David Sacks' big gamble pays off, 90% of his employees stay

Sacks offered a severance package, dubbed The Offer, to any employee that wanted to leave

Last week, when online HR provider Zenefits announced it was cutting almost 10 percent of its workforce, CEO David Sacks also offered every employee a severance package, which he dubbed "The Offer." 

Basically, Sacks was giving employees an out, a way to leave the company without fear, if they no longer wanted to work there. It was a gutsy move, but it seems to have paid off.

On Monday, Sacks revealed, in a series of Tweets, that the vast majority of his employees opted to reject The Offer. In fact, only 10 percent of the 1,100 remaining employees decided to use the opportunity to jump ship. 

1/ Very perceptive article about the The Offer, calling it a "bold move" "that could torpedo the entire company". https://t.co/pVDOyY90sY

— David Sacks (@DavidSacks) June 21, 2016

2/ Further: "we’ll find out if his faith in himself and his employees is rewarded. Or if Zenefits is headed to the unicorn burial ground."

— David Sacks (@DavidSacks) June 21, 2016

3/ Now we know the answer: Only ~10% of employees took The Offer. I'm so proud of the 90% who have recommitted to the new Zenefits.

— David Sacks (@DavidSacks) June 21, 2016

4/ It really is a new company now: new values, mission, leadership, and focus on compliance. Employees deserved a choice. They made it well.

— David Sacks (@DavidSacks) June 21, 2016

The Offer consisted of two months severance and four months of COBRA, available for every employee who joined before February 8, 2016, a.k.a. Sack's first day on the job. 

"I recognize that the new Zenefits may be a very different company than the one many of you joined. I want to be respectful and realistic of that fact," he wrote. "And if you are not motivated by our mission to make entrepreneurship easier, or if you do not agree with the new company values, or if your role has changed in ways that you cannot support, then you can take The Offer," Sacks wrote in an e-mail to employees last week.

"I have no idea how many people will take the Offer, but I’m certain that I want to work with people who want to be here and who are unified in the purpose of what we’re trying to achieve."

What Sacks is trying to do is turn around a company that had one been the darling of the tech world, but fell hard and fast due to an out of control company culture.

Zenefits was named the fastest growing company in Silicon Valley in 2015, and it raised over $583 million, including a $500 million round at a $4.5 billion valuation in May of last year.

Things started to spin out of control when reports began to surface that the company was employing people to sell health insurance, even though they were not properly licensed to do so, resulting in many of its sales being essentially invalid. 

Around the same time, Fidelity cut the value of its shares in Zenefits by 48 percent. 

The scandal caused CEO Parker Conrad to resign, after which there were some very, very salacious headlines about some of the things that had gone on over there before the change in leadership.

That's why the very first thing that Sacks did as CEO was to take aim at the values at Zenefits, pointing to a "culture and tone" that "have been inappropriate for a highly regulated company."

"As an entrepreneur myself, I know that Zenefits can never lose its innovativeness and willingness to experiment. But at the same time, I believe a new set of values are necessary to take us to the next level," he said at the time.

Sacks has now had roughly six months to get things back on track. His big gamble proves that, whatever he's doing, most of his employees have confidence in his ability to lead them.

(Image source: wired.com)