When a global payroll vendor boasts that it has one of the highest customer retention rates in the industry, what does that tell you? That the quality of its service is so good its customers would never dream of going anywhere else? Or that a sizeable bunch of its customers may be dissatisfied, but for one reason or another haven’t been able to escape its clutches? Most people would assume the first—but both explanations could be true.
In most industries, customer retention and customer satisfaction are interlinked, and it’s logical to draw assumptions about one from the other. If I go to a dentist, get sensible advice, feel comfortable with the facilities, and generally feel my teeth are in safe hands (so to speak), then I’ll keep going back for years. If I find I’m trusting my dental hygiene to a monosyllabic amateur with fat fingers and bad breath, I’ll move elsewhere. There’s a simple link between repeat business and satisfaction. The same logic can be used for making decisions on what car insurance to purchase, dry cleaner to use, or transatlantic airline to fly.
Of course, there are some exceptions. I’ve been using the same cable TV provider for more than a decade, and I would happily part company with it tomorrow. I‘ve spent more time screaming at its automated voice response system than at every other utility and service provider put together. But where I live, I have no real choice of provider.
In some respects, the global payroll market is a similar exception to the rule. The issue here isn’t typically about lack of competition—although companies with very complex or unusual requirements may find their vendor choices are limited—but has more to do with the unique nature of the market.
To begin with, retention isn’t a binary measure. Let’s say I sign up with a global provider for 10 countries and one year in, with just five countries implemented, I realize I’ve made a big mistake. Each implementation took twice as long as planned; initial error rates were way too high; the customer service was poor; and my international payroll team is exactly the same size as it was before I outsourced because I’m spending so much time cleaning up my vendor’s mess.
The only good news is that my vendor has thrown resources into tackling the problems and things are finally starting to work—but for me it’s too late. Disillusioned, I decide my global payroll journey is over. I leave those five countries in the hands of the vendor (since the alternative is to pay out more cash to switch them to someone else), but I abandon my plans to centralize any more international operations.
At this stage, thanks to its poor performance, my vendor runs only half the countries I planned to outsource—but I’m still one of its customers, so I still count toward its retention statistics.
Or take another scenario: I have 20 countries up and running with one vendor. I’ve spent years fighting to get to a barely acceptable quality of service. Most countries are stable, if not exactly good—and now I’m coming up on a contract renewal. I contemplate the idea of going out to bid to see if someone else can do a better job, but I can’t bear the thought of starting over worrying another supplier may prove just as troublesome. So, I renew my contract. I’m not satisfied, I’m just exhausted—but I’m still a retention statistic.
Or take a simpler scenario: I’m 18 months into a new relationship with a multi-country vendor. It’s all going horribly wrong, but I’m locked into a five-year contract. Yes, I’m a retained client, but only because someone put bars on the window and chained me to the table.
Of course, the opposite might also be true. Plenty of multinationals are happy with their global payroll vendors, and many will willingly renew their contracts. Likewise, the fact a customer switches from a vendor doesn’t necessarily mean there’s a problem with the quality of service. There are other good reasons why a multinational might stop a rollout or switch to another provider (when it’s been acquired, for example, or if the business is scaling back its international operations). But this simply reinforces the need to dig beneath the surface of marketing collateral and statistics.
Over the years at Webster Buchanan Research, we’ve heard many different claims from global payroll vendors, and we’ve found that it usually pays to look at even the most innocuous statements from as many different angles as possible.