Road Report: ADP's 2022 Analyst Day
September 14th, 2022
Late last week, I had the opportunity to spend a day with the senior leaders at ADP in their Innovation Lab in NYC. It was a flawlessly run event and I appreciated the opportunity to both listen to execs and actively participate in conversations on how to improve their products. This blog is a quick round-up of my takeaways from the event. You can also check out the Twitter thread at #adpaday.
At a high level, here are my key takeaways from the day:
- Consistent revenue growth: ADP grew 10% in revenue in FY2022 to $16.5 billion and experienced a 15% increase in new business bookings, growing $1.7 billion last year. The company is just short of 1 million clients, reporting 990,000 clients as of the end of FY22.
- Continued focus on comprehensive and unique HCM data set: A highlight of the session was ADP’s announcement of its new National Employment Report, which seeks not to be a forecast of the Bureau of Labor Statistics (BLS) report, but instead an independent estimate of employment. This report is being augmented by a 2,500 US adult worker survey of sentiment on things like engagement, connection, resilience, etc.
- Growth – though not as much as expected – in HCM platforms: ADP’s Workforce Now HCM platform for mid-market customers continues to perform well whereas its Next Gen HCM, targeted at larger, global customers, got off to a slower start than ADP hoped for, but is fully underway now.
- Increased focus on EX: Like many others in the space, ADP is focusing heavily on employee experience and engagement. They are making additional investments into their employee experience offering and launched an employee voice survey offering in July 2022.
Consistent revenue growth
Like many other HR tech vendors, ADP experienced strong growth last year – 10% for its FY22. The revenue projection for this fiscal year is a little lower at 7-9%, but, as CEO Carlos Rodriguez pointed out, it still requires them to add $1.2-$1.5 billion in revenue this year. These slightly lowered expectations are aligned with what we've heard from other HR tech vendors this year.
An overview of ADP's numbers that helped it reach that $16.5 billion in FY22.
- HR & Benefits: 39 million employee HR records, 36K clients, 9.9 m benefits participants, 2.4 million employees enrolled in retirements, $100B AUM
- Workforce management: 14 million employees served, 110,000 WFM clients, 4 billion time punches per year
- Talent acquisition: 38 million applications per year, 22,000 ADP recruiting solution clients, 2.4 million requisitions per year, 1.7 million hires, 10.6 million background checks per year
- Talent management: 29 million learning courses completed per year, 9.4 million competencies evaluated in performance reviews per year, 5.4 million evaluation goals per year, 5.7 million StandOut check-ins per year (up 10% YOY), 848K StandOut Engagement Pulse survey responses per year
- ADP Marketplace: 800 apps globally, 2B API calls per year
When ADP leaders talked about how they will meet these hefty revenue goals, they focused on the historical and continued innovation of the company (see Figure 1) and how their access to significant data insights and their long experience in the market enables them to respond to customers' needs (see Figure 2).
Figure 1: Overview of ADP's history of innovation | Source: ADP, 2022.
Figure 2: Overview of how ADP delivers value to customers | Source: ADP, 2022.
While I do not doubt the strategic strengths outlined by the ADP leadership team, I would have appreciated a clearer strategic roadmap for the company's growth path to becoming a $20 billion company with more than 1 million customers. Beyond a discussion of the growth path of ADP's Next Gen HCM (discussed more below), we didn't get a lot of specific insight into how ADP plans to grow. I would have loved to hear more and specifically how they plan to turn all of their data into powerful customer-transforming insights.
Continued focus on their comprehensive and unique HCM data set
ADP likes to talk about its large and differentiated HCM data set for good reason. It has nearly 1 million customers, 39 million workers globally, and pays 1 in 6 workers in the United States. This unique payroll-based dataset, combined with global worker surveys and psychometric data, enables ADP to publish important labor market information to the broader public while also providing clients with insights that can improve their understanding of their workforce and delivering higher-quality service.
Focusing on the former point, Nela Richardson, Ph.D., ADP’s chief economist, announced its new National Employment Report (NER), based on its anonymized payroll data and produced by ADP Research Institute in collaboration with the Stanford Digital Economy Labs.
As shown in Figure 3, the new report is designed to be an estimate on its own, not a forecast of the BLS’s consumer employment statistics survey. It will share weekly data for the preceding month, which will allow for a previously undisclosed level of granularity. Further, historical jobs data since 2010 is now available on ADP’s website.
Figure 3: Overview of the new National Employment Report | Source: ADP, 2022.
Interestingly, the new report will also include pay data, specifically:
“The report also presents pay trends over the past 12 months based on a matched sample of almost 10 million employees. Results on jobs are broken out by industry, U.S. census region, and establishment size. Also included is the Pay Insights report which captures median annual pay growth by industry, business establishment size, U.S. region, gender and age.”
With this insight, ADP can now share information such as that shown in Figure 4, which shows that job changers have seen a pay increase of 7.6% more than job stayers – reinforcing that many employees that changed jobs in the last year have done better than those who stayed.
Figure 4: Example of Pay Insights from ADP | Source: ADP, 2022.
Moving on from payroll-based data, Marcus Buckingham talked about the survey-driven work his team is doing around employee perceptions, and specifically four “thermometers” to measure the following:
- Engagement – Measures purpose, excellence, support, and future for “we” and “me”
- Workplace Resilience – Measures resilience for self, team leaders, and senior leaders
- HRXPS (HR Xperience Score) – Measures experience with HR, by measures % value promoting trust, growth, understanding and value, safety, and provision of needs
- Connection XPS (Connection XPerience Score) – Measure of inclusion by looking at extent to which people feel seen, heard, and valued
Monthly benchmarks of this information will be shared in ADP’s Today at Work report. All the information that report will provide is highlighted in Figure 5.
Figure 5: Overview of data in ADP’s Today at Work Report | Source: ADP, 2022.
Beyond the above, ADP is focused on leveraging all that data to support their clients’ needs. Specifically, they cited the following data, which mostly highlights their increasing focus on skills:
- 933K companies in their database
- 135K active executives and managers using People Data and insights via Mobile and web
- 90 million unique employees paid over last 10 years
- 64 million resumes powering skills graph
- 39 million job postings powering skills graph
- 30 million employee records powering skills graph
- 7,102 unique jobs
This new report, with all of its juicy, real-time data, is really exciting and represents a leap ahead in terms of what our industry can say about people using objective data. I love that ADP is making so many of these data public and anticipate that this report will continue to build their renown for high quality data that people can trust.
As far as the skills data, I would have like to have learned a lot more about how ADP is managing those data and how they will be enabling customers to use a skills-based approach in the future. The amount of data available to ADP is clearly impressive, but we need more details on how it will be leveraged.
A lot of focus – though not as much growth as expected – in HCM platforms
ADP has two HCM products: Workforce Now (mid-market customers) and Next Gen HCM (large global customers).
Figure 6: Overview of ADP’s HCM solutions | Source: ADP, 2022.
ADP has made some improvements to Workforce Now, which include:
- Accelerated implementation time and time to value (as soon as 8 weeks)
- Reimagined user journeys
- Native, seamless payroll and workforce management
- Re-platformed tech stack
The solution has 80K customers and 2.5 million daily active users. ADP had one customer from a financial services firm come speak to his experiences. He specifically called out the much faster time to deployment (he was still deploying his company’s previous solution 4.5 years later to a tune of $750K per year in consulting costs) and his overall satisfaction with the solution.
Next Gen HCM is a much newer solution, which is one of ADP’s big bets. It has taken longer to come to fruition, due to greater tech and implantation complexity than what was planned for, according to Don Weinstein, Corporate VP, Global Product and Technology. The product has the following features:
- Modern tech stack
- AI/ML capabilities "to deliver more intelligent and personalized experiences”
- Integrated ecosystem of mini apps
- Low-code development platform
- Public-cloud native (AWS)
The solution has 25 clients live, 20 clients in implementation, and 9 countries with employees active. ADP brought in a roughly 4,000 employee food services company that has high levels of seasonal hiring. The customer spoke to how well the solution was able to match actual contracts to job requisitions and to enable folks to use self-service easily. He specifically called out that “ADP made us feel special” and “helps them see around the curve to what is coming” through its data insights.
ADP wisely continues to invest in getting the Next Gen HCM product right. As and when they get that right, they will turn to driving adoption. Their largest customer – besides themselves at 60,000 employees – is a 25,000 employee global organization. By going slow now, they will be able to go faster later.
Increased focus on Employee Experience
ADP is focusing increasingly on employee experience by defining it by worker and workplace experience, as shown in Figure 7.
Figure 7: Overview of ADP’s approach to employee experience | Source: ADP, 2022.
The area that interested me the most was, as many of you can expect, the focus on creating an inclusive working environment. As shown in Figure 8, ADP has created an approach for their customers to actively work on DEIB issues, including benchmarking and pay equity analysis.
Figure 8: Overview of ADP’s approach to DEIB| Source: ADP, 2022.
Given ADP’s focus on payroll, their creation of a pay equity analysis tool is especially critical (Figure 9). This allows clients to conduct pay equity analysis at no additional cost. Across their roughly 1,000 customers using the solution, ADP has been able to show those customers have made $1.1 billion in pay adjustments to address inequity.
Figure 9: Overview of ADP’s Pay Equity Storyboard | Source: ADP, 2022.
Finally, ADP is pairing this Pay Equity Storyboard with its inclusion survey (see Figure 10), which is part of its new Voice of the Employee offering (launched this past July). The intention is to pair an objective data (what is actually happening) approach with sentiment data (how employees feel) to gain a better level of insight into DEIB. The Voice of the Employee survey was adapted from ADP’s Return to Office toolkit and represents its first foray into the employee engagement space. Launched in July 2022, we look forward to seeing this solution develop as it gains more traction and capabilities.
Figure 10: Overview of ADP’s inclusion survey | Source: ADP, 2022.
As I’ve said before, one of the most critical steps in enabling DEIB analytics is normalizing them. Due to its sheer breadth of customers, the creation of these DEIB tools – and making them easily available to customers – is a magnificent forcing function for the market. It will enable leaders to easily understand what is happening with their workforces – and when they don’t conduct that analysis, it opens them up to the question of, “Why not?”. I strongly applaud ADP for this robust combination of offerings and look forward to seeing it become even more nuanced and powerful in the future.
ADP has made some significant investments in UX, employee experience, and its Next Gen HCM. It continues to leverage its strength of data and experience to help it drive innovation in the market. We look forward to hearing more about its data analytics offerings and how it will further its DEIB analytics capabilities in particular.