The human touch
by Glenn RittFrederick Davison has come a long way from those early days in the basement of his home. In 20 years, he has parlayed his inventor’s mind and sweat equity – along with a sole investor’s $40,000 – into a company with 125 clients in 29 states, 25 employees and revenues approaching $5 million.
Today, F.W. Davison & Company occupies a spacious corner of Cordage Park, featuring computerized training facilities where his staff helps scores of businesses enhance their productivity and save significant dollars with proprietary software that serves as a virtual human resources department – supporting payroll, benefits, billing and accounts receivables.
F.W. Davison’s newest products are increasingly Web-based. That means clients can manage everything from payroll to health insurance administration securely on the Internet, avoiding costly servers and IT support staff.
Davison hopes his newest brand, MyPayrollHR, launched this spring, will significantly expand his customer base and let him compete head-on with two of the nation’s largest payroll services, ADP and Paychex Payroll Services.
Responding to opportunity
Davison’s company was essentially a consultancy in 1991 when a client asked him to locate a payroll program. Instead, he decided to develop it himself, parlaying degrees in finance, accounting and information systems – with the help of a friend who invested the initial $40,000 as a silent partner.
Once he satisfied that first client, Davison began selling his program to other corporate employers, such as L. Knife and Sons, the Budweiser distributor based in Kingston, and F.W. Webb, the plumbing supply company.
By the late 1990s, he was doing business nationally when he was approached by a Florida-based Professional Employer Organization, or PEO. These are outsourcing companies – about 2,000 nationwide – that contract with small to mid-size businesses to become the employer of record so they can legally administer benefits and payroll.
“This organization looked at our software and asked us to expand it from serving an individual firm to fit the PEO model,” said Davison. “It meant adding billing and accounts receivable programs, while scaling the capability to process hundreds of payrolls a day for thousands of employees.”
That product, HRPyramid, is the heart and soul of F.W. Davison & Company. It is marketed both as a corporate edition – serving as an in-house human resources department for an individual company – and the PEO edition.
Expansion, of course, meant that Davison would have to abandon his basement.
“Our first office in Plymouth actually was at the former headquarters of L. Knife & Sons. “I was talking to them about needing to expand. They had space and told me I was welcome to use it. It was a pretty sweet deal. I stayed there from 2000 to 2006 when we moved to Cordage Park.”
Davison needed more space – not so much to accommodate employees, but to build extensive training facilities for his PEO and corporate clients. “We love the ambiance and history of Cordage Park,” he said, “the tall ceilings, the ability to look out my office and see the ocean.”
That view is more than a luxury; it supports the inventor in Davison. As his company has grown, he has had to make critical judgments about his own relative strengths and weaknesses. It’s the classic case study of a creative entrepreneur evolving into a manager, but never losing the capacity to lead and grow the company.
The first employee he hired was a financial expert and former controller. Later, he brought on a chief executive officer. Today, Davison has gravitated back to his passion – software development and strategic planning. He sees this as the best way for his company to stay competitive and continue growing – especially as he responds to the rapid-fire growth of the Web and the need to migrate his entire business to the Internet.
Today, a PEO or individual corporate client can purchase the HRPyramid suite in a Web-based version.
But the true power of the Web is registered by Davison’s newest product – MyPayrollHR.com. It’s a “back to the future” story.
Back to the future
Until this year, 90 percent of F.W. Davison’s business was serving the very fertile PEO market with its HRPyramid suite of services.
Yet Davison always regretted leaving behind his original model – selling his software to businesses too small to afford their own human resources department, but reluctant to outsource this critical area to outsiders.
That small-business market had proven too expensive, in terms of both marketing and service. That is, until the Web’s rapid development and the expansion of broadband and online security.
“I always loved the small business and corporate market. I also realized that we were not fully leveraging our software. We were leaving money on the table. The key was to add a Web-based front end to our current back-end systems, so any single business could economically access it.”
So Davison – on top of all his other work – began his own “skunkworks project,” stealing time on weekends and nights. He also contracted a programmer in Australia to work with him. The entire R&D process for MyPayrollHR.com cost about $250,000 and was financed from F.W. Davison & Company’s cash flow.
“We had an existing product. The database architecture was done. The processing was done. We just had to design the Web interface. If we had to develop the programming code from scratch again, the process would have taken 10 years instead of two,” he explained.
Davison was driven by his own “gut,” as well as some informal survey work. He also knew that MyPayrollHR.com would pit his company directly against the likes of ADP and Paychex, national payroll services.
Inevitably, though, we were “reinvigorating our core product with a solution that was somewhere between in-sourcing and outsourcing human resource functions.”
Interestingly, you won’t find MyPayrollHR.com even mentioned at the F.W. Davison & Company Web site. Nor will you see references to F.W. Davison & Company at MyPayrollHR.com, because they are two unique products designed to address to uniquely different markets.
“We would like to grow MyPayrollHR.com locally first and then move outward,” explained Deana Collins, the company’s marketing director. “We are focusing on all small businesses, but initially those in the high-tech field.”
“The marketplace is a challenge,” she continued. “Payroll is one of those things that if it works, why mess with it? We must offer a compelling reason why a business should change. That requires education.”
Inevitably, it will be about price and customer support.
“We are looking to be fairly price conscious,” she said. “One thing we heard from customers is that other services that charge a bit less tend to impose additional service fees for every little thing; 10 cents for this, a dollar for that. We will sell one flat monthly fee per employee per month.”
“When you’re busy growing a business, HR expertise is often handled on an as-needed basis, usually at additional cost,” continued Collins, “so we built in an extensive HR support module that serves as both a resource area as well as live customer support.”
“We know how important it is to support customers after the sale, which is why we would rather invest in a support person at this stage than a salesperson.”
Entrepreneur versus manager
F.W. Davison & Company’s success is rooted in technology, of course. But it has depended most on the strategic judgments of its owner and founder. And none have been more significant than decisions he has made about his own role in the company.
“Six years ago, I realized we cannot be doing design and development and run a growing company,” said Davison. “Do I recruit developers and go into management? Do I hire managers and stay in development? What is my strength? For the company’s sake, what is my greatest value?”
In 2001, he hired a CEO who previously worked for Reebok International. Today, that CEO handles the business side of F.W. Davison & Company.
“He and I run the business. I focus on planning and strategy; his day-to-day focus is on finance, human resources and operations. I run the product development and manage the programming team.”
Hiring a CEO was a leap of faith for Davison. It was a cost he could not necessarily afford back then. “I treated his salary as a capital investment,” he explained. The CEO’s first assignment was to develop the capacity to host customers who did not want to spend heavily owning software licenses.
“He launched that business without me getting involved. And that business grew dramatically. It’s paid for his salary time and time again.”
Now, Davison is hoping the same scenario will play out with his newest venture, MyPayrollHR.com.
Published in Plymouth County Business October/November 2007 and Cape Business January/February 2008
Glenn Ritt Glenn Ritt is editor and co-publisher of Cape Business Publishing LLC. He is the former publisher of Cape Cod Community Newspapers and editor of The Bergen Record in New Jersey. 
Cape Business Newsletters
Keep up with the latest issues affecting your business and your life! To sign up for any of the Cape Business newsletters, click here.