Monthly Archives: February 2016

Simply a Better HR and Benefits World

Those who read my blogs and some of the publications that I write for know when news such as Zenefits firing their CEO hits the street I am more than likely going to have an opinion. In fact, I get calls all the time to comment on the news of the day. I guess I am as qualified as anyone to comment but all this writing I do and the webinars I conduct sometimes obscures one’s perception of what my real mission is. My “Why” has been consistent since February of 2001 when, while on the beach in Jamaica, I found out that our investors were not going to fund the needed next round of capital for our business and I had to sell the assets and find a new job. My mission that started that day continues today.

What I don’t want is to have outsiders define me or the mission of the company my partner Don Rowe have built. Just today I had one broker comment that I am telling everyone that brokers are going out of business. I don’t think that at all. In fact, I wrote an article on this blog titled, The Demise of Small and Mid-sized Benefits Brokers is Greatly Exaggerated . What I do believe is that if brokers don’t change with the times they will lose to brokers who do change or are more creative. Like any industry there will be some companies that go out of business. Capitalism rewards those that provide more value and create new things. It is responsible for innovation.

So what is driving me? As someone who understands insurance, understands the technology business, and is an employer myself, I simply think that there is a much better way to deliver and manage HR and Benefits. The problem, and I guess opportunity, is that the current structure of our delivery system is not really designed to make the changes that are possible. Some simply are protecting the status quo while others simply don’t have the capacity or maybe the vision to enact change. Heck, I may not either, but I am going to try.

I will say one of the frustrating parts is when people try to protect the status quo. I don’t think those in the industry have done enough to impact change. Maybe that is why the government got into the middle of health insurance and why firms like Zenefits pop-up. Therefore, when some change comes from an outsider that I think has a good idea I applaud it. When people try to protect the statuus quo I think they are part of the problem and not the solution.

I think the idea of Zenefits is a good idea. As a small employer their value proposition is strong. Does that mean I think they are a great company or think their founder is a great guy? No! Would I move my business to a company that made the management of my HR/Benefits/Payroll easier for me and my employees? Sure I would. Not to Zenefits but someone who did what Zenefits is promising well. Maybe it is Namely or Gusto. In fact, I have told people I would pay someone pretty good money if they provided more help in the HR/Benefits/Payroll areas. I really could use PEO like services. I only had two companies ever call me and offer to help me in this area and that is Zenefits and Paychex.

I think Fidelity entering the benefits business is a good idea too. I think that my employees should have a single place to call if they have a question about their 401K or benefits. I think that there is a relationship between which medical plan I should choose and how much I am contributing to my 401K. These decisions are related. So if Fidelity delivers a single point of contact for my employees then that would be progress. Nobody has ever offered that to my company.

When I see bad ideas I call them out too. Private Exchanges are a somewhat of a farce. The idea of giving employees more options is not a bad idea but the promise that this is real change is a joke. I sold cafeteria plans in 1987 which look like today’s private exchanges. Boy have we come a long way since 1987.

Most Wellness programs are pretty bad too. Many of these programs alienate people, probably lead to discrimination, and don’t save 10 cents in health care costs. Plus, I would not want my employer ever putting their nose in my personal business. This is getting out of hand and I think it will create friction between employers and employees. Does that mean all wellness programs are bad? No. If they make people feel better, improve productivity, or maybe build morale then that is fine. There are too many negatives in the corporate wellness programs.

I think benefits are too confusing too. Nobody understands their benefits yet nobody tries to make things easier. If I read another article about Benefits Communication I will die. I feel like yelling very loudly –  STOP MAKING HEALTH INSURANCE SO CONFUSING. Who is going to stand up and make things easier? You know who will? Apple.

The HR and Benefits world that I envision looks much different than today. As an employer I want things to be easy. I really don’t want the stress of going through a medical renewal every year. I want my employees to access information easy, on the web, at home, and on their cell phone. I want productive, happy, and engaged employees so if they are stressed financially, physically, or mentally, I would love to give them a place to call or go to get help. I don’t want my business to be at risk either. There are so many rules and laws I simply don’t know what I don’t know. I want someone I can depend on to give me good advice. I don’t want to work this hard to build a business only to have it blow up because I did something wrong that I wasn’t even aware of. I want people paid the right way. I want to record time-off the right way. I want all my benefits bills to be right and my payroll deductions to be accurate. All this stuff does not move my business forward a bit but needs to get done. Make it easy and get it out of my way.

As an employee I want health insurance that makes sense. I want my doctor to care if I am healthy or living the right way and not my employer. I would like to talk to a doctor at 1 in the morning via my cell phone when my son has an ear infection. Why do I have to go to the emergency room just to get a prescription? I always wonder why Jiffy Lube can send me an email when my car is due for an oil change but I don’t get an email from my doctor that I am due for a check-up or some other test. I would want to know how many vacation days I have left so when I am planning my vacation on a Sunday night with my wife I could look it up. I want to know the company holidays and how much time I get off if a relative died. I want to easily access my pay-stub if I want to apply for a loan. I want to have the balance of my FSA, HSA, and 401K on my cell phone. I want all this stuff in one place with one log-in, one app on my cell phone, and with one 800 number to call if I have a question. I have enough passwords in my life already so please don’t give me too many more. I already have my Excel file with my passwords list and I forgot where I put that.

And as an employer and employee I want my health insurance to stop going up 5%-10% per year. That is a dream.

In many other aspects of our lives things are getting easier. Paying my bills; managing my money and banking; communicating with my kids and my elderly parents; buying airline tickets; reserving hotels; avoiding speeding tickets (Waze App); I can go on and on. Yet, while everything I listed for above employers is available and possible today, few have achieved even a fraction of what is possible. Why is that? Why is it that people are selling “Private Exchanges” as something new when I was selling them in 1987?

Is it inertia? Is it people protecting the status quo? We are in an age where if those in any industry don’t make things better opportunist from the outside will. Trust me, people like me are thinking this way every day. Zenefits, Namely, Gusto, and Fidelity are going to try. Tomorrow it may be Google or Apple. Sounds crazy doesn’t it. Well I am not waiting.  The change I am talking about is going to be tough. It is going to take “out-of-the- box” thinking. It could take significant capital. It will require scale and resources. It may require one to blow up their own business model to move it to a better place. As the old saying goes, “if it were easy everyone would do it.” It will be tough but my partner and I are going to try. We think it will be fun too. Join us!

Zenefits CEO Resigns – In Comes the A Team

If you haven’t heard the news yet Parker Conrad, Founder of Zenefits, has resigned as their CEO. He has been replaced by David Sacks, the Zenefits COO and a Zenefits investor, who was a past executive at PayPal. You can see the announcement here along with a letter from the new CEO to the Zenefits employees here.

While the resignation of Parker Conrad may be a surprise to some this doesn’t surprise me at all. It is not uncommon for investors that pour $500 million into a company to eventually put in their own management team who may have more experience in running larger organizations. In this case you have a rapidly growing company in a very regulated environment whose CEO was not afraid to openly challenge regulators, call out his competitors on his website (unusual behavior in my opinion), and find a way to get into a lawsuit with a large competitor, ADP. I don’t know Parker Conrad personally and only met him once, so I won’t speculate as to his motivation, but as a business owner myself I don’t know how getting a lot of people “shooting back at you” would contribute to the growth of an organization. I would think it would be a big distraction. Let’s give Parker credit though. He is an outsider who came into the benefits business and started the fastest growing benefits brokerage firm ever.

In the letter to the employees David Sacks states, “I believe a new set of values are necessary to take us to the next level. Effective immediately, this company’s values are: #1 Operate with integrity. #2 Put the customer first. #3 Make this a great place to work for employees.” Those are his words not mine. It is clear that while Zenefits was seeing record growth their culture was not aligned with what the new CEO and others on the management team along with their investors more than likely had in mind.

So what is next for Zenefits? I have said in the past that the Zenefits investors were not going to wait around until things blew up. It is their job to protect the investment whether it is their own money or the money from investors that contribute to various venture capital funds. So what we have is capitalism in motion. And what comes after version one of something is version 2. And version 2 will be better. Zenefits will get much better. I think they will become one of the most efficient small business benefits brokers/technology companies in the industry. Their value proposition is strong and in great demand. They simply have to get better at it.

In addition to a new CEO the firm has added some notable members to their board including Peter Thiel, co-founder of PayPal. I have referenced Peter’s book “Zero to One” in a few of my past articles including Market Disruption is Coming to the Benefits Business and at it will Come from the Outside Not In”. Peter is focused on being different but not simply for the sake of being different. One of his quotes from his book is “All failed companies are the same: they failed to escape competition.” Zenefits will continue to try and avoid competition. I encourage people to read his book because it will certainly shed some light into the type of person and experience Zenefits is adding to their board and management team.

One thing I found curious is how the two articles I have read on this topic referred to Zenefits as a technology business for small businesses. In fact, David Sacks is quoted as saying, “I’m glad that Zenefits is one of the fastest-growing business software companies …. we help them (small business) achieve something larger than themselves, by making it easier to hire, onboard and manage employees.” It doesn’t say they help employers provide financial security for their employees by providing great benefits programs. The benefits advisory services still appear to be secondary to the Zenefits main purpose though don’t count on them keeping their head in the sand. I am sure their management team is well aware where their revenue comes from and will see even greater challenges in the event that small group commissions get reduced or even go away.

One interesting observation is that one of the main investors in Zenefits is Fidelity. Yes, the same Fidelity that recently entered the benefits business as a broker as an addition to their 401K business. I am sure their investment business is not that connected to their new benefits brokerage business but maybe there is more to it than one may think. Fidelity wasn’t in the benefits business and now they are in directly and through an investment in Zenefits. Is this a coincidence?

Zenefits is here to stay and is going to be bigger and better. And don’t think firms like Namely, Gusto, Paychex, and even ADP don’t take note of who is running Zenefits, who their investors are, and who is on their board. They know because it is their job to know. But Zenefits is not the only one. I hate to reference one of my recent articles again (well not really) but it was only a few weeks ago where I wrote, “Fidelity Enters the Benefits Business – Why Many Others Will Follow”. More non-traditional benefits brokers will be entering the business, and they will be doing so in droves. If you are a traditional benefits broker, I think you need to know.