Automatic Data Processing, Inc. (ADP) Earnings Call Transcript & Summary

Yes, sure. Lots of scales and advantage there. What is the rough size of the overall quota-carrying sales force on that? And just give us a sense of how rate at which it's grown over time.

Yes. So right now, if you look at quota carriers, people that are selling our products, we are over 8,000 quota carriers across the globe. We grow that somewhere in, call it, the single digits each year. I think what's important to point out, very important, because my guess is you'll ask me at some point what's important to me in growing this thing, is that balance of headcount and productivity. So while we grow with headcount, the total addressable market for ADP given where we play is significant. To be able to cover that market with headcount is important. So when I go into planning, while we have 8,000 quota carriers, grow it at single-digit rate, very important in that calculation is making sure we have the right level of productivity. And productivity is increasing over time as well. I talked about our marketing organization as well. And then, of course, we have a channel focus, a big component for us is being able to sell through channels. So more specifically, when I say channels, think about CPAs, brokers, financial advisers, franchises, ERPs, they are a critical channel for us. So we have an organization that paces out there to make sure we continue to drive penetration. Just as a point of reference for the team, if you look at our downmarket, 75% of the units that we sell will be with a channel, a CPA bank; 25% are mid-market; 50% in our enterprise space. So that is a big focus of ours. Over and above our quota carriers call it going, well, it's not door-to-door anymore, but our quota carrier is selling direct to businesses.

Okay. That's helpful on the go to market. What's the range of sales cycles as you go from low end to upper end?

24 hours, the lower end of the market. So we have -- we've really advanced our model over time. So we are in a -- today, we could go out to a buyer and have them started in the downmarket in 24 hours. At the upper end of the market, again, we get into very complex deals that have multi-country. Those could be upwards of 18 to 24 months. On average, it's somewhere less than 12 months, but it depends on the size, and of course, complexity there as well.

Sure, sure. Okay. Now you've been leading the global sales organization for about 1.5 years. Maybe talk about some of your top priorities and focus areas.

I just alluded to it before. If you said to me, Joe, what is -- in the next 3 to 5 years, assuming you make it, what is the most important thing for you in this organization? It's driving productivity. Now that's not a profound thought. I wouldn't be the first Head of Sales in any company to get up here and say how important productivity is, but I want to kind of elaborate why I believe it's more important than ever. Number one, the buying dynamic has changed significantly. So if you think just about a traditional sales funnel, people have more access to information. They have access to pricing. They have access to demos. They have access to more information than they ever have. Why is that different because now you're meeting the buyer at a different point in their journey. Instead of creating the awareness, you're coming in when they're in consideration. You have to be able to react to that sales process, understand what they've been through and be able to meet them in that journey and help them, number one. Number two, listen, there's more competitors than there were before. Good, better and different, there's different experiences that a buyer goes through. Some cases, elevate it, in some cases, may deteriorate it, but we expect our sellers to be better in that process. So when I think about all that I want to accomplish, it's continue to grow our headcount in that single-digit rate and single-digit rate, but I really want to expand on our productivity in a meaningful way to make our people truly the best across all segments and making sure that we drive the productivity. And that productivity is meant to drive the best buying experience you've ever had with ADP.

How do you do that? So how do you help them?

Yes. So there's a multitude of ways on how you do that. First, the most basic is your new hire training program. So one of the things that I'm excited about is, we have now fully expanded our new hire training program. So maybe a point of compare, there was a world a while ago where you come in as a new hire, you go through -- and by the way, the new hire training I should caveat. New hire training is different by segment. So maybe we'll get into how we -- where we hire our people. But let's start in the SMB in this down market space. There was a world where you come in. We train you for a couple of weeks. We put you out on the street. You work with your leader, and that's your on-the-job training. That training was highly effective. But with all the things that I just shared with you, multiple competitors, so you need to understand multiple products. You need to understand how to objection handling in a bigger way than before. People have more access to information than they've ever had. So you need to understand all that information. So the first step is making sure, and we are, we've rolled out a really robust new hire training program. That new hire training program will be here for 20 minutes going through all the detail, but starts with, you come in, you go through a couple of weeks, you go out, you come back again, you go out, you come back again. In addition to that, driving productivity is critically important, making sure our leaders can coach and make our people better. When you have 8,000 sellers across the globe, upwards of 1,500 leaders or whatever the number might be, these are -- having that -- making sure that people are effective at coaching, our people is really important, the leaders will go through that training as well. The next step there, Bryan, which is critically important is, okay, we've trained you. Are we giving you the tools? So we've given you the knowledge. We have given you the coaching, and are we giving you the tools to meet those buyers in their journey? The tools are critically important to helping our people gain access, making sure that we have the information available that's important to the client. We're serving up to the client, what's important to them. Those would be kind of the 3 examples I would give in truly driving sales productivity.

Okay. That's helpful. Let's dig into the tools aspect. And maybe just more broadly, the tech -- the usage of tech within sales and marketing, within the go-to-market, maybe any examples that you can share as it relates to technology playing a larger part in the sales process?

Yes. There's a multitude. So we probably have -- what I would say first is we are often giving tons of complements on the tech stack that we have for our people. It's truly about, when you have that many sellers making our people smarter, giving them a 360-degree view of the client. We have 1 million clients, serving up when that client is ready to buy something different because they've grown in size. They've gone backwards in size. So tools to give them that visibility, tools to cadence management. How often do you touch a prospect or a client? What's the right level of touches? How do you coordinate that across multiple business units? AI, leveraging AI for coachings. So our calls are recorded, then we can pull those recordings, and there's AI that actually monitors all the calls that will say, hey, here is a training point relative to X, Y or Z to truly make our people better. Tools are critically important for us, being able to create videos for our clients versus just calls. There's a significant amount of tools that we continue to invest in, and a big component. My belief is we can invest all we want in the tools, but making sure that we're training on those tools, we're driving utilization through the leaders is the most important point.

Okay. It wouldn't be a tech event without digging into AI a little bit here. So just Generative AI, are there ways in which you can leverage that within the process right now?

Undoubtedly. So I've actually created a team for, that works with -- directly for me that is serving up use cases on a regular basis to make sure that we are staying in front of this on where Generative AI could play a big, big role. I think we're -- I wouldn't say it's early because this is moving fast. I think there's a lot to learn. But if you said to me, Joe, where could it play the biggest role for you? It's in our tools, making sure that through that sales process, there's something that can help them. Basic stuff. Just listen to a sales call. Could it recap an e-mail for you to the prospective buyer. There's a significant role it could play. What I want to make sure and what we're doing is making sure we're moving fast. Staying in front of this, serving up the use cases, what works now, how do we leverage and put out what we can now. And then I think there's a maturity cycle of Generative AI that we want to see take place. But I want to move fast here and we're staying up on a bit.

Okay. Let's talk a little bit about the reps. So can you talk a bit about where you're sourcing reps from? And does it vary based on the market that they're selling in?

Yes, of course. So the simplest way to think about it is, again, because we're big, think about downmarket, mid-market, upmarket. And then you have PEO, you have international. Think about a feeder pool that kind of bleeds through. So you start at the end of the -- you started down market, it's not uncommon for us to hire out of college. We do a lot of college campus recruiting, get people. When candidly, they haven't learned much on selling and we could teach them bottoms up on how to sell, that feeder pool is significant to feed mid-market, mid-market feeds enterprise, so on and so forth. That being said, I also, excuse me, I'm a big believer in I want constant outside-in perspective. So making sure that we are hiring in the mid-market in our enterprise space, making sure that we're going to market to get sellers that have experience that have a different perspective on whether it'd be a competitor or other products, whatever it might be, just have a different perspective where they can bring value to the organization to constantly pulse check us. Are we on the right things? Is there something we need to evolve? So I would say it's kind of a combination of the 2. Probably majority of feeder pool from down market up.

Okay. And when you look at that upper end, you're happy to take HCM, comp, training, elsewhere, you're happy to take other enterprise sales in tech? Are you looking for a diverse mix? Or do you lean more toward the HCM?

I will take a diverse mix. I'd probably prefer HCM, and I'll tell you why. I'm biased. We are the biggest. We are the best. I think we teach the MBA course in sales at ADP. I love teaching those foundational principles of sales in ADP. That's tough to learn sometimes, bring that HCM experience in from somewhere else, fortify whatever skills they may not have. I think that's the winning, winning match. But trust me, we've had plenty of people that have come from outside HCM that just understand the sales process, understand the value to the buyer and whatever it is they're selling, we'll take them. I'm not objective to having those people as well.

Okay. Why don't we pause here and see if the audience has any questions. No? I got a point. Cool. Okay, well keep going. Well, let's shift to retention. So can you talk about sales force retention? How rates have trended there in recent years and the means to improving those?

Yes. So we were not shielded from, call it, the Great Resignation. So our turnover rates were significant as well. And we've seen that normalization back to -- I would tell you, in some of our business units, we are better than pre-pandemic levels, which is really, really great for us, a significant part -- it applies to any organization. But when I think about the size and scale of ADP and our growth, a huge lever for us is tenure. And back to your question around like how much do you -- how many -- what is your hire rate in the year? And it's single digits. And we had a great hiring year this year, which puts us in a great position in terms of strength and tenure. But when I look at our organization now, I would say we've normalized at my level. Looking at some of the business units, we're better than pre-pandemic levels and in a really, really good spot. And I think part of that, Bryan, which is important, I wake up every day, realizing that more than ever, our sellers have a choice of where they want to work. And it's not that, that wasn't the case before, but it was limited. They have a stay of a choice now. And part of it is making sure that we continue to fix silos, fix friction, make sure that our people, when they come in every day, any salesperson -- what excites a salesperson, believe it or not, is not the money, it's visibility to the opportunity, a pathway to the opportunity, limited friction, the tools, the incentives, the compensation to allow them to get there. That is a core focus to us. So will I -- I appreciate that there's probably been normalization, if you will, across the board in terms of turnover, we -- I am, with my leadership team, really focused on making sure that the only choice they have is here. And it's not because we're just the biggest and the best, because they get everything they need to truly win in the market.

Okay. And obviously, a big focus on productivity. Can you just give us a sense on how you're measuring that sales rep productivity? And in general, how long does it take for a new rep to get to a full level of productivity?

Yes. So we have a very important KPI we called ASP, average sales productivity. At the end of the day, for me, it -- it's not for me. The math says lower end of the market, it's quicker to get to the productivity. You can get there in a year. The further you go up, those productivity, it becomes a lot harder to get there over time. And there's the levers in each of those markets is a little bit different in helping them drive the productivity. By the way, the productivity at the upper end of the market is also a function of what is the total addressable market that we have? How many people do we need? Versus down market, we have the opportunity to really continue adding headcount in our small market, retirement, insurance. We will add headcount in our upper end, but you're not going to add at the rate you will downmarket just given the total addressable market. So your lever-up here in terms of ASP becomes really important in helping people get there.

Okay. And now, you mentioned, what, 50% new logo generally is each year? Talk about the client account relationship, the upsell motion. And have there been any changes in that process at all? Maybe just give us a sense on how you target upsell opportunities.

Yes. So maybe give you my perspective on both in terms of how I lead my organization, which is, what's important to me, is we do both, but you can't do one in lieu of the other. We have to continue to grow market share. So anything you see from me, it's about growing market share. And that is not in lieu of. You have to continue to drive clients. You have to continue to have market share in a really big, meaningful way. On the client piece, continuing to grow that there hasn't been a significant change. So let's think about it this way. We have our digital sales organization, which is our inside salespeople, who we face off with the client base, who we arm with the right products and the tools to serve up those products at the right time to those clients. It hasn't changed much. Now if there's some -- if there's new regulation that comes out that we believe can help our clients, that goes to the top of the priority list is to make sure we get that out there. Other than that, we're pretty consistent. And again, as our client base grows, we grow that group of people as well. What I don't want to do is over index that people. I want to make sure it grows with the client base, and we stay just as focused on growing market share.

Okay. Last call. Any questions from the audience? We've time for one about one more. All right. So we're going to close that on the regulatory environment. So you just mentioned that. So you spent time in Retirement Services. Can you just talk about the current opportunity for ADP there? And what do you see happening in the U.S. regulatory environment? Maybe how do you see that business performing in the coming years?

Retirement Services is -- again, I'm biased. I've ran -- I was Head of Sales and I ran the business, but it is an outstanding business for us. Candidly, the HCM space as a whole, whenever there's regulatory change or there's any type of legislative change, that becomes an opportunity for us. So in this case, in Retirement Services, you've got SECURE Act 2.0. We've had state mandates. What ADP is known for is mobilizing behind the opportunity in a really big way. So as soon as SECURE Act 2.0 was approved or passed, we'd start mobilizing around the opportunity. We did really well through the state mandate so far, continue to grow our business. We'll continue to do that. As far as what's upcoming, I don't know. Right now, the focus is on SECURE Act 2.0. Our team is ready to go. And that continues to be a great business for us.

I think we're going to end it on that. So Joe, I appreciate all the color here. We've covered a lot of ground. Thank you again.

Thanks, Bryan. Thank you to everyone for hanging on there. I appreciate it.

Thank you.