Zenefits is laying off nearly 250 employees

Zenefits is laying off a ton of employees

Zenefits is getting rid of 17% of its employees, or nearly 250 people.

An email sent by CEO David Sacks says the layoffs will focus mostly on the company’s sales divisions.

“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,” Sacks wrote.

“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 added.

Zenefits has recently come under regulatory attacks for how it was running its business, specifically an internal program called “the Macro” which allowed employees to fake the hours they said they committed for pre-certification in California.

The company also allowed unlicensed brokers to sell health insurance, according to a BuzzFeed report.

It’s believed that up to 80% of the company’s deals in Washington State were completed by unlicensed brokers.

Founder and CEO Parker Conrad was forced to step down from his post and leave his position on the company’s board of directors following the Buzzfeed report.

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Zenefits quickly grew to a $4.5 billion valuation over the course of just a few years and now its future is in the hands of Sacks, the former CEO of Yammer, a social enterprises platform that sold to Microsoft for $1.2 billion.

“During my years in Silicon Valley, I’ve seen a number of attempted tech turn-arounds. Frankly, they don’t have a very good track record,” Sacks wrote in the email.
“But that’s because those companies had become obsolete technologies; they had lost their product-market fit. That is not Zenefits. Zenefits has made mistakes but it never lost its product-market fit.”

Sacks told employees that the layoffs are necessary at Zenefits because it 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,” Sacks wrote.

Written by John Howard

John Howard

John Howard is the Business Editor at BusinessPundit.com. He is an avid watcher of markets, a wallflower of retail, and a fan of disruptive businesses that utilize technology and unique ideas to form brilliant new ways of doing business.