Tom GolisanoA broad-based change to Paychex's product bundling and pricing is on the way over the next week, founder and chairman Tom Golisano said in this morning's Webast of results for the first quarter ended August 31. And although results were better than expected, Golisano outlined a plan that he said is necessary to counter the deterioration of sales close rates, to make the company more competitive than it has been in the last few years and to look into international expansion.

"The bundling of our offering is going to be modified and the price point will likely be modified," Golisano said. "I think they market is going to be pleased." Without mentioning former CEO Jon Judge, who retired in July, Golisano criticized the company's pricing, sales compensation and aggressiveness over the last several years. He listed changes and said he would be more involved in the company than he has been, although not as much as when he was CEO.

Net income for the quarter just ended was $131.9 million, up 7 percent compared to $123.7 million a year earlier. Paychex reported $518.3 million in first-quarter revenue, a 4-percent increase from $500.2 million from last year's corresponding period. Payroll service revenue of $360.7 million was 2 percent higher than $354.4 million a year earlier. But Golisano said performance had stagnated and the economy was only partly to blame.

Golisano faulted the compensation plans for sales representatives for a significant deterioration in the sales close rate. The company's efforts to retain sales people put too much emphasis on base pay. "Our compensation plans have evolved into not being incentive enough for our sales reps and sales management," he said.

The chairman also said Paychex needed to do a better job of managing territories and quotas. Without pointing to specific problems, he commented, "We have allowed some follies to go on far too long." Modifications will also be made to make sales training more in line with current market practices.

Golisano reported the company introduced a new CPA program called "Explorer" about five months ago and said the spoke about the efforts of the company's national sales manager, Del Humenik, as "doing everything he can to do reactivate it [the CPA effort]." About two thirds of Paychex payroll customers come via CPA referrals.

Paychex has also not done what it should to grow outside the United States. "This company has been pretty dormant in trying to seek out opportunities in other parts of the world," according to Golisano. "Where there are governments that are very intrusive in the payroll process, there have to be opportunities for us."

Last modified on Sunday, 02 June 2013
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