ADP's profit "margins are vastly below where they should be," Ackman said on a conference call, walking listeners through Pershing Square's analysis and research.
"ADP's historical success has made it a lethargic and inefficient sleeping giant," he wrote in the presentation.
The hedge-fund manager shared the five key points of his proposal later in the slide show:
1) "Fix corporate structure, Business Unit silos, matrix structure, corporate bloat and inefficiency (bureaucracy, spans-and-layers)."
2) "Accelerate investments in necessary product and back-end improvements."
3) "Accelerate product migrations, sunset back-end systems, and cut associated legacy spend, with some reinvestment in product and other back-end improvements or other growth initiatives (i.e., Big Data)."
4) "Reduce excess support personnel; focus on value-added services."
5) "Increase sales force productivity with better product offering."
Ackman said he believes if ADP executes the plan it will lead to a "significant increase" in sales growth and profit margins for the payroll processor.
Ackman's Pershing Square firm said if ADP is managed properly, then its earnings per share can rise to $8.70 by fiscal 2022 and its share price "can increase to $221 - $255 per share" in less than four years.
ADP closed at $111.10 on Wednesday.