On this episode of Fast Forward, my guest is Jay Fulcher, the CEO of Zenefits.
We spoke about the future of human resources and how small businesses can compete with big tech firms.
Dan Costa: So, I think most of our listeners are going to know and have heard of Zenefits, but the company has changed a lot over the years, especially since you've taken over.
What is Zenefits today?
Jay Fulcher: We have made a lot of changes as a company.
Today, we're a fully resurgent, comprehensive technology platform company, first and foremost.
Zenefits 1.0 was really a fairly clever business model, but it was a very services-intensive-type model and company.
What we've done is transitioned to being a very comprehensive payroll, benefits, human capital management platform for small business.
Our whole approach is how can we provide the technology and expertise that small and midsize businesses need in order to compete.
Why do people come to you? What problem do you solve for small businesses?
I think the reason that we are resurgent and growing so quickly is the fact that small businesses really never had a level playing field.
We talk a lot about that nearly half the workforce in the US, 48 percent to be precise, works for companies that have fewer than 500 employees.
Those companies, for the most part, have just been shut off from the type of technology that we provide that allows them to not only compete for the best talent, but also enables them to be able to harness and leverage that talent to be able to grow their businesses.
We provide these companies with, we think, a very sophisticated but easy-to-use, very employee-friendly type of technology platform that allows people to get a lot of the headaches, and the compliance issues, and the regulatory issues out of their way.
It gets them out of their day-to-day life, and allows them to focus on the really meaningful work that they're most interested in.
Is this for companies that have an HR department but want a technology stack that they can deliver services on? Or is it for small businesses that maybe don't even have an HR team?
It runs the gamut.
We've got thousands and thousands of customers across the US, and it runs from companies that maybe have a couple of handfuls of employees, all the way up to companies that have 1,000 employees.
At the end of the day, for the most part, I'd say about maybe 20 percent of our customers are coming from either a outsourced HR environment or some kind of an environment where, quite frankly, they didn't necessarily have an HR product or platform internal to their company.
About the other 80 percent are coming off of some other kind of capability, whether we're talking about spreadsheets, or whether we're talking about some sort of a relatively rudimentary HR platform, and are now really looking to be able to have the kind of technology that they can scale their company with.
What are some of those technologies that big businesses have been taking advantage of that you are enabling small businesses to leverage?
First and foremost, we're in an age of transparency.
I think these small businesses are really looking for insight and guidance and help related to: Where do I find talent? How do I bring them in very seamlessly into my company? How do we pay them both competitively but also in a way that is going to produce the best results? What kind of benefits offerings are going to be necessary to be able to attract the kind of talent we want into our company? Then all the way through to learning and development and all the professional development work.
We're in a world now where the workforce is very different than what it was not even five or 10 years ago.
That's a workforce that has a different level of expectation in terms of what it expects from its employer.
Let's dig into that a little bit.
I remember when I was looking for a job the first time, I cared about what the salary was.
Then I wanted there to be some kind of retirement plan and healthcare, obviously.
None of that was negotiable.
It was either there or it wasn't there.
It was good if it was there, but honestly, if the money was right, I'd probably take the job anyway because I really needed the job. How are people looking for jobs today that's different?
The reality is that we are in a world where about 80 percent of the workforce over the course of the next couple of years is going to be made up of millennial and Gen Z employees.
Those are employees who have a fundamentally different view of what the social contract is with their employer.
They expect all the things that you were looking for, but those expectations go way beyond hoping that those things are in place.
Those are prerequisites for people to make decisions about where they're going to go to work.
The reality is that small businesses, small and medium-sized businesses, really on up to about 1,000 employees, they need sophisticated tools to be able to manage the regulatory and compliance issues.
They also need tools that give them better opportunities to be able to take the talent that they have attracted to their business and to put them in a position to win.
A lot of that is around learning and development.
A lot of it is around performance management.
A lot of it is around, really, employee engagement.
Where I think Zenefits has really in some ways set ourselves apart is we have really focused on the employee experience.
We've really focused on making sure that employees have an exceptional dynamic with the tools that a company is using to be able to manage its workforce.
That's probably almost never been said, right? Where companies were really focused on making sure that the internal tools that employees and managers and leaders were forced to work with actually allowed them to do their job better.
It wasn't one of those things where you had to work with it because you had to.
Instead, you got to use the product and you got to use the technology in a way that actually added to your work experience.
That's really been something that Zenefits has focused on.
I think it's the thing that allows us to compete as effectively as we do.
Has that affected how you develop the product? How do you think about the software that you're building? Because I'll point out, and this is totally by chance, but Zenefits is currently the Daxdi Editors' Choice for both HR management software and benefits administration, which is hard to do because it's a super competitive space. Did your product development cycle change as you changed your business model?
It did.
I think that we basically have adopted a much more kind of rigorous, sophisticated approach in the way that we're building our products.
I think in the early days, in many ways, we were really kind of focused on delivering products quickly and delivering products that were sort of minimally viable in terms of getting customers what they needed.
As we've begun to move up marketing, as we now have much bigger, more sophisticated companies as clients, it's become important to us to make sure that we have really high-quality, very reliable, very dependable software across all of the different application areas that we focus on.
So, it's really changed in some ways not only the existing products that we deliver every single day but also the roadmap.
We've got new ideas around, as an example, how we think about analytics, how we think about not just helping an individual company deal with the insights and the analysis around what's going on within their own business, but we find that a lot of our customers, they're really interested in all of the comparative aspects of, how does my company compare to other companies that look like me either in terms of size or demographics or location? How do I start to make smart decisions around not only what I pay people, but what are competitive benefits today? What do those look like? What's really necessary? If I'm going to open up another operation somewhere in the country, where should I do that given the industry that I'm in, given the size and scale of my company today, and given the kind of talent pool that's required that really is going to make my company go? Those kinds of insights are ones that we can deliver because of the big audience that we have, the thousands of customers that we have, but also because of the way that we've taken a certain approach around the way that we think about data.
That's really interesting because we've all seen those reports about the average salary of an engineer in Austin, Texas, the average salary of a media executive in New York City.
I can tell you, knowing a few of these industries, they're all over the place.
They're wildly off, and it's not generally very actionable.
But with the size and variety of your clients, that would seem like that would give you a huge advantage.
The other thing, too, and it's not limited to technology companies.
So, a lot of times, those of us that are in technology, that are building software for a living, tend to view the world through a lens that's very skewed around tech companies specifically.
The things that I'm describing that are really necessary for small businesses, this is true across a variety of different industries, professional services, healthcare.
I mean, the list goes on and on and on.
So, because of that, it's been, for us, a very kind of a basic fundamental transition to be thinking about.
So, how do we start to basically leverage data for small business in the same way that a large company would if they had a few hundred thousand employees?
Talk to me a little bit about how Zenefits fits into the gig economy.
It's staggering how many people not only have a side hustle but are even working full-time freelance.
A lot of these small businesses, they may have five, 10 people on staff, but they've got 30 contractors that they're interfacing with, that they have some kind of professional relationship with.
How does Zenefits fit into that?
For sure it does.
We identified several years ago that the notion of contractors, the notion of part-time and/or contract employees is not only an idea that's not going away, but it's an idea that's only going to expand over time.
It's really important for us to build products and capabilities that start to look at employees not really based on whether or not they're full-time or not, and not, frankly, whether they're located geographically specifically where the company may be headquartered or not, and instead provides an employee experience that's really inclusive and that basically looks at both full-time, part-time, contract employees in ways that allows companies to understand that they're going to, for lack of a better way to describe it, they're going to inhale and exhale in terms of size and scale and their burst capacity around talent.
That's going to be dependent on a variety of different factors depending on the industry that they're in.
We've got to be able to provide the kind of technology and the kind of systems that allow them to do that in a smart way, in a way that can be monitored closely, measured in a way that hopefully allows contractors especially to feel like they're a part of the team, to feel like they are really an extension of the company's value proposition and culture.
So, the way we've designed our products, the way that we've kind of built our capabilities is with that in mind.
So, I want to talk to you a little bit about that sort of strange state we are in sort of the economy right now.
You mentioned that we're sort of flipped.
Unemployment's very low.
GDP is pretty reasonable.
At the same time, I feel like it's a tremendous amount of uncertainty among workers in the economy.
There's not a lot of job security that's being felt.
We're probably going to be heading into a recession soon at some point.
I mean, just by the numbers—
We've been saying that for a while.
We have.
It's been a long, long run, but that just makes it more inevitable.
So, how do you square the fact that unemployment is so low, and yet at the same time, there's so much insecurity, and people are worried about automation and all these different things? What are the trends that are sort of shaping the workforce in the next five years?
Well, you've had some great shows on some of those topics, actually, that I've seen.
So, for me, I think in general, first of all, the battle for intellectual capital is going to continue to rage on.
Companies are going to be really focused on making sure that they can get the kind of talent that they need in the locations that they want, and to be able to basically leverage and harness those resources in ways that they feel like can be more or less kind of managed over time.
Again, I think in a lot of ways, companies are recognizing that this new world of work isn't really about managing the workforce.
It's around leading the workforce. We don't have the time this morning to go through that, but those are two different concepts.
It kind of requires culturally and otherwise different mindsets with the way that leaders think about building companies today.
To your point, we're in a world where there is a lot of technology disruption.
There is a lot of, I think, angst and concern about how people are going to drive and maintain and ultimately try to exploit their career potential.
A lot of that, I think, comes down to learning and professional development and the opportunities that employees are looking for.
So, I think the successful small and mid-sized companies who are going to grow at a pace that's going to basically drive the US economy, those are going to be the companies that really, I think, embrace this notion of employee development and embrace the notion of learning, and understand that that in some ways the way in which people think about the tools and the capabilities from a technology perspective that they're allowing their employees to use is going to have a huge impact on whether or not those employees love their job, love who they work for, love the work that they're doing.
One of my favorite stories about Zenefits is the fact that I had a chief people officer at one time, she was running a fairly large several-hundred-person company, who said to me that the reason I bought Zenefits was because of what the CEO and I thought it said about our company to our employees.
I think it's that notion that kind of drives a lot of what's going to happen over the course of the next decade in terms of how people think about how to use technology basically to exploit the human potential in ways that are really positive and helpful rather than trying to kind of manage and ...
It's not command to control anymore in terms of how these companies are thinking about, I think, their talent base.
Do you think that there's enough room? I think that's absolutely true for engineers, for knowledge workers, hopefully for writers for a little bit longer.
But do you think there's enough? What happens to truck...
