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Easy lessons from Zenefits’ dumpster fire of layoffs

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(BUSINESS NEWS) New CEO Fulcher said that, “This isn’t how any CEO would choose to spend his first week on the job. But I strongly believe these difficult decisions are essential in setting Zenefits up for success.”

A quickly declining value

Once the darling of Silicon Valley, software company Zenefits is quickly losing its status as the “unicorn” of the startup world.

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Zenefits impressed us at first, drumming up millions of dollars in investments in just two years and quickly growing to become a billion dollar company. In 2015 the company, which makes software for small businesses to manage human resources functions like payroll and health insurance, was valued at $4.5 billion, but that number dropped to $2 billion the following year.

Growing pains and more

Most experts diagnose Zenefits’ failure as a textbook case of too much growth too soon. There were also concerns that the company was skirting laws regulating who can and can’t sell insurance. CEO and co-founder Parker Conrad resigned amidst these rumors, leaving his positon to David Sacks, who laid off over 300 employees and famously e-mailed his staff admonishing them not to drink alcohol or have sex in the company stairwells.

Just three days ago, Sacks was replaced by Jay Fulcher, who spent his first week on the job laying off almost half of Zenefits’ staff.Click To Tweet

In an email to 430 employees, 250 of whom work in San Francisco and another 150 in Arizona, Fulcher said that, “This isn’t how any C.E.O. would choose to spend his first week on the job. But I strongly believe these difficult decisions are essential in setting Zenefits up for success.”

Layoffs long in the works

Another Zenefits spokesperson explained that the layoffs had been in the works before Fulcher took over. “This has been planned for some time and is the result of a lot of hard work over the past year to improve our products and service and make operations of the company more efficient,” they explained.

Meanwhile, the company is expanding their engineering and product divisions in Vancouver and Bangalore.

“Today we took a hard but necessary decision,” said the spokesperson.

Just 500 employees remain on Zenefits’ payroll.

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