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From the library of the New York Stock Exchange at the corner of Wall and Broad Streets in New York City, you're Inside the Ice House, our podcast from Intercontinental Exchange on markets, leadership, and vision in global business, the dream drivers that have made the NYSE an indispensable institution for global growth for more than 225 years. Each week we feature stories of those who hatch plans, create jobs, and harness the engine of capitalism right here, right now at the NYSE and at ICE's 12 exchanges and seven clearinghouses around the world.
Pete Asch:
Welcome back Inside the Ice House. I'm your host, Pete Asch, archivist for the New York Stock Exchange. Today we're addressing acquiring, managing, and putting to work a type of capital we have not discussed before, one that you can't raise from private equity or on the public market: human capital. Ceridian HCM Holdings listed on the New York Stock Exchange on April 26, 2018, about five weeks ago. The HCM stands for human capital management. The shares listed under the ticker symbol NYSE-CDAY, originally priced at $22 and as of last check were trading about 60% above that offering price.
Pete Asch:
Ceridian operates global human capital management technology software designed to "make work life better for its customers and their employees by improving decision-making processes, streamlining work flows, exposing strategic organizational insights, and simplifying legislative compliance." What does that all mean? We'll find out today from our guest, David Ossip, Chairman and CEO of Ceridian, who's been responsible for the company's impressive turnaround that culminated in its return to the public market after over a decade. Our conversation with David right after this.
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Pete Asch:
David Ossip, Chairman and CEO of Ceridian HCM Holdings, was named CEO in 2013 after Dayforce, a cloud-based platform he founded, was merged with the company. As reported in a recent profile, David is the recipient of 40 different awards from Top 40 Under 40 to Canada's Most Admired CEOs. But if you were to mention that to him, as I just did, he'd prefer that we concentrate on Ceridian's awards for product innovation, corporate culture, and executive leadership. David, welcome to the Ice House and welcome back to the New York Stock Exchange.
David Ossip:
Pete, glad to be here today.
Pete Asch:
When you were here in April, you rang the opening bell and then watched your stock open on the floor of the Exchange. It's been a few weeks. We were talking a little bit on the ride up. Have you recovered from the road show and the excitement of the IPO?
David Ossip:
The IPO was just a fantastic experience. For us at Ceridian, I thought it was a great recognition of the transformation of the business and how much we've accomplished over the last four or five years. And the institution, NYSE is absolutely fantastic and we were very proud to be here ringing the bell.
Pete Asch:
You were definitely excited that day, but in a few interviews you did, you kept mentioning that today's the excitement and tomorrow it's back to work. So it's been about five weeks. Any big changes in the day-to-day operation of Ceridian?
David Ossip:
What we've already done, because we now have a remarkably different balance sheet than we had beforehand, we've accelerated our 2019 planning so that we can take advantage of the success of the IPO and the access to capital and the availability of cash that we have, to look at future ways that we can grow the business.
Pete Asch:
Ceridian wasn't the first company you took public. You founded Workbrain, which designed self-hosted workplace management surfaces for larger companies. What attracted you to the HCM space?
David Ossip:
In 2009, my non-compete from the sale of Workbrain had expired, and when I looked at the human capital management market, what I liked was that the size of the market was enormous, probably about $20 billion for HCM applications. And when I looked at the market, particularly at the payroll segment, which is about 25% of that, I noticed that the requirements were quite similar across client. Obviously what that means from a cloud perspective is that you can build an application that doesn't require customizations and obviously can be deployed on a single code base, so that was very great.
David Ossip:
There were two other things I noticed as well. The second was that the average life of customer for a payroll vendor seemed to always be above 10 years. And in cloud, we always think about the lifetime value of a customer, and having a very long life of customer means that the return that you get for acquiring each customer is very, very high. And the third thing that I noticed was that there was a desire from the customers to see a platform. What I mean by that was that once you had payroll and workforce management embedded, the clients would want to have recruiting and performance and compensation management and other features that could add to the recurring revenue of the client base. It was a very attractive market to enter.
Pete Asch:
Were ever tempted to pull up your Canadian roots and head out to where many of your competitors are out in Silicon Valley?
David Ossip:
You know, Toronto's a unique place, or Canada's unique place. There's fantastic access to human capital. The schools are tremendous. The technology is also very good. And when we look at human capital management and the Dayforce application, we built it as a global application. Even if I look forward today, I see the global expansion of the company as one of the growth avenues.
Pete Asch:
In 2012, you made a decision that reminds me of Intercontinental Exchange acquiring the New York Stock Exchange, when your company, Dayforce, a new disruptor in the space, merged with Ceridian, one of the stalwarts of the human resources industry. Take me through that decision and what attracted you to the idea of merging your leading HR technology company with a legacy brand like Ceridian.
David Ossip:
It goes back to about 2010. Dayforce had started. We were quite successful in the market, and we knew we could grow very quickly. To grow, we had two choices. We could do it independently, or we could look for a partner. I knew a lot about Ceridian, in that I'd been a customer a few times. In fact, I was a customer at the time, and I liked the services characteristics. But I knew that the company hadn't had any innovation for quite a long time, and I felt that the Dayforce application could solve that.
David Ossip:
So the idea was, could we combine Ceridian and Dayforce together and create a culture where you'd have this founder-led enterprise, which is obviously very innovative and fast moving, but combine that with the deep domain experience of Ceridian? In addition to that, Ceridian had certain assets that I thought were very, very helpful. One was the tax capabilities of Ceridian. In the United States in particular, it is very, very complicated to do the back office for payroll, and Ceridian was one of just a few that had already scaled and highly robust tax operations.
Pete Asch:
So on paper, it made sense, and you've been very public on, there were some growing pains in terms of culture and bringing them up to innovative speed. I think everyone we speak to talks about how a strong culture is important, but why is it important?
David Ossip:
You need a culture and you need a mission for the company that really draws people in. My belief is that I do believe that everyone who works at an organization has to be committed to the cause of the organization. At Ceridian, as you pointed out before, our brand promise is to make work life better for everyone who uses our products and services. And it's a brand promise that applies both internally and externally.
David Ossip:
It was important because in 2012, 2013, the culture at Ceridian was not great. In fact, our Glassdoor scores were around two, which is pretty hard, quite honestly, to get to. Today our Glassdoor scores are about 4.3, top 100 company to work for in both the US and Canada. We did that through a lot of effort, but it really started by creating that brand promise and the values that surrounded that and making sure that we had a culture where people felt very committed and they wanted to make sure that the customers were very, very happy.
Pete Asch:
You'd mentioned now a global company. I was on the floor for your IPO day. I spoke to a lot of your executive team, and the one thing that we kept hearing over and over again was, "We're a team. We're all part of a team. It's one big team." How do you make an employee that wasn't there for an IPO day, that is maybe in an office thousands of miles away from your headquarters, feel like they're part of the same team that is there that day for a listing?
David Ossip:
What's important on not just the listing day but I think on every day is to have proper communication so that people feel connected to the company. On the actual listing day, we went through a lot to make sure we had celebrations in all of our offices around the world. We made sure that people could see the news feeds. The interviews that you did that day were displayed on all the TVs across all the different offices. And if you look at what the IPO really did, I think it created a lot of pride for the people at Ceridian, which I think is a wonderful thing.
Pete Asch:
One of the products that Dayforce offers is a talent recruiting solution. How has Ceridian been able to leverage its own product to make sure you stay competitive as you grow, particularly with the talent pool of developers?
David Ossip:
When we talk about the product, we say Dayforce is innovation, and we are an example of how we were able to use our own product to create this culture of innovation. And if you create that culture, that leads to performance, and if you have that great performance in the company, obviously you see client acquisition, you see happy clients, referenceability, and growth.
Pete Asch:
When you're looking to build out your company, you had mentioned a little before about Glassdoor, your company is one of the top 100 places to work in the United States and Canada, top 15 company to recommend to a friend, and also a best workplace for women in 2018. What are you looking for when you're growing your company, beyond the skillset, that helps you make sure that the Ceridian culture is maintained as you grow?
David Ossip:
We talk about FIT, and what we really mean by FIT is that we look for fun people, not rah rah fun people. The test that I would use is if you were getting on a plane with a coworker, would you try get the seat next to the person or would you make sure that you were as far away from the person? Obviously, you're looking for people that we would want to sit next to. The I obviously stands for intelligence, and what we mean by that is not someone who knows everything, but rather someone who has the capability to learn and the desire to learn. And the T stands for teamwork. We're looking for people who are team players. In particular, we actually are not looking for mavericks. What we are looking for is someone who will take the role that is most suitable to the actual time, and is someone who is willing to grow as the company grows.
Pete Asch:
After the break, Dave and I will talk about the future of Ceridian and how the company's preparing to service the workforce of the future.
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Pete Asch:
Welcome back. Before the break, David Ossip, Chairman of Ceridian, that is NYSE-CDAY, and I were talking about the culture that has transformed Ceridian since he became CEO in 2013. Since you took over Ceridian, the workforce, not just at Ceridian but across the globe, has begun to change. While the majority of adults continue to look for what we describe as a traditional nine to five job with benefits, recent estimates put in this country, in the United States, around 40% of employees are now in term, the gig economy, whether that's their primary business or an added gig. This could be anything from an Uber driver to a highly skilled freelancer and everything in between. What have you seen from your user groups that speaks to that?
David Ossip:
Instead of the gig economy, what I would term people as flexible workers, and we're seeing a shift in the workplace for more people becoming flexible. In other words, they're looking to augment their income, or it might be someone who's dropped their kids off and has a few hours to spend during the actual day. It might be someone who's going to visit a friend, and they have a few hours and they'd like to earn a little bit of income. And in terms of the flexible workplace, the big debate is whether or not the people are really W-2 employees or 1099 employees. W-2 obviously is a bit more burdensome for an organization, because you have to worry about things like WCB and SUI and different types of taxes.
David Ossip:
When we look at the opportunity over there for Ceridian, we have the technology that does continuous calculations for pay and time, which means that any time you clock in or clock out, we can calculate your net earnings net of all the withholdings and all the different types of taxes. So you can imagine a application where I can use my mobile phone to find a gig, a temporary work, and I could use the phone to clock in and clock out, and when I clock out the system automatically calculates my net earnings for that particular shift and transfers the money to my digital wallet, which I can then spend, or I can save or transfer to any type of institution that I would like. We see a big opportunity in that particular market.
Pete Asch:
You had mentioned the W-2 versus 1099. One of the discussions going on, because they're projected to be over half the workforce by 2030 to be working almost full time in flexible work, is the idea of creating a system that allow individuals to pay into their own version of a 401(k), unemployment, health benefits, things like that. Is Ceridian looking into that as possibly part of its suite?
David Ossip:
In the future, that could be a possibility. At the moment, we're focusing on the technology that we have that is quite differentiating the market, which is this ability to continuously calculate the net earnings. But as those networks begin to grow out that you speak about, I would see opportunities for ad hoc or a la carte benefit-type packages, different types of savings products out there that I think people could utilize, and obviously could make sure that they're well taken care of, not only today but in the future.
Pete Asch:
We had spent the first half talking about how important culture is at Ceridian. Do you see this gig workforce hurting the efficiencies that a cohesive workforce would have?
David Ossip:
I don't. I think that today with different types of on-demand training and with different types of employee ratings, you can really create the right type of culture, because you can use technology to convey the values of the organization where the person is working. And you can also use different types of technologies like video interviews and past ratings of the people and networks, et cetera, to make sure that you have the right person who is well suited for the actual role that needs to be filled.
Pete Asch:
Looking at things like AI technology to preview potential employees, is there a time that you will be connected technologically-wise with an employee, but possibly never have them come into the office, whether for Ceridian or elsewhere?
David Ossip:
Well, I think that's happening already today in traditional workplaces as well. There's a lot of use of mobile technologies, video technologies, where people are able to know someone that they have not sat down with face to face.
Pete Asch:
Are there any other areas of the HCM space that you're exploring beyond the gig economy that we should keep an eye out for?
David Ossip:
Well, if I look at Ceridian and I think about how we're going to continue to grow, first, we will continue to grow just by disrupting the HCM space, and we've done that very successfully. I think the Dayforce product has grown at a compounded annual growth rate of 60% over the last five years, in which time we've onboarded over 3,000 customers onto the platform. The global opportunity that I spoke about is one that we're very active on. We just took the first set of clients live in the UK with our payroll product over there, and we're very happy with the results.
David Ossip:
The platform piece that I spoke about, if I look at last year, about 17% of our new sales were add-on modules to clients that were already live. And we're continuing to build new modules, which gives us the ability to go back to our already live customer base at over 3,000 customers and sell them additional types of modules. We're also investing heavily in the partner ecosystem, and already we're seeing great things come from that. And then lastly, as we've already discussed, the gig economy we see as also an area of growth for the company.
Pete Asch:
What are some of the partnerships that you're exploring or already entered into?
David Ossip:
We have partnerships with the advisory firms. These are companies that help other organizations select vendors and make sure they get efficiencies. We spent a lot of time with that. We had our partnership conference in Orlando, in I believe it was February of this year, where we had over 100 partners attend. We have partnerships with private equity procurement organizations, where we have pre-negotiated contracts and pricing for all the portfolio companies that they have. We also launched something called the Dayforce Software Partnership Program last year, which is a set of RESTful APIs, which effectively allow other third party software vendors to build upon the Dayforce application where they have read/write and update access to all of the data.
Pete Asch:
In terms of importance, 2011, you actually spoke and you made a comment that something like scheduling can provide so much value. I think what you said is that if it took four hours to schedule with an old system, if Dayforce allows you do it in two hours, across 1,000 businesses, I could save, I think your estimate was about $24 million a year. What do most people miss in how important it is to manage people? I think we all look at costs, overhead, things like that, but what are we missing if we're not thinking about people capital?
David Ossip:
Well, it depends largely on the industry. We're talking about scheduling. Scheduling is very important when you're dealing with variably staffed workforces. That will be companies like hospitality, distribution centers, retail, where you have a fluctuation in demand for the work that the people are doing. So for example, if I take a retailer where you aren't certain about what the foot traffic is going to be inside the particular locations, we can use predictive technology, and we do it inside Dayforce, to forecast out what the volume of people will be in each of the different locations at the different times. And then based on that, we can use additional predictive technologies to determine when people should work. And so instead of working an eight hour shift, we can have a two hour shift or a three hour shift, and instead of starting the shift at, say, 10:00 AM, we might start it at 10:15.
David Ossip:
By doing that, we can make sure that we have adequate coverage for that location to take care of and to deliver very good service to the people coming to different locations. The benefit normally for the organizations, when you're using that type of predictive tech, is that you typically get a higher conversion rate of foot traffic into sales, and you also typically get a much more efficient spend of labor, because you're allocating your labor spend to when it's needed, as opposed to having people sitting there idly.
David Ossip:
There also are different other techs that we use as well. We use a lot of posting of shifts and picking up of shifts, which allow organizations, again, to staff up variably with inside a particular day. So if I'm doing what they call base scheduling, where I will schedule a location to say two, three people, and customer traffic is very high on that day, I can post the shift and people will use their mobile devices to pick up the shifts almost immediately. In fact, if I look at our mobile apps, we've had half a billion mobile sessions, and I would wager that most of those sessions are people basically either posting shifts that they would like to trade with someone or picking up shifts that either the company has posted or someone else has posted.
Pete Asch:
When you go into a more traditional workspace, how receptive are they to these ideas of, maybe your employees don't work during the same eight hour shifts they've been working for a hundred years?
David Ossip:
It comes down to flexibility for the workers as well. When you use a technology like Dayforce, you can give the employees a lot more flexibility around their schedule. A few things we do, for example, we allow the employees to set their availability, so they can say by day of week when they're available to work. If I'm a mom and I want to take care of my kids during the middle of the day or the start of the day, I can block out those hours. If I'm a student and I have classes at certain times during the week, I can block those out. And then we make sure when the manager or the system builds the actual schedules, we adhere to the availability constraints set by the employee.
David Ossip:
We also offer the employees the ability to trade shifts. If I'm given a shift, say on Friday, and something comes up in my personal life that I'd like to take care of, I have the ability to post that particular shift, either to a particular individual or to the broader community, and other people who are qualified can pick up that shift. The system makes sure that we don't violate any of the labor constraints that might be there, any of the labor rules that we might not want to trip. And we make sure that people aren't working more than the maximum number of hours that they're allowed to work in a given day. So you can give a lot of flexibility to both the workers, but also you can deliver sizeable results to the companies.
Pete Asch:
That sounds like a win-win. As we wrap up, what is next for Ceridian? We talked a lot about the potential for the gig economy and things like that, but if you come back in 10 years to celebrate your 10-year anniversary, what are we going to be talking about?
David Ossip:
Well, for us, it's just continued growth. We believe that we can grow the company within the next few years to where we're over a billion dollars, and we expect that our EBITDA should be above 30% at that particular time. And we believe that the market that we're playing in is huge, so there's tremendous growth opportunity for us, both in North America and globally.
Pete Asch:
Thank you so much, David, for joining us Inside the Ice House. That's our conversation for this week. Our guest was David Ossip, CEO and Chairman of Ceridian HCM Holdings. If you like what you heard, please rate us on iTunes so other folks will know where to find us. Got a comment or a question you'd like one of our experts to tackle on a future show? Email us at [email protected] or tweet us @NYSE. Our show was produced by Josh King and Ian Wolff, with production assistance from Ken Abel and Steve Portner. I'm Pete Asch, your host, signing off from the library of the New York Stock Exchange. Thanks for listening. See you next time.
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Information contained in this podcast was obtained in part from publicly available sources and not independently verified. Neither ICE nor its affiliates make any representations or warranties, express or implied, as to the accuracy or completeness of this information and do not sponsor, approve, or endorse any of the content herein, all of which is presented solely for informational and educational purposes. Nothing herein constitutes an offer to sell or a solicitation of an offer to buy any security or recommendation of any security or trading practice.
