The resignation this week of Parker Conrad as the CEO of tech darling and HR administration upstart Zenefits should hopefully serve as a wake-up call to other technology providers in the fledgling health insurance and human resources technology sectors.
The digital transformation of these industries is inarguably long overdue. Many group insurance brokers fear this disruption, still clinging to vestiges of the past. But long gone are the days when brokers could retain clients simply based on relationships: the annual round of golf, dinner out with the spouses, and a slap on the back just don’t cut it any more. Results matter.
Many early tech entrants have already demonstrated the capacity for technology and automation to bring about dramatic improvements in HR administrative efficiencies, data accuracy and regulatory compliance. (To be fair, however, true cost containment yet remains elusive, but that’s a subject for a different day.)
Zenefits value proposition, while no means perfect, shows some promise for very small companies who either don’t see, don’t value or don’t understand the services provided by their benefits broker. But their reckless behavior in prematurely entering the market proves that taking shortcuts at every turn will eventually catch-up with you.
There are countless maxims in the start-up world used to self-justify rushing a sub-standard product or service to market. There’s “fake it ‘til you make it”, “80 percent today is better than 100 percent tomorrow” and my favorite, the “minimal viable product”.
The latter concept posits that cash-strapped and time-constrained start-ups need only build a product or service with the absolute minimum set of features to test the offering and gain early interest. While there’s mostly nothing wrong with this approach, if used solely to justify a “proof of concept”, all too often these companies fail to follow through on the all important next step in the process, which is to then plow all of their initial user feedback back into a meaningful development cycle to develop a thoroughly QA’d, full feature, fully-compliant product worthy of a full scale launch.
Flush with cash, full of hubris, and under intense pressure from investors to demonstrate rapid growth and adoption, Zenefits simply failed to finish the product.
As has been covered extensively in the press, they cut corners at every turn. When their automation software failed, they evidently covered it up and quietly hired thousands of people to manually (and inaccurately) process records their clients trusted were being processed in an automated fashion. When they couldn’t meet ADP’s safety standards for data integration, they reportedly deployed automated systems to circumvent ADP’s safeguards, trigging a self-imposed shut down of ADP’s systems. And when they couldn’t get their sales people licensed to legally sell insurance in all 50 states, they simply ignored the regulations.
At each and every turn, they put their clients’ businesses in jeopardy. In doing so, they have in all likelihood slowed technology adoption in this space. It’s no wonder that their newly appointed CEO, David Sacks, told employees on Monday that “effective immediately, Zenefits’ values will be to operate with integrity, put the customer first and make the company a great place to work for employees.
"Effective immediately? Really? For a company that’s only three years old, it’s somewhat remarkable that a company still in its infancy already needs to reestablish its moral center. And for a company whose value proposition is to “ease the HR administrative burden” for their clients and “put things on auto-pilot”, the irony here is all too rich.
For what it’s worth, and for the good of digital transformation in these industries, we’d like to see Zenefits right itself. But far more, we’d like to see a return to the days where another adage was far more popular than “minimal viable product”; that of “under promise and over deliver”.
If you would like more information about the use of technology in benefit communications, please contact us today. As specialists in employee benefits automation, we can help you find solutions that work best for your employees and your company as a whole.
Editor's Note: Since publishing this blog post, another high-flying start-up in the healthcare and insurance space dominated the news with a potential cover-up which misled investors as to the state of its technology and operations. You can read all about the rise and fall of that company, Theranos, right here as well as the collateral damage they've caused for their strategic partner, Walgreens.