New Zenefits CEO has harsh words for employees: 'Our culture and tone have been inappropriate'


Zenefits COO David Sacks


Zenefits COO David Sacks

Most of the time, when a founding CEO resigns and a second-in-command takes over, the letter to employees announcing the change is bland.

But after a rough couple of months, Zenefits CEO Parker Conrad resigned. David Sacks has taken over as CEO. He was previously COO and also an investor.  

Zenefits offers cloud HR management software, much of it for free.  It makes most of its money selling HR related benefits, like insurance. It was an inventive business model that sent the company soaring, growing very fast. Investors, including Sacks (a well-known Valley angel investor) rushed to pour more than more than $500 million into the company in its first two years at a $4.5 billion valuation.

Sacks letter to the troops strongly criticizes his predecessor, Conrad. In it, he explains that Conrad is leaving because of "inadequate" compliance measures. The company was facing regulatory scrutiny over accusations that it was selling insurance in some states without being properly licensed. 


 But Sacks goes on to talk about Zenefits culture, saying that "Our culture and tone have been inappropriate for a highly regulated company." And he also says that not only have the "internal processes" around compliance been inadequate, "some decisions have just been plain wrong."

He says, "I believe a new set of values are necessary to take us to the next level" and added, "In order to be a great company, integrity must be at the core of what we do."

In addition to having "integrity" with compliance and with customers, he adds, "We must have integrity in the way we treat each other, " adding "We must make this a great place to work for employees, because we're all in this together, and if we're not enjoying ourselves, what's the point?"

It's hard to say exactly what decisions were "wrong" and where a new vow of integrity must be applied. But in recent months, information about life at Zenefits was leaking out, some of which raised eyebrows.


For instance, it recently offered employees who left the company a one-time cash settlement over unused vacation days in exchange for a promise not to sue. This happened even though the company said it had an "unlimited" vacation policy, so employees never accrued vacation. 

A contract worker talked about being let go a little over a month after being hired when the project he was working on was suddenly shut down.

Beyond that, Zenefits also got into a very public brawl and lawsuit with its one-time partner ADP in which both sides took the web and social media to bad mouth the other. The suit was eventually dropped in October.

We've posted the full email to the troop here.

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