Category Archives: Zenefits

Brokers Heading Down the Wrong Technology Path


A few people have said I write too much about Zenefits but in fact, I have been writing about the Zenefits model since 2009 and talking about it since 2002, well before Zenefits even existed. You can see my article on this blog titled, “Payroll Firms, PEO’s and BPO’s, Have Got it Right”. (See article here: https://joemarkland.wordpress.com/past-articles/) I have also conducted numerous webinars on the topic that can be seen on my website here: http://www.hrtadvisors.com/AboutUs/HRTWebinars.aspx . Over the last few months I have seen many brokers contract with some technology vendor to develop their Zenefits-like solution and based on what I am seeing I think most are getting it wrong. They aren’t really developing a competitive or sustainable business model. In fact their solution may be creating a false sense of security leaving their firms vulnerable to the competition.

This past week I spent significant time with a good friend of mine that is a benefits broker discussing the benefits business and this Zenefits phenomenon. He is probably the one broker who I think has truly changed his business model to compete in this new benefits world where technology and outsourced services have become a big differentiator. He still has much work to do but he gets it. With all the noise in the market and new technology vendors popping up everywhere promising to help brokers beat Zenefits we tried to separate the new noise from what we thought the employer market is really looking for when it comes to HR type technology. We had no agenda because we both want to make sure we build a sustainable business. Lying to ourselves would not do us any good. What we concluded was that what most brokers are doing to compete with Zenefits is most likely wrong. The emerging broker models of partnering with some HR and Benefits only vendor (without payroll) is most likely not sustainable and many of the technology vendors will not make it. Here is why.

HR and Benefit Systems without Payroll have a short future.

At my company we have been consulting employers around these solutions for years and we definitely see employers moving to a single system for HR, Benefits, and Payroll. In fact, very few vendors even exist anymore without payroll. There are exceptions but it is a shrinking market. That is until Zenefits came along, but we don’t think Zenefits really is a technology play. I cover that in my webinars. And we believe that even Zenefits will build, merge with, buy, or be bought by a payroll company. Not because they want to but because they will have to. The only employers that will want HR and Benefits systems without payroll will have fewer than 30 employees so maybe Zenefits can survive there without payroll. Trying to integrate a HR and Benefits system with another payroll system is a problem employers would prefer to avoid. Even Zenefits is struggling with this and it probably consumes their resources. Yet most of the new vendors marketing to brokers have HR and Benefits without payroll. Do you know why? It is easy relative to payroll. Understanding and marketing HR and Benefits systems without payroll is also easier for most brokers. What we see is that it is primarily benefits brokers marketing these types of solutions. The rest of the market including HR Consultants, HRIS Consultants, PEO’s and BPO’s are not. Also, almost every HR-Benefits vendor is adding payroll and almost every payroll vendor is adding HR and Benefits. Look around and see how many third-parties are selling just HR and Benefits systems other than brokers. Hardly any. That is for a reason.

Selling or “giving away” someone else’s products does not change your business or build an asset.

If the benefits world changes and revenue for small group insurance gets cut significantly then the revenue from the other products and services that firms like Zenefits provides will need to come into the broker’s organization and not the third-party vendors coffers. The company that provides the value will be the one receiving the revenue. So selling someone else products does not build your asset. It builds the other vendors asset. Brokers selling other peoples products are essentially giving away future revenues that may be needed to sustain their business if commissions gets cut.

Brokers are getting a false sense of security.

If you are a broker that sells or gives-away HR and Benefits systems without payroll your client is still vulnerable to takeover. First, every payroll company in America will still be calling on that employer with a complete solution (with Payroll). Other brokers, like my friend, will be providing solutions with payroll too. Employers will get tired of having two systems and will always be looking out for a better solution. They will take the prospect calls. So, for most of the employer market, HR and Benefit systems without payroll will more than likely be seen as a band-aid until they move to a better solution. And if it is free from a broker or Zenefits then it is not a bad band-aid but it is still a band-aid. I guess if it is free it can be considered a trinket.

Most brokers prefer to keep an arm’s-length between them and HR-Benefits-Payroll solutions.

I wrote an article on this too. (Link here: https://joemarkland.wordpress.com/2015/03/04/an-arms-length-may-be-the-distance-between-winning-and-losing/.) My major point with this really comes back to “selling someone else’s stuff”. If you want to be arm’s-length then you don’t own it. If you don’t own it you won’t get the majority of the revenue from providing the product or service. My broker friend was asked if one of his clients could be used as a reference for another broker who was looking to get into this business. The inquiring broker was looking to see what the client thought of the technology my friend was selling. The problem is the client would not talk about the technology but actually talk about how great the broker’s service is. You see, the employer’s payroll questions come into my friend’s office, not some third-party. His service is anything but arm’s-length. He owns it and he gets paid to deliver the solution while other brokers give things away. Another broker I know delivering a complete solution just landed a client with a fee of $70 PEPM.

Most of these points I have made over the past months or even years. This has not prevented brokers from making what I think is the wrong decision. I believe the reason is because the path most brokers have taken is easy. And as the old saying goes, “if it were easy then everyone would do it”. And everyone has. Selling someone else’s HR and Benefits system is easy but does not solve the employer’s bigger problems. I actually had one broker who put in a payroll system through me once say “Joe, Zenefits says they make it easy and this was not easy”. I had to laugh and I told him that Zenefits says they make it easy for the employer, not for Zenefits. For Zenefits it is tough. That broker proceeded to move to an “easier” solution for him, and promptly lost a prospect to another brokerage firm offering a full-blown HR-Benefits-Payroll solution. He didn’t know why he lost but I know because I was working with the winning broker.

Changing your business and competing in this new benefits world is not going to be easy. You will need to move out of your comfort zone. The good thing is that there are so many resisting change that when you do start doing the tough stuff you will find the blue oceans with less competition and more profits. And you deserve it.

Zenefits Has Crossed the Line


For those of you who have not seen it Zenefits, an emerging benefits broker offering free technology, has posted a comparison of their services to many of their competitors across the country. You can see the link here. https://www.zenefits.com/broker/ In my opinion this tactic goes below the line of ethical standards. Not only does it misrepresent what many of their competitors are offering but they seem to be excusing themselves if they are wrong by putting asterisks at the bottom of the comparison that reads as follows.

** Zenefits cannot be sure what services are offered by (Broker Name). Contact them directly to find out.

This one line does not excuse them from being wrong. It is disingenuous. And I am quite sure they did not go out of their way and call all their competitors to validate their information. I ask anyone who reads this blog to call me if they did in fact call you and ask about your services.

I know for a fact that much of this information is wrong as many of my clients are on this list and I supply some of the products or services that Zenefits says they don’t provide. Zenefits says, for just about every broker on their list, that the competing broker does not provide Benefits Administration Software or ACA Software Compliance and Administration. Many brokers on the Zenefits list provide these products or services. Whether they provide them FREE or not is another check box on their list but that can be represented fairly.

I was once given some good advice by a broker in Michigan when I was a young sales guy for UNUM. He told me to never say bad things about your competitors because 50% of buyers out there will think less of you and not buy. Why would you want to eliminate 50% of your prospects? I have taken that advice. That does not mean you can’t sell against other companies models. In this case Zenefits is not necessarily saying bad things about their competitors. However, I do believe they are knowingly misrepresenting the competition. If they are knowingly doing this then in my opinion it sinks to the level below of someone that bad mouths a competitor. At least a person that verbally bad mouths a competitor is not trying to deceive. I would rather have someone tell me what they really think even if I don’t like what they say.

Zenefits is a benefits brokers and wants to disrupt the benefits distribution market. Why they want to create enemies with firms like ADP ( See USA Today: http://www.usatoday.com/story/tech/2015/06/10/zenefits-vs-adp/71019080/ ) and now benefits brokers across America I don’t know. As a young athlete I learned to respect your competition but also play fair. My father used to use terms like “take the high road”. These lessons that we have all learned at a young age have been lost on Zenefits. I can only blame their leader. They should immediately take down these web pages and apologize to all those firms that they misrepresented. If they want to show a comparison then at least get the information right and don’t hide behind a ** at the bottom of the page.

Two Things Zenefits is Doing That Most Brokers Aren’t


I was working last weekend and browsing the web when I had a Zenefits Ad pop-up on the page that I was on. I know how that works, if you have searched Zenefits in the past then the system remembers you and pushes their ad onto the page. Had I not searched Zenefits the ad most likely would not have popped-up. I would imagine this would also happen to the thousands of employers getting calls and email from Zenefits. They may check out who they are on the web and then sometime in their future browsing they get the same ad. I also saw a commercial on TV the other day from Namely, another technology vendor getting into the benefits brokerage business, so Zenefits is not the only such firm advertising on TV and the web.

Recently my organization was the target of a Zenefits marketing campaign. Within a two week period of time my HR person (I don’t know where they got her name and email address) received 3 phone calls and 4 emails. She did give them the opportunity to present to her and their pitch was pretty compelling. However we are a little more educated in the technology area and have a solution much more advanced than Zenefits.

To compete with Zenefits many brokers sign up with some technology company so that they can say they  have a Zenefits-like solution. What they don’t realize is one of the reasons Zenefits is successful is because of their marketing. Most brokers don’t have the marketing system in place where they can find the right person in a company across the country and make 3 phone calls and send 4 emails in two weeks. In fact most have not even thought through what to say on a call or write in the email. What you say and how you say it matters.

When I start working with a benefits firm one of the first questions I ask is whether they have a marketing person on staff and an operations manager. It is amazing how few firms staff these type of people. Many will say they have a marketing person but that person is often not trained or skilled as a marketing person. The employee may have been the best PowerPoint person and became the head of marketing. Few majored in marketing in college. The ones that do have thriving businesses.

The same goes with operations. I rarely see benefits firms with operations managers on staff. Once again, they may have someone that may have the title of Operations Manager but that person often was someone who was promoted from some administrative role or the Office Manager position. It is amazing when you see a company that is operating with a great operations manager.

The lack of staffing and vision around these two functions may become very critical to a benefits firm in the near future. These are the areas where firms like Zenefits will shine. I believe Zenefits will eventually become the most efficient small group broker in the country. Much like Digital Insurance they will put the systems, people, and processes in place where they can become more and more efficient operationally. This efficiency will enable them to operate their business at a lower unit cost yielding higher profits than the average benefits firm. And if benefits commission changes significantly they will be able to charge fees for their services because of the systems they built to provide better service at lower costs.

Most benefits firms have no vision for operational efficiency. This is an area where I have a great deal of experience having discussed and viewed how hundreds of brokers are operating internally. Many have a database that can store information but few have thought through every process in their organization and develop automated workflows to make those process better. It is amazing how many times I hear from a business owner that “their staff won’t use it” when referring to their internal system. Since when should that be an option?

Many benefits brokerage firms are structured to be successful in what I think may be a dying business model. They are designed to protect the status quo. I have written numerous articles in this blog including one about the coming end to commissions and the rise of price competition. ( Fee for Services for Benefits Brokers – It Changes Everything and It’s Coming ) Another article I talked about the future of health care where health insurance may be all individual purchases and the future insurance companies may be the hospital systems. ( The Coming End to the Benefits Business As We Know It ) If commissions get reduced then those organizations with operational efficiency can have an advantage. With solid marketing they can grow rapidly as others struggle to adjust their business models. Also, if the health insurance purchase moves from the employer to employees then those organizations that can service individuals will also have an advantage.

Many brokers think firms like Zenefits will perpetually be bad and others hope they go away. What they are not seeing is that Zenefits is building a business to thrive in a new benefits world. By leveraging technology and building organizational efficiency they will have lower costs and higher profit margins.  And if they don’t someone else will.

Webinar Invite – Upping the Benefits Game – Introducing Ideas Most Brokers Aren’t Thinking About


I am conducting a webinar for benefits brokers that you may be interested in. This addresses many of the recent events in the benefits business and incorporates some of the content previously published on this blog. Between what Willis has done and Aetna there is a lot to discuss.

The webinars are on July 8, 13, and 21st from 12-1 est. to register click on this link to my website.

http://www.hrtadvisors.com/AboutUs/HRTWebinars.aspx

Here is some of the text from the invite.

How would brokers react if the entire small group benefits market went fee for service like Aetna is doing? What would the market look like if an individual health insurance plan became tax deductible? HR Technology Advisors would like to invite you to a webinar that will introduce what we think are strategic business decisions that brokers can make today that will position their firms for a much different benefits world. We can assure you these ideas are things most brokers are not close to thinking about that can give you a competitive advantage today while preparing your business for the future.

Feel free to call me if you have any questions at 508-530-5043.

Can Your Benefits Business Endure?


I spent the past few weeks traveling across the country meeting with different benefits brokers when I had a question asked of me that required some thought but produced what I think may be an interesting observation. The question was “What brokers are investing in changing their businesses the most to meet the changing demands of the benefits marketplace?” I speak to many brokers and work with many more and as I thought closely my answer came out as follows: “The brokers changing the most are those that plan on being around in 10 years. It is those that want to perpetuate their businesses independently rather than prepare their businesses for sale.” I could actually visualize the business owners of these firms that I was referring to as I was answering the question.

In my business I contract with brokers and one of the things I try to figure out is whether the broker I am speaking to is going to survive and thrive, sell, or fade away. I don’t know if one of the options is to exist as is in perpetuity. Can a broker survive but not thrive, sell, or fade away for a period of 5, 10, or 15 years? Will “as is” be an option?

The question also reminded me of a quote I saw in Peter Thiel’s book Zero to One that stated, “For a company to be valuable it must grow and endure”. The most important question you should be asking yourself is “will this business still be around a decade from now?” He is not asking whether the business will look different but will it even be around. Using this idea I thought about some of the questions one needs to ask oneself including:

  • Will health insurance still be purchased through an employer plan?
  • Will benefits brokers still be the main distribution source?
  • Will the carriers still be paying commissions? If so at what rate?
  • Will the current insurance companies still be around?
  • How will people (employees) be accessing their benefits information?
  • Will there still be claims analysis tools, underwriting, and where will wellness be?

–          What will health insurance plans look like? If they exist.

There are probably many other questions I could ask.

If you honestly answer these questions or at least make an educated guess then the future of the benefits world will be much different than it is today. If the industry is different how will your business be different?

What I am finding in the marketplace that the national firms are working hard to change. Obviously if they are publicly held companies then there are many people in the organization that want growth or at least compensated for growth. Other organizations that are changing include ones where the owner had brought in a son or daughter into the business. Organizations where the owner is less than 45 years old also see then need to be around 10 years from now. I don’t want to put everyone in the same box as we know there are exceptions to every rule but these are trends that I see.

The behavior of those that plan to be around is much different from those planning to sell or those wanting to hang on until retirement. Those planning to be around are investing in the future. They are making strategic decisions based on the long term and not just short term. They are building a culture that is not complacent but one that is dynamic where people can think different. They lead not follow.

Others have a plan of “Hope”. They hope the world doesn’t change. They hope that they can survive as is. They hope carriers don’t reduce commissions. They hope Zenefits goes away. They don’t invest in the future but actually reduce expenses to save money. They make minimal changes, usually following some other firm rather than think outside the box and plan for the long run.

So now I have written another article on change. I had one broker ask me what I would do if I were a broker. Good question. I don’t write these articles without taking my own advice. Or should I say take the advice of Peter Thiel. The answer to this question will be revealed in my upcoming webinar titled, “Upping the Benefits Game – Introducing Ideas Most Brokers Aren’t Thinking About”. Benefits brokers are welcome to attend this webinar by clicking on the following link to register. http://www.hrtadvisors.com/AboutUs/HRTWebinars.aspx

I guess I will finish with a quote from Henry David Thoreau who said, “Never look back unless you are planning to go that way.” I think it is safe to say that the future of the benefits business will look nothing like the past. So ask yourself, can your benefits business endure? Will it be around in 10 years? If so what will it look like? It is time to ask and answer those questions. Then take action.

Be Careful – Your Benefits Goggles May be Blurring Your Vision


There comes a time in many industries where things begin to change. Some people welcome change and others fight it. Regardless, change is often inevitable and the market forces of change are too powerful to prevent it. I think the employee benefits industry is going through some big changes right now. This article is not really about what those changes are though I can throw out some words like Private Exchanges, Zenefits, ACA, Consumer Driven Healthcare, HSA’s, ACO’s, that are all terms that are more common today than just a few years ago. What this article is about is the ability to recognize change and then take action to meet the challenges that those changes may present. Or should I say to capitalize on the market opportunities that the changes present.

In any industry it is important to recognize change. When you look at firms like Kodak and Blockbuster Video you see two firms that missed the market change. Try to think of the biggest selling cell phones before the iPhone or Samsung. Remember the Motorola Razr? How about the health insurance business? When I entered the benefits business in 1986 UNUM was in the health insurance business. So were Travelers, Prudential, Metropolitan, and Guardian. I do recall delivering my first renewal with an employee rate of over $100. What will the benefits business look like 10 years from today? For the most part the brokerage side of the benefits business has not changed that much over the past 3 decades. However, over the past 5 years the fastest organically growing benefits brokerage firms have been a payroll company and now a technology company. Times are changing.

Recently I have been conducting many webinars for benefits brokers about some of these market changes. While I am not going to proclaim that I am the soothsayer with a clear vision of the future, I do like to try and point out some of the factual changes and provide some interpretation of what these changes may mean for the industry. Zenefits raising $500 million does have industry implications. And how about the number of hospitals entering the insurance business? What are the future implications there? What I find most interesting is the broker audience reaction to some of these webinars. Some brokers don’t want to acknowledge that changes are coming while others simply misinterpret what the actual changes are. Those that don’t see the change most likely don’t want to see it, while others are simply viewing the world from a narrow perspective. I like to say they that their “benefits goggles may be blurring their vision”.

There are many examples of different perspectives. Is Zenefits a technology company or a benefits broker? They call themselves a technology company. Others call them a broker. I refer to them as an outsourcing firm. At lunch today I had the President of a major HR Technology company tell me he believes stand-alone benefits enrollment systems will not exist in the future while earlier this morning a broker was telling me he just invested in a benefits enrollment platform. I had one broker tell me the future will all be individual health insurance. Other brokers are entirely dependent on an existing employer-based insurance model. An employer recently told me he would never allow his broker to offer voluntary products to his employees because he thought they were too expensive. At the same time voluntary product vendors are saying the way to make up for decreasing medical commission is by selling more voluntary products.

The changes you may need to make to compete effectively in a future benefits world may be dependent on some prediction as to where you think the market is going. I know brokers today are struggling to decide whether they want to make a play to compete with Zenefits. The moves you make may be very dependent on what you think their value proposition is. If they are a technology company then you may need to do one thing. If they are really an outsourcing firm you may need to do something else. Whatever it is you choose to do my advice is to take your benefits goggles off. They may be blurring your vision. Because if your vision is off you could choose the wrong path for your business which could have negative implications in the future. And if you want to buy a benefits enrollment technology company just give me a call. I know several that are for sale.

Webinar Announcement – Zenefits Raises $500 Million – What does this mean for benefits brokers?


I write on this blog periodically about Zenefits. Just this week Zenefits announced that they have raised $500 million in additional venture capital. ( read more here ) In my opinion the rules of the benefits game have now changed. $500 million is a lot of money. If you have not heard of or competed with Zenefits they will show up fast, real fast, in your market. It is NOW time to take action – not a month from now or 2 months from now. By then most brokers will lose a case or two to Zenefits. According to Zenefits,  “The new round of funding will enable Zenefits to build up its sales and marketing teams to help the company reach the approximately 5 million American businesses with between 2 and 1,000 employees and to scale its account staff so that it can support these new customers.” And yes, they are going up market.

I am conducting a webinar on this topic over the next few weeks. Any benefits broker that wants to attend this webinar can register by going to my website at http://www.hrtadvisors.com. Go to the webinars section.

While I have done other webinars on this topic this webinar will be different. It will get more into where the market is going versus where it is. I think those who attend will find the time well spent. Click on the link to register. Thanks.