Zenefits, the Troubled Software Startup, Just Cut 9% of Its Staff
Human resources software startup Zenefits, which laid off 250 employees in February as part of massive sales reorganization, will reduce its headcount again, according to two executive memos circulated to employees Tuesday.
The latest cost-cutting measures include the elimination of 106 positions (about 9% of Zenefits’ current payroll) in the company’s Tempe, Arizona, office. Although Zenefits will maintain a presence there, it is consolidating all sales and marketing processes into its San Francisco headquarters, said CEO David Sacks, in his company-wide email. “These changes are about working smarter, not just more efficiently,” he wrote.
When I spoke with Sacks last month, he said Zenefits employed more than 300 licensed brokers—out of a 1,000-plus total workforce—representing 10,000 different state licenses. It’s unclear how these latest layoffs will affect the total number of brokers Zenefits employs.
The workforce reduction is part of a broader restructuring that will consolidate the company’s operations into five primary departments: broker services, insurance marketplace relationships, payroll services, human resources services, and quality control.
The aim is to make it simpler for Zenefits’s approximately 20,000 customers to get questions answered, wrote Zenefits COO Abhijeet Dwivedi, who sent a separate email to employees Tuesday. “The goal of the changes we are making today in operations is to amplify what we do well, and obliterative our deficiencies,” he said.
If employees aren’t happy with the mission changes or their specific job role after the reorg, they might be paid to leave as part of what Sacks calls “The Offer.” The severance package, which is being offered just to people who have been with Zenefits since before Day One, includes two months of pay and four months of COBRA health insurance benefits. Employees have until Thursday, June 16, to accept the offer.
As you consider your options over the next two days, please know that the company isn’t making The Offer because we don’t want you. We do want you, but we want the best of you. We want you winning core values awards. We want you prototyping a great idea at Hackday. We want you staying late to help out on a project. We want you busting ass on Z2 [the code name for the next generation of the Zenefits software platform].
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Zenefits gives away cloud software that allows small companies to manage employee-related information and process—such as payroll, time-off requests, and insurance selection. It receives fees for managing or representing certain services. A major update to this software, including a heightened push on mobile features, is set to debut in October. The company has annual recurring revenue of more than $60 million, said Sacks in his employee email.
Zenefits was once one of the most heralded software “unicorns,” a nickname for startups valued at more than $1 billion by virtue of their venture backing. Its last officially valuation was $4.5 billion.
The company has been scrambling to reposition since February, when Sacks (who was previously COO) took over from ousted founder Conrad Parker, who was blamed for overlooking gaps in Zenefits’ broker training and compliance processes.