Communicating Organization Change – Case Zenefits

Zenefits is a company in trouble. They missed revenue projections, face regulatory charges, and their founder/CEO was forced to resign. How to pick up from here?

The new CEO, David Sacks sent an email to all employees. The email was said to be “brilliant”. Let’s see what’s in it.

Stripping the email down to essential, it says:

Parker has resigned because of his mistakes. We will work on governance and compliance to fix the problems. I’ll appoint Josh Stein as our Chief Compliance Officer. Our company culture is outdated, here are our new values: 1. integrity, 2. customer success, 3. job satisfaction. As a CEO I will first focus on culture and values. Then we’ll sharpen our strategic focus. We’ll focus on small business market because it’s huge, underserved market with product-market fit for us. Purpose of Zenefits is to make it easier to hire, onboard and manage employees of small businesses.

That’s a good structure. Lay down the facts, explain how the problems will be solved, give a vision of the future. However, the email is loooong. It takes 1000+ words to tell the above information, which is less than 100 words. What else is in the email?

Here’s the original email (from Business Insider):

By now all of you have heard the news that Parker has resigned as CEO. I know that this will come as a shock. Parker was not only the founder of this company but also its driving force until this day.

I know it will take time for people to absorb and process this news, and it will raise many questions about the company. I believe that Zenefits has a great future ahead, but only if we do the right things. We sell insurance in a highly regulated industry. In order to do that, we must be properly licensed. For us, compliance is like oxygen. Without it, we die.

The fact is that many of our internal processes, controls, and actions around compliance have been inadequate, and some decisions have just been plain wrong.

As a result, Parker has resigned. In order for us to move forward as a company, we cannot seek to hide or downplay the problem. We must admit it and remediate it as soon as possible. In December, we hired a Big Four auditing firm to conduct an independent third-party review of our licensing procedures that we will turn over to regulators as soon as possible.

I will expand that effort into a top-to-bottom review to ensure appropriate and best-in-class corporate governance, compliance and accountability. I am also appointing Josh Stein as our Chief Compliance Officer. I know that he will bring the same rigor to this job as his did in his previous experience as a federal prosecutor. Josh is already in communication with regulators to advise and update them of our compliance issues. These steps are a start to fixing the problem, but they are not enough.

We must admit that the problem goes much deeper than just process. Our culture and tone have been inappropriate for a highly regulated company.

Zenefits’ company values were forged at a time when the emphasis was on discovering a new market, and the company did that brilliantly.

Now we have moved into a new phase of delivering at scale and needing to win the trust of customers, regulators, and other stakeholders. As an entrepreneur myself, I know that Zenefits can never lose its innovativeness and willingness to experiment.

But at the same time, I believe a new set of values are necessary to take us to the next level.

Effective immediately, this company’s values are: #1 Operate with integrity. #2 Put the customer first. #3 Make this a great place to work for employees.

In order to be a great company, integrity must be at the core of what we do. We must have integrity in our business practices, compliance obligations and internal processes. We must have integrity in our product. We must have integrity in our data and infrastructure.

And we must have integrity in the way we treat each other. We must also put customer success at the heart of what we do. Everything we do should further the goal of earning and extending our customers’ trust. We want customers for life, and if we can’t reasonably expect to make a customer successful, we shouldn’t sign them in the first place.

Finally, 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? This is not to say that there won’t be major challenges and tough days ahead, but that must be balanced with a feeling of fun, fellowship, and esprit-de-corps. I want all of us to feel excited to come into work every day.

We all have a role in that, but I’m going to try my best to do my part. I’m making my first actions as CEO about culture and values because I believe these things are fundamental to a company’s success and who we are and want to be. I want to push down decision-making ability into the company.

Culture and values enable us to do that by ensuring that everyone is aligned around the right goals.

Once we’re aligned as a team around core values, the next thing we’re going to do is sharpen our strategic focus. When you raise $500 million and have a vision as big as Zenefits’, it’s tempting to think you can do everything at once. But no matter your size or resources, companies execute better when they ruthlessly prioritize and sequence their efforts.

For us, that means hyper-focusing on the small business market where we have product-market fit.

This is a great market for us because (1) it’s huge (with many million small businesses in the US); (2) it’s “greenfield” (meaning that it’s under-served by technology — in fact an Excel spreadsheet is often the main competitor); and (3) the free aspect of our product is extremely compelling.

There is one other critical thing that I want to do, and that is make Zenefits a purpose-driven company. I’m glad that Zenefits is one of the fastest-growing business software companies, but that’s not our mission. It alone doesn’t fill my life with any meaning, and I doubt it does yours.

However, Zenefits does serve an important purpose in the world, by making the lives of small business owners so much easier. We further the dreams of anyone who wants to start a new company. We help them achieve something larger than themselves, by making it easier to hire, onboard and manage employees. By doing that, Zenefits makes entrepreneurship more accessible to everyone.

I believe this is a very powerful and real mission in the world, and personally I’m proud to be part of it. There are very few startups that ever get to this level of scale and importance.

I believe Zenefits has a great opportunity, vision, and future if we can align it to the right execution. As a friend once told me, “successful companies have multiple founding moments.”

This is one of them. This is a founding moment. You are all co-founders in this new path forward. I know how much hard work everyone has put into this company and that we will all come together on this journey.

This is Day 1.



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