Monthly Archives: October 2014

Some of you have heard about this new company from California that is disrupting the benefits brokerage market not just in California but across the U.S. I have heard from brokers in many states that lost business to this company named Zenefits. These brokers claim to have had good relationships with their clients yet those clients left them to move their business to Zenefits, who in many cases the employer most likely never met. According to some accounts Zenefits has added around 2000 employer clients with close to 50,000 employees in 2 years. Now these numbers may be exaggerated, I don’t know, but imagine if they were just half that. What broker in America has added 1000 new clients in 2 years?

So what is it that Zenefits is doing that would motivate an employer to fire their current broker and hire Zenefits? Many benefits brokers conclude by looking at their website that it is because they are giving away free Payroll with some HR and Benefits technology. While this may sound plausible I don’t think that is the case. One does not get 2000 new clients in two years because they give something away for free that could cost $5-$10 per employee per month. If “free” is the reason then that says even more about what these employers think about the value of a broker as a benefits advisor. I would contend that the reason that Zenefits is getting so many new clients is because they are delivering a value proposition that solves a big problem for employers that few other brokers are delivering.

This is where I get to the “mowing the lawn” stuff I referenced in the title. The Zenefits value proposition is clearly stated in an interview that the president conducted on Bloomberg News. In response to a question where the interviewer asked how his technology was different he answered as follows” “We handle everything else – employment agreements, compliance, getting them on payroll, getting them on benefits, all that stuff from soup to nuts. That’s the way I would have wanted it to work so that’s the way we built it.” Most of the brokers I speak to believe Zenefits are getting business because they give away some free technology. As you hear in the presidents response he is clearly stating that they provide services. Brokers think they are giving away lawn tractors when what they are really doing is mowing the lawn. I have had many brokers ask me if there is technology to compete with Zenefits. If you were to hire someone to mow your lawn do you ask to see their lawn tractor? Most brokers are missing the point.

As a business owner myself with 20 employees I can relate to the value proposition that Zenefits provides. I don’t have a HR person on staff and I wish someone would come in and offer to take care of all my HR, Benefits, and Payroll issues. I have a job to do; I don’t want to worry about these things. The other day an employee came into my office and asked about our 401k. My answer was “I don’t know.” As a small business owner I want someone else to worry about answering employee questions. I know what I want. I want “worry free”. If a company like Zenefits called me and said they would take care of all HR, Benefits, and Payroll and make me worry free I would say sign me up. I did have a company call me one day that did offer all this. That company was Paychex, not a traditional benefits broker.

So if you are a broker and want to generate new business like Zenefits you need to change your business and offer similar services. And remember, the employers attracted to their value propositions aren’t looking for lawn tractors. They are looking for someone to mow their lawn.