With all the different services – stock plan temp and permanent staffing, compensation-related assistance/outsourcing, and equity compensation project help – that Equity Point represents, the predominant focus of our prospect calls continues to be stock plan outsourcing. Among our smaller clients, we are certainly evangelists of the fluid economy. Our mission is to move these companies away from trying to manage complex stock plan needs internally with a hodgepodge of people from around the company who have no idea what they are doing, and who are not really interested in doing it anyway (and it happens this way far more often than you can believe). Our message is, if it is not being handled internally by someone with good equity compensation knowledge and experience, then it should be managed externally by a person or group with those attributes.
Now, however, we are increasingly talking to a different type of prospect, and that is the company that is already outsourcing, but interested in looking at alternatives. “Why?”, you ask. Here are the top three reasons:
Changes at Company – Whether it is a change in what department owns the function (e.g. Legal, Finance, etc.), a change in personnel, or, on a broader level, a change at the company like an impending IPO, merger, or other type of corporate action or reorganization, the introduction of different sets of eyes and owners will often lead to fresh perspectives on what constitutes a good outsourcing relationship. Doing this type of analysis as a company is navigating change actually makes a lot of sense. Whoever the internal stakeholders are (and whatever their responsibilities may become as part of a bigger change), they are now going to be holding the bag, so they should be sure they have the right team behind them before moving forward. Given a big enough change, we usually also suggest that the company look at, as another alternative, bringing the function back in-house as well. And, in almost all cases (see below for a possible exception), the current vendor should be given every chance if it gets to the point of a full-blown vendor selection process.
Changes in Scope – Sometimes related to the above. And to say “changes in scope” implies that the changes are well-defined, which they often are not. This is often just a nagging belief that there is more that they should be getting, including equity accounting, participant service, or some other type of improved or expanded service. The grass is always greener crowd (and indeed, sometimes it is). Definitely not unreasonable to periodically assess whether other vendors may have superior people, offerings, processes, technologies, or methods. One thing we ask our prospects to consider is that maybe their current vendor is just fine for what they are doing, and they should actually consider other specialized vendors (or individuals) to handle some of the areas on their wish list of expanded services.
Irreconcilable Differences – I use the language of divorce because that is what these conversations feel like. “We used to be so happy…they used to send me such sweet notes every time they finished settling my SARs, but now, the PASSION and ATTENTION TO DETAIL and RESPONSIVENESS and all those reasons I gave them that silly testimonial they still have on their website…it is just gone!” Sometimes it is a slow burn, sometimes the result of a recent, major mistake. More often than not, it will start when the prospect starts seeing a change in their team. Maybe a move to a new account manager, when the old one was always steady and reliable. In the end, outsourcing IS like a marriage in that this is a business about people and relationships, and attentiveness. And when they’ve lost that loving feeling, they will look elsewhere for it.
In part II, we will cover how to make sure to make it work the second time around. In the meantime, take our refresher course on Selecting an Outsourcing Provider & Differences in Services.