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Now I'm wondering whether Zenefits was even a technology startup or more of a hustler operation which went online. Excerpt: Zenefits’ technology was frustrati

by achow 11y ago

Now I'm wondering whether Zenefits was even a technology startup or more of a hustler operation which went online. Excerpt: Zenefits’ technology was frustratingly limited. The software is built around a central dashboard and lets small businesses onboard new employees, generate health insurance quotes, and manage 401(k) plans and other benefits. But while this system looked slick and did a fine job with small tasks, much of the important work on the backend was done manually. “The back office is really heavy in terms of bodies,” one former Zenefits employee said. “It’s really archaic. It just seems automatic to the customer.” This kind of work is standard practice in the insurance brokerage business, but it’s notable for Zenefits, which purports to be an “automated” solution. The lack of true automation behind the scenes led to numerous problems. With one customer, Plated, a food delivery startup in New York, mistakes by Zenefits staff in entering payroll deduction information caused a string of erroneous paychecks to be issued, according to one former employee and an online comment by Plated co-founder Nick Taranto. Zenefits is “not connected well enough with payroll providers,” Taranto wrote, “so we’re having to cut lots of manual checks.” The first public indication that something was amiss at Zenefits came last summer, when BuzzFeed News reported that customers were complaining of software glitches and seemingly careless errors.

puranjay 11y ago
This reminds me of FoodPanda India, the Indian arm of Samwer Brothers' FoodPanda food delivery service. The app was just a front-end. When customers ordered something, people sitting in call-centers would manually order the items at restaurants. There was zero compliance, widespread scams and no checks and balances, all along with minimal technology. Full story for anyone interested: http://www.livemint.com/Companies/rYKC6HjnShogjE62jO5lpK/The-trouble-with-Foodpanda.html http://www.livemint.com/Companies/rYKC6HjnShogjE62jO5lpK/The... I'm becoming more and more cynical of the startup world and the press that makes founders out to be heroes.
- brianwawok 11y ago
  Startups are supposed to do things that don't scale. Seems a reasonable way to get going..
  - ryguytilidie 11y ago
    What? Why would you do something that doesn't scale? This is like the exact opposite goal of a startup...?
    - brianwawok 11y ago
      New around here? http://paulgraham.com/ds.html http://paulgraham.com/ds.html
      - ceejayoz 11y ago
        PG isn't saying "do stuff that won't ever be possible to scale" in that, though.
        brianwawok 11y ago
        Sure. But if the other providers don't have an API, it may take hiring a bunch of fax machine runners for a few years. Doesn't mean that was the end game plan... especially if they could automate as much of the fax machine running as possible.
    - traviscj 11y ago
      My take: you try to do something that could scale, but maybe doesn't. You might start with something that doesn't scale to explore market fit and figure out whether it's worth genuine automation. Seems like the problem here was either choosing not to or simply not being able to automate their process.
      - brianwawok 11y ago
        My take is prove if it works and gets enough traction before you fuss over how well you scaled. If that meant you had to hire 100 people to fax things for a year or two, that seems reasonable (especially if you aren't losing massive money because of it). I suspect you could still be profitable without automating 100% of selling insurance. Source: Every other insurance agency out there.
- Erwin 11y ago
  That's how TopTable, a UK table reservation site used to work. 10 years ago most restaurants did not have online booking (may be not even a website!), but you could still book through TT -- they'd just call the restaurant on your behalf to confirm and update your account. I believe this was a win/win for the restaurants: a fancy place back then might well have free tables for tomorrow evening but everyone will think they're fully booked. TopTable was eventually acquired by OpenTable (losing lots of its charm in the process).
bbulkow 11y ago
Who cares whether they're a technology provider? It's a benefits service, and I don't care how they achieve a better user experience. If they do that in the short term with humans, power to them. Isn't that the mantra of MVP that we all worship these days?
- semerda 11y ago
  A ~$4B MVP?
dkarapetyan 11y ago
Have you ever peeked into how payroll, healthcare, and insurance systems work? This is a genuine question, I'm not trolling. The reason I'm asking is because you can't really have automation and APIs for systems that have literally zero automation to begin with. The entire industry is a combination of fax machines shuttling paper back and forth between the different players. It doesn't matter how much software you throw at this problem if you're just a broker because from the perspective of the other players you're just another fax machine. That is the level of electronic and computer sophistication of the healthcare insurance industry, fax machines. ADP, Trinet, etc. are just as manual and full of error prone human processes. It's all just heroic human effort on all sides. If anything Zenefits has shown the incumbents and everyone else in the space that you can indeed provide a software solution that integrates well with human processes and in the long run make things much more automated and efficient.
- manyxcxi 11y ago
  Having had to work with ADP and a number of insurance agencies before on technology projects- I can't imagine what a nightmare scenario it would be to try and automate all of these companies together. I could see how a company could try to fake it until they make it- as in, until they get enough clout (via money, customer base, important friends) that the companies they're trying to automate realize that it is in their best interest to work with them. However, while trying to make it, I would think that you would do everything humanly possible not to screw up even one piece of data for even the lowliest of customers. If you are 100% above board and have a really good process in place, when things happen you can be pretty sure it wasn't you, and you can be in a better position to actually help the client. FFS, Zenefits is screwing up the only thing about employment that matters to a lot (most?) people: the freaking paycheck and the health care. Hearing all these horror stories it becomes hard to see how Zenefits gave a crap doing their job at all- I can understand a mistake, but a mistake with a devil may care attitude means you've lost my business forever.
  - api 11y ago
    I think this was exactly their strategy and it failed since these industries are stubborn and moribund to an extent that's hard for us to imagine. I've had a little exposure to health insurance and the medical bureaucracy and I've worked as a government contractor, and in my experience the healthcare world is far more sclerotic than the Federal bureaucracy in many areas. The Feds are also much more open to automation and newer technology, while in medicine they literally do everything with paper files and fax machines and will not budge.
achow 11y ago
Trying to connect dots together. If Zenefits solution was so manual and archaic then was ADP right in the year old controversy... On June 4 (2015), we disabled Zenefits access to ADP’s RUN small business solution due to unusual and alarming demand for data from Zenefits far out of proportion to the number of clients who have allowed them access to our system. Despite Zenefits serving less than 0.25% of the clients on our system, they had been responsible for up to 25.0% of the total user traffic (in other words, a hundred-fold times ordinary user traffic). …it was pulling sensitive information, including unmasked Social Security numbers and employee banking information, in a manner that did not comply with ADP’s standards for data security. http://www.businessinsider.com/adp-and-zenefits-are-at-war-2015-6 http://www.businessinsider.com/adp-and-zenefits-are-at-war-2...
verst 11y ago
Not only was Zenefits doing lots of manual work behind the scenes, but also was the quality of that work incredibly poor. Personal anecdote: Enrolled for health insurance through the Zenefits portal. Waited a few weeks for my insurance information in the mail. Eventually I got an insurance card for someone with a different name and gender, but with my address, phone number and even social security number! I even got the insurance nurse hotline calling me for this person, but not for me. It took Zenefits 2+ months to correct this data entry issue. Another anecdote: The insurance plans we had selected with our account rep were different from the ones offered through the Zenefits portal. We assumed these were the same, but employees were actually enrolling for worse plans than we had thought. Account managers were generally very unresponsive, then again - we were just a small startup (but with very simple, standard needs).
- x0x0 11y ago
  I also had an unfortunate zenefits experience. They had difficulty giving clear answers about a critical detail of dependent coverage, and I felt uncomfortable enough with their answer that I didn't trust them and spent hours on the phone with Anthem to verify. That said, a previous startup that did not use zenefits fucked up DOBs for both me and my partner, causing her to be unable to fill scrips for a while. So they're not the only ones with issues.

by achow 11y ago

puranjay 11y ago

This reminds me of FoodPanda India, the Indian arm of Samwer Brothers' FoodPanda food delivery service. The app was just a front-end. When customers ordered something, people sitting in call-centers would manually order the items at restaurants. There was zero compliance, widespread scams and no checks and balances, all along with minimal technology. Full story for anyone interested: http://www.livemint.com/Companies/rYKC6HjnShogjE62jO5lpK/The-trouble-with-Foodpanda.html http://www.livemint.com/Companies/rYKC6HjnShogjE62jO5lpK/The... I'm becoming more and more cynical of the startup world and the press that makes founders out to be heroes.

brianwawok 11y ago
Startups are supposed to do things that don't scale. Seems a reasonable way to get going..
- ryguytilidie 11y ago
  What? Why would you do something that doesn't scale? This is like the exact opposite goal of a startup...?
  - brianwawok 11y ago
    New around here? http://paulgraham.com/ds.html http://paulgraham.com/ds.html
    - ceejayoz 11y ago
      PG isn't saying "do stuff that won't ever be possible to scale" in that, though.
      - brianwawok 11y ago
        Sure. But if the other providers don't have an API, it may take hiring a bunch of fax machine runners for a few years. Doesn't mean that was the end game plan... especially if they could automate as much of the fax machine running as possible.
  - traviscj 11y ago
    My take: you try to do something that could scale, but maybe doesn't. You might start with something that doesn't scale to explore market fit and figure out whether it's worth genuine automation. Seems like the problem here was either choosing not to or simply not being able to automate their process.
    - brianwawok 11y ago
      My take is prove if it works and gets enough traction before you fuss over how well you scaled. If that meant you had to hire 100 people to fax things for a year or two, that seems reasonable (especially if you aren't losing massive money because of it). I suspect you could still be profitable without automating 100% of selling insurance. Source: Every other insurance agency out there.
Erwin 11y ago
That's how TopTable, a UK table reservation site used to work. 10 years ago most restaurants did not have online booking (may be not even a website!), but you could still book through TT -- they'd just call the restaurant on your behalf to confirm and update your account. I believe this was a win/win for the restaurants: a fancy place back then might well have free tables for tomorrow evening but everyone will think they're fully booked. TopTable was eventually acquired by OpenTable (losing lots of its charm in the process).

bbulkow 11y ago

Who cares whether they're a technology provider? It's a benefits service, and I don't care how they achieve a better user experience. If they do that in the short term with humans, power to them. Isn't that the mantra of MVP that we all worship these days?

semerda 11y ago
A ~$4B MVP?

dkarapetyan 11y ago

Have you ever peeked into how payroll, healthcare, and insurance systems work? This is a genuine question, I'm not trolling. The reason I'm asking is because you can't really have automation and APIs for systems that have literally zero automation to begin with. The entire industry is a combination of fax machines shuttling paper back and forth between the different players. It doesn't matter how much software you throw at this problem if you're just a broker because from the perspective of the other players you're just another fax machine. That is the level of electronic and computer sophistication of the healthcare insurance industry, fax machines. ADP, Trinet, etc. are just as manual and full of error prone human processes. It's all just heroic human effort on all sides. If anything Zenefits has shown the incumbents and everyone else in the space that you can indeed provide a software solution that integrates well with human processes and in the long run make things much more automated and efficient.

manyxcxi 11y ago
Having had to work with ADP and a number of insurance agencies before on technology projects- I can't imagine what a nightmare scenario it would be to try and automate all of these companies together. I could see how a company could try to fake it until they make it- as in, until they get enough clout (via money, customer base, important friends) that the companies they're trying to automate realize that it is in their best interest to work with them. However, while trying to make it, I would think that you would do everything humanly possible not to screw up even one piece of data for even the lowliest of customers. If you are 100% above board and have a really good process in place, when things happen you can be pretty sure it wasn't you, and you can be in a better position to actually help the client. FFS, Zenefits is screwing up the only thing about employment that matters to a lot (most?) people: the freaking paycheck and the health care. Hearing all these horror stories it becomes hard to see how Zenefits gave a crap doing their job at all- I can understand a mistake, but a mistake with a devil may care attitude means you've lost my business forever.
- api 11y ago
  I think this was exactly their strategy and it failed since these industries are stubborn and moribund to an extent that's hard for us to imagine. I've had a little exposure to health insurance and the medical bureaucracy and I've worked as a government contractor, and in my experience the healthcare world is far more sclerotic than the Federal bureaucracy in many areas. The Feds are also much more open to automation and newer technology, while in medicine they literally do everything with paper files and fax machines and will not budge.

achow 11y ago

Trying to connect dots together. If Zenefits solution was so manual and archaic then was ADP right in the year old controversy... On June 4 (2015), we disabled Zenefits access to ADP’s RUN small business solution due to unusual and alarming demand for data from Zenefits far out of proportion to the number of clients who have allowed them access to our system. Despite Zenefits serving less than 0.25% of the clients on our system, they had been responsible for up to 25.0% of the total user traffic (in other words, a hundred-fold times ordinary user traffic). …it was pulling sensitive information, including unmasked Social Security numbers and employee banking information, in a manner that did not comply with ADP’s standards for data security. http://www.businessinsider.com/adp-and-zenefits-are-at-war-2015-6 http://www.businessinsider.com/adp-and-zenefits-are-at-war-2...

verst 11y ago

Not only was Zenefits doing lots of manual work behind the scenes, but also was the quality of that work incredibly poor. Personal anecdote: Enrolled for health insurance through the Zenefits portal. Waited a few weeks for my insurance information in the mail. Eventually I got an insurance card for someone with a different name and gender, but with my address, phone number and even social security number! I even got the insurance nurse hotline calling me for this person, but not for me. It took Zenefits 2+ months to correct this data entry issue. Another anecdote: The insurance plans we had selected with our account rep were different from the ones offered through the Zenefits portal. We assumed these were the same, but employees were actually enrolling for worse plans than we had thought. Account managers were generally very unresponsive, then again - we were just a small startup (but with very simple, standard needs).

x0x0 11y ago
I also had an unfortunate zenefits experience. They had difficulty giving clear answers about a critical detail of dependent coverage, and I felt uncomfortable enough with their answer that I didn't trust them and spent hours on the phone with Anthem to verify. That said, a previous startup that did not use zenefits fucked up DOBs for both me and my partner, causing her to be unable to fill scrips for a while. So they're not the only ones with issues.