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David Sacks vows to turn Zenefits around by cutting the fat and fixing its company culture
The last few weeks have been pretty rough on Zenefits, first with the ousting of its CEO following months of bad press, and possible scandals, and then the very, very salacious headlines about some of the things that had gone on over there before the change in leadership.
Despite everything that has happened, newly appointed CEO David Sacks still believes that he can turn things around. The first step for getting Zenefits back on track is trimming some of the fat, and laying off a large percentage of employees, the company has confirmed to VatorNews.
“Today Zenefits is reducing our headcount by roughly 250 employees, or about 17 percent of total employees. These changes are almost entirely in the Sales organization, with about a dozen employees in Recruiting," Sacks said in a statement.
"This reduction enables us to refocus our strategy, rebuild in line with our new company values, and grow in a controlled way that will be strategic for our business and beneficial for our customers.”
He also explained his decision to cut these jobs in an e-mail sent out to Zenefits employees on Friday.
"When I became CEO of Zenefits, I promised on Day 1 to reset our culture, refocus our strategy on serving small businesses, and create a new beginning for success in the future. Today I have to make a very difficult set of decisions about how we do that. In fact, this is the most difficult decision I’ve had to make in my career, but it is necessary for Zenefits to move forward successfully," he said.
"I want to make clear that this is a reduction in force (RIF), meaning that we are not cutting these jobs for performance reasons. We are letting go of many great people today, and it is not their fault. It is no secret that Zenefits grew too fast, stretching both our culture and our controls. This reduction enables us to refocus our strategy, rebuild in line with our new company values, and grow in a controlled way that will be strategic for our business and beneficial for our customers."
Founded in 2013, Zenefits offers cloud-based software as a service to companies for managing their human resources, with a particular focus on helping them with health insurance coverage. It was a rising star in the tech world, as it 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.
In recent months, though, reports had begun to surface that the company was employing people to sell health insurance despite not being 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. So things started taking a downswing pretty quickly and Parker Conrad, founder and long-time CEO of Zenefits, could not survive it. He stepped down last month, and Sacks, who was COO of the company, took over.
Almost immediately, Sacks set out to change the culture at the company, hiring Zenefits' first Chief Compliance Officer, former federal prosecutor Josh Stein, and conducting an independent audit of how it has been operating. He also banned alcohol in the office.
In his e-mail, Sacks restated his belief in his company's ability to turn itself around, acknowledging that, while those efforts often don't work out, that Zenefits is different because while it "made mistakes," it also "never lost its product-market fit."
"I believe that the measures we are taking — self-reporting our issues to regulators, fully cooperating with their investigation, instituting new controls that bring us into compliance, naming a new exec team and Board, introducing new company values — put us on the path to fixing these problems," Sacks wrote.
"I have confidence that we will turn a corner and deliver on our promise, because I know how much pride all of you have in this company. I know how much you care about what we’re building, how hard you have fought for our customers’ success, how special you believe this company is, and how great it can be."
These layoffs were first reported by Forbes.
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