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Dec 20, 2016

Since late 2014, I’ve heard agents around the country complain about Zenefits. “They can’t take BORs like that!” “They aren’t even changing the plan design!” “Clients will hate their service once they find out how bad it is!”

But Zenefits kept growing. And took business all across the country. And got hundreds of millions of investment dollars at a $4.5 billion valuation.

Then, in February 2016, Zenefits fell from its perch due to ethical and compliance lapses by CEO and founder, Parker Conrad (and probably many on the management team). Conrad was fired in February 2016; the valuation was cut to 'only' $2 billion; they fought state regulators across the country with the largest fine ($7 million) coming from the California Department of Insurance and Washington state calling their business model illegal (ruling they must charge for their software).

In February, I heard the sigh of relief from brokers across the country. “I told you so,” they said. I believe many felt all this news justified their lack of change. With the latest findings this month, the audible sigh hit social media again.






I will chime in with two lessons I’m taking from all these events and hope they help you, too…

1)   Brand matters. And ethics impact your brand.

Your company’s brand matters. So does your personal brand. Your reputation will make it easy for people to refer others to you. Or it will make it easy for people to tell horrible stories about you.

As the stories go, Parker Conrad apparently loved to pick a fight and thought he had a Teflon reputation. Like many business leaders and politicians before him, he thought normal rules didn’t apply to him (in fact, he wrote a special program that allowed his employees to bypass state licensing laws). Although his investors loved what he was creating, in February they had to fire him to attempt to save the Zenefits brand. His blatant lack of ethics proved the market couldn’t trust him.

What can you learn from this?






20 years ago a mentor said to me (as we were making a decision about how to handle a tough situation), “Can you live with this if it is printed on the front page of the newspaper tomorrow?” It’s been a fantastic guide in my professional life. Be humble. Don’t get to a point where you believe standards in business don’t apply to you. Don’t ever think “nobody will find out.” Somebody ALWAYS finds out.







2)  This doesn’t mean you don’t have to improve.

Just because Zenefits stumbled doesn’t mean they’ve fallen. Based on current reports, it looks like they still grew by more than 50% over last year. Other companies watched their meteoric growth and are also setting their sites on similar services - and (sooner or later) broker commissions: Namely, BambooHR, ADP, Gusto Trinet, Paychex, and more…

What can you learn from this?






A common theme among the brokers who cheered Zenefits’ bad press was “nobody else can do what we do” and “this justifies me not changing my business model.” Too many brokers haven’t significantly improved their client service in the past decade. As an industry, we continue to rank only above Internet & TV Service Providers. If your business didn’t grow 50% this year, then you should get better. Become more of a consultant. Ask your clients what they appreciate about what you do, and what other challenges they need help with. Stop selling the same way you have for years. Find new benefit strategies that differentiate you and your business.

So, what’ll Zenefits do next? Honestly, I don’t care. And neither should you. We should both be so busy implementing real improvements to our companies’ service model, that we can’t be bothered.






Now it’s your turn! What lessons does Zenefits teach you? What changes have you made to your business that paid off? Comment below or send me an email to


Reid has a passion for helping brokers & employers strategize fresh approaches to benefit plans that contain costs and increase access to care - helping employers & employees control their healthcare dime, time, and peace of mind. He writes & speaks around the country and is the Co-Founder & CEO of freshbenies.

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