{"id":1185,"date":"2015-12-05T16:19:40","date_gmt":"2015-12-05T21:19:40","guid":{"rendered":"https:\/\/digital.hbs.edu\/platform-rctom\/submission\/zenefits-disrupting-human-resources-management\/"},"modified":"2015-12-09T17:43:48","modified_gmt":"2015-12-09T22:43:48","slug":"zenefits-disrupting-human-resources-management","status":"publish","type":"hck-submission","link":"https:\/\/d3.harvard.edu\/platform-rctom\/submission\/zenefits-disrupting-human-resources-management\/","title":{"rendered":"Zenefits: Disrupting Human Resources Management"},"content":{"rendered":"

Zenefits<\/a>\u00a0is a fast\u00a0growing\u00a0startup\u00a0that offers a human resources software-as-a-service (SaaS)\u00a0platform for\u00a0a variety of functions\u00a0including payroll, benefits management, vacation tracking, compliance, and more. Founded in 2013, Zenefits now serves over 10,000 firms\u00a0who in turn employ\u00a0over 100,000 employees.<\/p>\n

Zenefits is rapidly disrupting an old-line industry that has long been\u00a0dominated by giants such as\u00a0Automatic Data Processing<\/a>\u00a0(ADP) and\u00a0Paychex<\/a>. Zenefits offers a robust\u00a0online platform\u00a0that powers a variety of services, all of which are offered to customer firms for free. \u00a0The firm makes money if and when their customers enroll in\u00a0health insurance plans via the platform, \u00a0acting as a health insurance broker and receiving commissions from insurance providers. The health insurance brokerage commission market is estimated to generate over $18 billion in sales annually, and traditional brokers\u00a0offer their customers little in terms of support for customers other than a new health insurance plan – they certainly do not offer full HR management solutions. This freemium business model offers value to all users, but only captures value when users sign up for a certain subset of services. Even then, the value capture is not directly from the users, but rather indirectly from insurers.<\/p>\n

\"gfvbyygvzile2mhhyjng\"<\/p>\n

Zenefits is pioneering a new model that delivers immense value to customers.\u00a0By tapping into a unique revenue stream in the form of health insurance commissions, Zenefits is able to offer services such as time tracking and payroll (which traditionally have cost firms hundreds of dollars per employee per year) for free. This operating model combines two prior models – the payroll provider and the insurance broker – reducing overall cost for customers and allowing Zenefits to quickly capture market share from traditional firms. Conrad Parker, Zenefit’s CEO, has boldly proclaimed an internal target of $100 million in revenue under contract by January 31 of 2016 – an unprecedented rate of growth considering that the firm had $20 million in revenue under contract in January of 2015, and that the firm was founded less than three years ago.<\/p>\n

In order to grow at such an impressive rate, Zenefits has focused on aligning its\u00a0entire organization around delivering a strong technology product and then aggressively selling this product. The company has sought to automate and digitalize processes that have traditionally been managed on paper. Customers and their employees are able to manage a wide variety of\u00a0on boarding tasks and HR management functions from Zenefits portal. This reduces c0sts\u00a0(paper, shipping, processing etc.), centralizes information, and allows customers to handle more issues in a “self-serve” capacity, ultimately reducing the need for labor to support customers. Secondly, Zenefits employs an aggressive sales force with over one hundred employes. This sales force is heavily incentivized to onboard new clients, and furthermore to sign these clients up for insurance policies via Zenefits, which is how Zenefits generates revenue.<\/p>\n

\"Zenefits-Dashboard\"Zenefits operating model is built around reducing costs and offering a low cost service to customers. They accomplish this in two ways – first, they have combined two, traditionally separate business models (insurance with\u00a0HR management services) and have cross subsidized one set of services (payroll\/401k\/HR management) with the revenues of the other set (insurance). This is an indirect form of capturing value for their other offerings, but has allowed the company to deliver immense value to customers. Secondly, Zenefits has\u00a0effectively employed technology to minimize labor inputs and to automate a number of processes that historically have required human involvement. Finally, the management team has built an organization that is aligned and incentivized to market, sell and deliver\u00a0the\u00a0service to customers. Zenefits operating and business models are well aligned, and they will continue to disrupt the human resources management industry.<\/p>\n

 <\/p>\n

Sources:<\/p>\n

Zenefits<\/a><\/p>\n

Business Insider: Zenefits CEO Refutes the Naysayers<\/a><\/p>\n

SAASTR: How We Hyperscaled Inside Sales<\/a><\/p>\n

New York Times: Zenefits Leader is Rattling an Industry, So Why is He So Stressed Out?<\/a><\/p>\n

Wall Street Journal: Zenefits Tries to Take the Pain Out of Human Resources<\/a><\/p>\n

Pando Daily: Zenefits\u00a0Raises $500 Million for its HR Software and Insurance Hybrid, Beating Off New Customers With a Stick<\/a><\/p>\n

 <\/p>\n","protected":false},"excerpt":{"rendered":"

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