In spring 2015, Zenefits’ then CEO, Parker Conrad, promised that the 2-year-old company would hit $100 million in revenue by the end of the year.
Based on such promises, Zenefits had raised $596 million in venture money and was valued at $4.5 billion.
It hired over 1,000 employees in 2015, roughly tripling its size. And with that breakneck pace of growth, the right hand stopped knowing what the left was doing.
Soon, multiple states were investigating the company for allegedly selling insurance without proper licenses, and Zenefits wasn’t on target to hit its sales goal, sources told Business Insider.
Zenefits told employees that they could not take vacations. It needed all hands on deck for the busiest quarter of the year.
But its COO at the time, David Sacks, ignored the vacation ban and left for the Caribbean anyway, Bloomberg’s Claire Suddath and Eric Newcomer report.
By February 2016, Conrad suddenly resigned and Sacks, who had been COO since December 2014, took over as CEO.
Where is David Sacks?
This idea that Sacks was often MIA echoes what multiple former employees have told Business Insider. One worker told us that Sacks had earned a reputation as constantly being on vacation, saying that Sacks and his wife, “all they did was vacation. I never once saw David Sacks, not once.”
This person tells a story of how at the all-hands meeting, led by Conrad, “Someone would always inquire what’s David Sacks working on. Parker’s answer was always that he was working on ‘customer acquisition costs and insuring they were not too high.’ It was considered a companywide joke. No one ever saw David Sacks. What’s he working on, Parker? Where is he?”
Another former employee, who worked in the benefits department that was ultimately reporting to Sacks, told us, “Parker was CEO. I didn’t even know who David was.”
Zenefits spokeswoman Jessica Hoffman denies that Sacks was ever MIA: “This is incorrect. David attended almost every (if not all) All Hands meetings and was in the audience like everyone else. Parker preferred to be the only person presenting.”
PTSD from working at Zenefits
- Business Insider/Julie Bort
Several former employees talk about their experience at Zenefits under Conrad as if it was traumatic.
“Everyone who has left has, like, PTSD from working there,” one former employee told us.
Benefits administrators, for instance, who at other companies might have seven to 10 clients a year, were being asked to manage up to 20 open enrollments per month, which increases the chances of making mistakes with people’s coverage and claims, this person said.
“It’s not a joke. I started working at 5:30 or 6 a.m. and I was waking up in the middle of the night worried about work,” this person said.
As the new CEO, Sacks is now trying to change the company culture and its reputation. He banned alcohol at the office. He instituted a new company motto to “Operate With Integrity” and he told Bloomberg:
The company culture of pressuring and bullying employees to cut corners and do the wrong thing is over.
Software, or insurance?
But the company may need to change other important aspects of the organization if it really hopes to reinvent itself and mount a comeback.
Zenefits makes its money by being an insurance broker, and it gives away human-resources software for free to its brokerage customers.
- Business Insider/Julie Bort
One of the former employees believes that Zenefits ran aground because it lacks the understanding to be an insurance broker and that this won’t change until the company understands insurance better. Most of Zenefits’ senior leadership come from the software-tech industry, not the insurance business.
“At least the VP of operations should come from brokerage world, understand how it works,” this person said. “If they want to concentrate on the software side, they should and drop the brokerage side. It’s ridiculous. They shouldn’t be brokerage if they don’t understand it.”
The VP of operations, Patrick Saeger, came from the software industry. He previously worked for Lars Dalgaard’s company SuccessFactors. Dalgaard sold SuccessFactors to SAP.
Spokeswoman Hoffman points out that Zenefits’ vice president of carrier relations, Colin Rogers, “had a distinguished career in healthcare.” Rogers has worked for a number of healthcare-tech companies and for brokerage company Towers Watson.
Hoffman also says that Zenefits is looking to hire more people with insurance expertise.