PEOs and what are current trends that that you think PEO owners, leaders should really pay attention to any [00:28:00] time?
[00:28:00] There is a, as you had mentioned, there's anytime there's a crisis, there's an opportunity. And we saw that in 2008 and that was really a turning point and the growth trajectory for the PEO industry. If you look at the numbers, they experienced this rapid accelerated growth as an industry since that time.
[00:28:24] And I think that is going to be accelerated. Again with this type of crisis, the one thing that, again, my background in an insurance something called tail risk. And so insurance carriers underwrite for risk today. They hope to understand the tail risk and what that's going to look like in the future with future claims.
[00:28:52]And right now I would say that the tail risk with this whole crisis is not in significant. And [00:29:00] particularly with again, worker's compensation and potential for COVID claims and also medical insurance and the potential for COVID claims now but also ongoing. And so there's definitely a meaningful tail risk associated with those types of policies.
[00:29:18] And compounded with low interest rates. I, again, I have to suspect that is going to have a meaningful impact on pricing for those types of policies. And to that point PEOs because of the partnerships that they have with their carriers I think are going to have to evaluate. Options, I've always believed that the person with the most options wins now, you see it all the time in sports and in chess and different games and certainly in business.
[00:29:53] You mentioned innovation. I want to dive deeper into that. What are some ways but that's from a [00:30:00] technology from a service perspective, right? Where you see real innovation in the market that POS could leverage and audit to differentiate and win. Yeah. So innovation is critical.
[00:30:14] I think that's pretty self-evident and actually timing's everything. But as we've seen this past year, you don't always have a choice when it comes to innovation. Sometimes necessity is what creates innovation, some other innovation. And we've certainly seeing that, restaurants are a great example.
[00:30:31]If you could only offer indoor dining this past year you were in trouble, especially depending on the state where your business was. But if you can innovate. An offer outdoor dining and maybe take out and delivery. Now you have four options to generate revenue and actually have a restaurant client that did just that, out of necessity they found a way to innovate weather the storm.
[00:30:57]And then now in a really good position it could have [00:31:00] very easily allow their livelihoods to be destroyed and then not found a way to, to create so. It's kinda just a recent anecdotal example in the restaurant industry. But if you look around and there aren't many companies that have withstood the test of time, small businesses, really.
[00:31:22]And if they have, they're probably not doing the same thing they're doing 20, 25 years ago, or they're certainly not doing it the same way. They used to do it. You look at ADP and Paychex. They began just as, as payroll processing companies, and now they're transformed into these massive human resource and technology companies that provide many additional services and solutions.
[00:31:52]Innovation is about identifying opportunities and. And creating efficient solutions. It's really the only way a small [00:32:00] business can survive right now. And bigger companies have better buying power, better economies of scale, more resources. But they're not always as, as innovative or they can be slow to innovate.
[00:32:12]And so there's always an opportunity for an agile small business exploited to market niche. Homey is a great example of that in the in the real estate industry they disrupted the home buying and selling process. Robin hood is, or at least was a disruptor in the the financial services industry.
[00:32:33] But yeah, so I think, and again, I don't have the answer for what PEOs are gonna look like and how they continue to innovate. But I do know that they're going to. And that they have. And a lot of that is going to be driven by circumstance and Adam out of necessity. But I think we're going to continue to see them offer additional solutions and services to continue to increase their value proposition and just [00:33:00] find ways to help small businesses, better contain costs.
[00:33:07]And again, I don't know exactly what that's going to look like. But I know that's going to have to happen because that is going to be a driving force in it, and really a major headwind for small businesses. Moving forward and always has been, but I think it's going to be accelerated with the pandemic.
[00:33:25] Thanks for listening to today's episode, don't forget to subscribe and visit us @ peo-podcast.com to learn more. I'm Andreas Deptolla and this is The PEO Podcast. We'll see you next time.