(Hey) Ding Dong, the witch is NOT dead.
As I read the back and forth between Zenefits and ADP, I can almost hear an industry breathing a sigh of relief. Many of you may think this marks the beginning of the end for Zenefits. I don’t think so; they have $500,000,000 worth of pressure to get it right.
Other brokers may not be carrying the weight of $500,000,000 of other people’s money on their back, but the weight of your own business’s survival likely feels just as heavy. Regardless of the final Zenefits/ADP outcome, there are lessons to be learned and warnings to be heeded.
Be careful what you demand, you just might get it
In fact, despite your complaining and desire for them to just go away, you demanded Zenefits. Of course, you didn’t specifically have them in mind, but they are a result of the very free market you demanded when initially threatened with the ACA. You demanded a free market, and now you have to be sure you are able to compete in a free market with inevitable new competitors like Zenefits.
It’s time to quit bitching, pay attention to the lessons being taught, and do something about them. If you won’t, well, you deserve the fate that follows.
First lesson – A free market, by definition, promotes competition
While I think there are many flaws in the approach Zenefits has chosen to take, I also applaud them for the wake-up call they have brought to the industry. While not an ideal business model by any stretch of the imagination, they are still an example of how quickly competition can rise and shake up an industry.
It wasn’t that long ago that this industry was (still is) up in arms about the possibility of the ACA. We DEMANDED a fair, open, and free market. We argued that a free market encourages innovation. We argued that competition is good for business owners. We argued that true cost control is the result of both. We were right in our arguments and we were right with our demands!
But here’s my problem with the arguments and demands. For many, it wasn’t truly a free market they were arguing for and demanding; it was protection of their status quo.
However, you have to realize that because a truly free market, by design, fosters and encourages innovation, change, and competition, the last thing it guarantees is protection of the status quo. For those of you who aren’t willing to innovate; who haven’t fostered change adaptive organizations; who haven’t built a differentiated value proposition on which to compete, you are about to become a fatality of the very free market you demanded.
The business model on which our industry has largely been built (being paid a lot of money for quoting someone else’s product and fixing the related problems) is nothing more than an opiate that has collected countless addicts. It was one thing when our competition was limited to others who were addicted to the same model. However, our addicted ways stand no chance against new competitors with a fresh-eyed, energetic approach.
We must continue arguing for and demanding a free market. However, we must also embrace the height of the bar set by that same free market.
- Innovation must replace the copy-cat approach of “let me quote and fix your problems.”
- Your agency must embrace profound changes to the very core of your business; incremental tinkering will do nothing more than delay the inevitable.
- In a world where “competition” was a matter of who could best dress up the same spreadsheet, most aren’t prepared to compete with new, unknown-before competitors who have created a whole new category. You must compete with the insight and results you bring to the business of your clients; this must become your greatest advantage.
A free market is worth fighting for, but it also means you have to be prepared to fight for your own survival and success every single day.
Second lesson – Collaboration is healthy for everyone
And like the broker community Zenefits has thumbed its nose at, they too are getting what they demanded. When approached by brokers asking to partner with them to take their technology solution to the market, Zenefits basically responded, “Screw you, we’re going to do this alone.” They demanded to take an isolationist approach and now, in a very ironic twist, that’s coming back to haunt them.
I believe that if Zenefits had partnered with the broker community to deliver their technology product and if they had worked hand-in-hand with the payroll vendors, the very brokerage community who has seen Zenefits as the new bane of their existence would be hailing them as one of the most important partners they have.
However, instead of collaborating with the broker community, they chose to hi-jack the broker relationship in order to get the commission dollars. And, instead of collaborating with ADP, it appears they may have hi-jacked the ADP system in order to bolster their technology solution.
Of course, I don’t have access to the inner workings of the non-relationship between ADP and Zenefits, but I have to believe that there was a sizable team of lawyers who reviewed the fact sheet released by ADP. By public accounts, Zenefits hi-jacked the payroll services of their clients in much the same way they hi-jacked the valuable advisor services you were providing. They don’t seem to be concerned about anything other than their own, short-term interests.
Business owners could have enjoyed the benefits of having a collaborative adviser/technology/payroll team serving their needs at an unprecedented level. Instead, because of Zenefits’ determination on isolation over collaboration, their clients have lost access to the advice they used to receive from their old broker and have one of their most critical functions (payroll) in a state of flux. “Free” all of a sudden seems to have a very high cost.
An isolationist approach has been the downfall of many: it has brought down great individuals, companies, and entire countries. Isolationism leads to (or maybe it follows) hubris, narcissism, carelessness, and, eventually, desperation.
An isolationist approach rallies everyone else against you. The path Zenefits has chosen to pursue has alienated the brokerage community they claim to be part of; it has inspired countless new start-ups thirsty for a Zenefits milkshake; and has resulted in them being cut off from a primary lifeline they have to their clients. Hubris? Narcissistic? Careless? Desperate?
Now, before you get all “holier than thou” in condemning their isolationist approach, do a gut check on how truly collaborative you are for the benefit of your clients.
True collaboration starts with the best interest of the client in mind. As I said in an earlier post, no single product will best serve the needs of your clients, whether it’s a technology product or an insurance product. The needs and best interests of today’s clients do include insurance and technology, but, as I have identified before, they are only part of a much bigger answer to much broader needs. There is no single company out there who can meet all of those needs, but those who have the most collaborative mindset are going to come closest.
True collaboration also requires that every player knows his or her role. Just like Zenefits would have better served their clients by focusing on their role as a technology solution while partnering with and allowing the advisors and payroll companies to serve their roles, your clients are best served when you are focused on your true role of advisor.
Don’t confuse collaboration with cohabitation. Simply having access to a technology solution, a compliance solution, an insurance solution, or any other kind of solution is a good start, but it is NOT collaboration. It is not collaboration until you are purposefully working with those partners to ensure that their solution is implemented in such a way that it impacts the business of your mutual clients in the way it is intended to make an impact.
And, the warning – There is no being saved, there is only saving yourself
I have listened to an industry bemoan the entitlement mentality created by the ACA, while at the same time demanding that it’s own entitlements be protected. Nobody owes you anything. The government doesn’t own you anything (other than perhaps a legitimate opportunity to compete), the carriers don’t owe you anything, and your clients don’t owe you anything.
I find it insulting to this great industry that every time it’s “entitlements” have been threatened (and many feel they are entitled to be the distribution model of the carriers and also feel they are entitled to historic commission schedules), so many have sat back and waited, often times demanded, that someone step in and save them.
- We have waited for SCOTUS to determine the ACA was unconstitutional.
- We have waited for the very people who passed the legislation to overturn it.
- We have waited for changes to the MLR rules to return historical commission schedules.
- We have waited for SCOTUS, yet again, to determine parts of the ACA are invalid as written.
- Many are, once again, waiting for a presidential election to overturn it all.
And, now when faced with Zenefits as a competitor, too many are taking the “save me” approach again:
- We waited for Utah to determine their “free services” were illegal.
- And, now many are waiting for ADP to kill the witch.
For those depending on someone else to step in and protect you, I have bad news. Even if the “Wicked Witch of San Francisco” is dead (she’s not), there will be another, and then another, and then another after that. Who knows, ADP may prove to be an even more evil witch herself.
If the survival of your business depends on someone else saving you, you probably don’t deserve to be saved.
Quit bitching about Zenefits, exchanges, the ACA, or your commissions being taken away. Instead focus on your business and your ability to improve the business of your clients in a way that makes you invaluable. Do that and you can’t be separated from your clients; do that and you will always get paid for what you do.
I’m not suggesting that this means you have to go at it alone – you read my thoughts on collaboration – but you do have to be a part of your own solution.
There are many producers and agencies that will not survive. However, the industry that is left standing will prove to be the single most valuable partner any business owner has. Those left standing will innovate and collaborate in such a way that they will have the broadest, most significant impact on their clients of anyone – more than the accountant, the attorney, or the banker. The industry left standing will impact their clients strategically, financially, operationally, and emotionally. America’s businesses will be stronger because of what our industry will do for them.
I don’t know about you, but that gets me excited; that makes me proud to be a part of this industry. Now, let’s go get that transformation started – together!
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