Tag Archives: Beneifts Enrollment Systems

The Zenefits/OneDigital Partnership – It’s Magic

You may have seen the news about the Zenefits/OneDigital deal and the how Zenefits will now start working with brokers. This news reminds me of a magician performing a magic trick. They get you to focus on one hand while the other is where most of the action is happening. With this new partnership, most brokers are probably focusing on this competitor named Zenefits. The real story however is about the competitor named OneDigital.

The details of this relationship and how Zenefits may partner with other brokers has yet to come out. Let me speculate here. First, I would assume the OneDigital deal with Zenefits is similar to what OneDigital has done with other brokers in their small group outsourcing business. OneDigital gets 50% – 60% of the commissions to manage the business and the other broker gets 40% – 50%, or something like that. Without some significant share of the commission being retained by Zenefits this deal would not have happened. If Zenefits was giving away free software then they certainly can’t give away all the revenue and still employ all their people.

I would assume that any broker that wants to have a relationship with Zenefits will have to provide what OneDigital is doing. Handle all the service for 60% of the revenue. Or if they want to sell Zenefits technology, I would imagine the fees would need to be closer to what the market is.

The thing about OneDigital is they built a business based on leveraging technology in the most optimum way to drive down costs and provide better service. Brokers tell me all the time they can’t make money on small group for 100% of the commission yet OneDigital does it with only 60% of the revenue. How can that be?

The idea of combining HR/Benefits/Payroll technology with services is something we have been touting for years now. In fact, a shift in our business was made because of the need to provide the united services around the technology. Even Namely recently announced they are moving from a software as a service model to software with services model. These services include benefits brokering along with benefits administration and of course, HR and payroll.

The one-stop-shop for everything HR is an attractive value proposition for employers. Mike Sullivan, One Digital’s Chief Growth Officer stated in today’s Employee Benefit Advisors article that, “In a very client-centric way, the alignment of these two platforms makes sense for small businesses.” Indeed, it does.

This is not OneDigital’s first play in this space. It was less than two years ago when they announced their investment in GoCo. The title of the press release said, “GoCo Takes Zenefits Head on with Digital Insurance Partnership and Investment”. You can see that press release here. Even today Mike Sullivan is still listed on the GoCo website as a Board Member. I don’t know where this leaves that relationship.

What will come out in the coming days or weeks is how Zenefits plans to partner with other brokers. I wonder if and how the insurance commission is going to be leveraged to deliver this joint offering. Somehow, I don’t think this strategy of benefits commissions subsidizing HR technology game is over. Firms like Gusto and Namely are still combining benefits brokering with HR/Payroll technology and services. And we all know that other brokers are subsidizing systems across the country to get new business. As I have stated in the past, the idea of giving away free technology to get a broker of record started at least a dozen years before Zenefits was even founded.

Personally, I don’t think Zenefits has anything special, but OneDigital does. So, while most brokers are paying attention to what they perceive as the fall of Zenefits, I think the competitor to look out for is OneDigital. They will be knocking on your client’s door.

Note: This article is wildly speculative, but it is my blog. As more information comes out I will write again.

Your Competitors May Not Be Who You Think

This past week there were two press releases related to the benefits brokerage business that were fairly significant. One of them was picked up by the industry publications, generated some kudos on LinkedIn, and created some noise in the benefits community. Brokers were talking about it and many emailed me or called me to see what I thought.

The other one went mostly unnoticed in the benefits world. The industry pubs didn’t pick it up and I did not get a single phone call asking my opinion. Yet, from my perspective, the second press release will have a greater impact on the average benefits broker than the first.

This contrast made me think of a quote I keep on my wall that reminds me to not be complacent. It is from Jim Keyes, the former CEO of Blockbuster Video, who once said:

“Neither RedBox nor Netflix are even on the radar screen in terms of competition,” he said. “It’s more Wal-Mart and Apple.”

We all know how that turned out.

The first press release announced the merger of 20+ benefits firms, many who I know. While this is noteworthy, I am not sure that the world is any different today because of it. Yesterday they were wearing one uniform and today they are wearing another. They are the same people, in the same locations, and until there is some other new big announcement they are probably doing pretty much the same thing today that they were doing yesterday.

From a competitive standpoint, I am pretty sure this event won’t change the landscape much. Most brokers are already competing with larger firms that use their size and resources as their competitive advantage. Some brokers may even think this is good for them competitively because their market just lost another boutique firm and the competition of local boutique firms just got smaller. In reality, not much has changed until someone brings something new to the market.

The second press release was from a company called Namely. Namely raised an additional $50 million in capital bringing their total capital raise to $157.8 million. (Source: Venture Beat January 5, 2017) Concurrently, Namely also announced the following:

“Namely also announced today a new benefits offering called the Namely Health Advantage, which groups together similar companies to offer their employees health benefits at preferred rates.”

What makes this significant is that Namely has brought something new to the market. They have developed an engaging HR-Benefits-Payroll platform promising simplicity and ease of use. They also act as a benefits broker, creating a single source technology and service offering to employers. And as can be seen from the quote above, they created a new health insurance offering for their clients.

Namely claims to have 650 clients totaling 120,000 employees which would be an average client size of around 185 employees. Unlike companies like Zenefits, that targets much smaller employers (< 50 employees), Namely targets mid-market employers ranging from 100 – 1000 employees. From a competitive standpoint, this is the sweet spot for many benefits firms.

If you do the math and assume they are generating revenue at a $25 per employee per month rate, then their annual revenue would be in the range of $36 million. This is a real rough guess. Even if I am off by $10 million it would not be bad for a company that was founded in 2012. That would make them one of the fastest growing benefits brokers in the country. Though I am sure they would not classify themselves as such.

In 2015 there was $2.4 billion invested in HR Technology type companies. And as one industry analyst said, “Do you know what they will do with that money in 2016 and 2017”? Spend it. They will spend it on marketing and sales. They will have Ads on LinkedIn and Google. They will be at all the HR trade shows. They will be everywhere marketing to your customers and prospects. Namely has even had TV commercials on Fox News. I don’t see many brokers advertising on TV.

I could imagine asking the average benefits broker about their competition and it would not surprise me if they responded as follows:

“Neither Namely nor Zenefits are even on the radar screen in terms of competition,” he said. “It’s more Gallagher, Mercer, and USI.”

You may not have recognized this competition yet. Many brokers say they never lost a case to Namely or similar companies. What they don’t know is how many prospects they lost to these firms. How many employers looking for solutions found Namely but did not find you? How many prospects would respond to their value proposition versus yours? Do you even know what their value proposition is?

There is a way to meet and beat this new competition. But is takes work, planning, investment, and risk taking. Or maybe these firms are really nothing to worry about. Ask Jim Keyes what he thinks.

It’s a Saturday night and I should go. I could end this article by saying I am going to be watching a movie on Netflix tonight but playoff football is on, and anyone who knows me would know I am lying. But if you want to learn about these new competitors and what you can do to compete with them, check out our latest webinar titled, “The Future of Human Capital Management and Benefits” by clicking on this link.

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.

Benefits Brokers Can Make a Difference with HR and Benefits Technology in 2015

I was in a meeting about a month ago with a broker and we were talking about business when he mentioned how he was always paying attention to outcomes. It got me thinking about how sometimes when you wander through life or business you tend to take your eye off the ball. You do things and go through the motions and forget about what the objective is to whatever action you are taking. What is the expected or desired outcome of your action?

In my business we help brokers and their customers find and implement technology to simplify the administration and communication of the HR and Benefits. What I am finding is that the utilization of technology in the HR area is not much different than in many other areas. The technology is under-utilized and the desired outcomes are often not met. There is an opportunity for a third-party to help these employers make a difference. And those that provide this type of results based support will reap the benefits.

Ask yourself these questions:

  • How many employees really understand their benefits?
  • Do employees know what products like critical illness or voluntary disability are?
  • How many employees are properly insured?
  • Should an employee pay off their credit card first or buy the right amount of Life Insurance?
  • Should an employee buy a lower deductible for health insurance before buying the right amount of disability?

The internet and use of mobile devices creates an opportunity for third-parties like insurance companies or benefits brokers to reach a large group of people in an easier way. The internet can effectively be used to educate people and provide information on demand. Yet, for the most part, this does not happen in the benefits industry because few carriers or brokers have recognized that this is their job and therefore have not developed the capability to engage the employee in an effective way via the web and mobile.

I am often told by brokers that they are not technologists. Any broker that has heard me speak about technology will have heard me say that technology is just a tool to solve a business problem. Benefits brokers have been in the business of helping employers enroll their employees in benefits and communicate benefits. Now that these things are done via the web does not absolve them of their responsibility.

I remind them that understanding the tools of your profession is your business. My analogy is that if I hire a realtor to sell my house that realtor needs to know how to take pictures of my house and upload those pictures to the web to sell my house. That does not make my realtor a technologist or a photographer. It makes my realtor a better realtor. The same goes for a benefits broker. Understanding the technologies impacting your business makes you a better broker. It doesn’t make you a technologist. In my opinion the failure of brokers to realize this has been a major part of the problem.

Many brokers are too focused on making themselves “sticky” with the client using technology. I have a broker a week looking for a technology solution where if the client were to fire them they could turn off the technology. In my opinion trying to “tie” the client to your firm with technology is not in the best interest of the client. It certainly does not pass the test of being a trusted advisor. Other brokers will point out your motives. I believe there is an opportunity is to do something special so your clients won’t leave you and it does not require you to tie them to you with some technology. This strategy often results in the broker being tied to some technology vendor with some big financial obligation.

I laid out a vision of what is possible by leveraging technology in my article titled, “What Would Steve Jobs Do If He Were a Benefits Broker Today?” See my article here: https://joemarkland.wordpress.com/2013/12/22/what-would-steve-jobs-do-if-he-were-a-benefits-broker-today/ . The technology is available today to make the administration and communication of HR and Benefits much better. The problem is that most employers either don’t have the capacity, capability, or the vision to deploy technology in a way where the outcomes are at a minimum desired, but at a maximum, awesome. They need help. Those that help the client in this area with the client’s best interests in mind will find that they will win more business. You can make a difference with technology in 2015.

If You Want Results Like Zenefits You Need to Mow the Lawn

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.

What Would Steve Jobs Do if He Were a Benefits Broker Today?

One of the things my firm does at HR Technology Advisors is look for new and unique technologies that can change the way employers and employees manage their HR, Benefits, and Payroll. The HR and Benefits industry, like most others, has had its share of new technology vendors offering the latest and greatest solutions that they claim can change the world. In this market, like others, there will be winners and there will be losers, but the winners may change the way things are done forever.

As a practice I conduct regular educational webinars for benefits brokers introducing new ideas that can be leveraged to generate new business and often highlight some forward thinking HR and Benefits Technology vendor. To my surprise, the most common response I get from brokers attending these webinars is “Nobody is asking me for this”. Whenever I hear this comment it makes me think of Steve Jobs. You see, Steve Jobs was the total opposite of “Nobody is asking me for this.” When I read the book about Steve Jobs by Walter Isaacson I took many notes (on my iPad) which included one of my favorite Steve Jobs quotes.

“Some people say, ‘Give the customers what they want.’ But that’s not my approach. Our job is to figure out what they’re going to want before they do. I think Henry Ford once said, ‘if I’d asked customers what they wanted, they would have told me, ‘A faster horse!’’ People don’t know what they want until you show it to them. That’s why I never rely on market research. Our task is to read things that are not yet on the page.”

Now think back to the time you saw the first iPhone commercial. (You can see it here: http://www.youtube.com/watch?v=4acWkNihaxc ) If you were like me, then you were thinking, “Wow, I want that.” But prior to that commercial how many of you were sitting on your couches thinking that you would really like a handheld device with a glass screen where you tap on icons to watch a movie, browse the internet for a restaurant, find that restaurant on a map with a phone number, and then press on the phone number that pops up a phone so you can make a reservation? Unless you were a Trekkie (Star Trek Groupie) then you most likely weren’t “asking for this”. Steve Jobs and Apple “changed the game” and delivered something that once seen, everyone wanted. I don’t know how many people bought an iPhone right after seeing the commercial but Apple has sold over 300 million of them worldwide. Imagine they sold over 300 million of something that nobody was asking for.

Now many of you may think this is crazy to not ask your customers what they want. Don’t confuse what Steve Jobs was doing with not caring about what your customers think. This is where I am going to quote another young Billionaire, Mark Cuban. In his book titled, “How to Win” I found a quote that addresses this issue. It is as follows:

“Your customers can tell you the things that are broken and how they want to be made happy. Listen to them. Make them happy. But don’t rely on them to create the future roadmap for your product or service. That’s your job.”

There is a distinct difference between listening to your customers and driving the vision of your business. It appears that Steve Jobs, Mark Cuban, and Henry Ford share the same philosophy. And to quote Mark Cuban again:

“The best way to predict the future is to invent it.”

So if Steve Jobs were a benefits broker today what would he do?  I am not going to claim to know but I would imagine if Steve Jobs were a broker he would think of a new technology to make things easier.  He would ask himself and his team to imagine what would be the best system for an employee to access work related information. How would they purchase benefits? How could they learn about them? How would an employee transact an enrollment? How would they request a vacation day? How can they access pay information to do their taxes?  What would be the perfect system for an employee? What I do know is that if Steve Jobs built such a system people would say “Wow! I want that.”

Now I don’t think I can elevate HR and Benefits Technology to the same level as the iPhone because the iPhone’s launch was almost a “one of its kind”. Nor do I think someone has built a HR and Benefits solution that would match what Steve Jobs would have built. However, the idea and opportunity to bring something new and innovative to a prospect or customer that they “aren’t asking for” exists in the benefits business much like any other industry.

That being said, I recently did see a solution that I think if a CEO saw it they would say, “Wow! I want that.” Because I believe the majority of CEO’s want to show their employees they are forward thinking.  They want their employees to be happy, healthy, and productive. They want to be efficient and save money. They want to promote their brand and culture to their staff. They want to eliminate business risks related to HR and Benefits or for that matter, in any area of the company. And they want to inspire their employees to help move their business forward much like you may want to move yours forward.

Just imagine a system where an employee logs in and can immediately see all the things that are important to him or her. They can see how many vacation days they have left, the balance of their 401K, their FSA balance, and see their YTD pay. They can watch a video on Wellness and do a Personal Health Assessment. They could get tips on finance from Dave Ramsey and even go through a whole financial plan online. They could enroll in their benefits and do online chat with a benefits counselor. They could purchase products at a discount through payroll deduction. They could chat with their co-workers and participate in topic based discussions. They could do all this from home or work on smartphone, tablet, or Smart TV without having to log into ten places or remember ten user names and passwords. They would have just one.  Just imagine!

For someone who wants to change the way they do business and deliver this type of solution the opportunity is there today. It does take hard work and a commitment to change. It requires a vision and attitude that there is a better way. As a technology consultant I know the technology exists to get this done yet less than ½ or 1% of employers are delivering this type of experience to their employees.

The good thing about solutions like this is that CEO’s are not sitting on their couches watching commercials promoting these types of solutions. It’s not because they aren’t watching TV, it’s because solutions such as this aren’t sold through TV commercials. Someone has to get in front of the CEO and show them. And then I believe they will say,” I want it”. The question is who will show them first.

So if Steve Jobs were a benefits broker today what would he do? Well one thing I am quite sure of is he would not say, “Nobody is asking me for this”. He would find a way to be the innovator because he believed “Innovation distinguishes between a leader and a follower.” (“The Innovation Secrets of Steve Jobs,” 2001).  And I will add that being an innovator is more fun too.