Company culture lessons from the Zenefits debacle

The HR technology wunderkind is getting spanked over its hedonistic environment and leaders’ inability to manage its rapid growth. A focus on doing the actual work is a solid first step back.

The party is over for Zenefits.

Once the golden child of the HR technology scene with a funding round that valued it at $4.5 billion, it’s on the wrong side of the cultural roller coaster right now.

It has sacked its founder and CEO and laid off 17 percent of its workforce, and the fun’s not over yet. The company will probably have to pay massive fines for alleged compliance failures and will see its workforce depleted and turned over.

Founder and former CEO Parker Conrad’s ouster had been in the cards since that massive funding round closed. Conrad’s inexperience in scaling and operating a company in the highly regulated insurance industry felt doomed to fail.

Criticism from within and without

Venture capitalists don’t like to see their investments get flushed away. I’d assumed that Conrad would be out within a year and that Zenefits would be better off for it.

It’s going to take a while to clean up the mess that Conrad and his cronies made. New CEO David Sacks has a lot of work to do, and the first thing he is doing is rewriting Zenefits’ culture.

Entertainingly enough, that move is not universally being applauded.

Grumblings of anonymous Zenefits employees have made their way to a few news stories and comment sections as the company has attempted to curb office drinking and sex in the stairways (for real). Even as Zenefits tries to fix the issues from its alleged institutionalized cheating and reinvent a culture on the fly, some worry the company will lose its mojo and bleed talent in a very competitive Silicon Valley.

They say that like it’s a bad thing.

It might take a complete employee turnover cycle to turn Zenefits around. If you loved the day drinking, (alleged) cheating, reported compliance miscues, and using manual data entry as a way to overcome lacking technology, you probably won’t love a compliance-focused company that must improve its offerings and make its investors happy before it blows through all the dough they poured into it.

Bad through and through

In my job, I do a lot of discovery and research to learn what makes an organization tick. It’s not in my nature to make value judgments on culture. There are lots of companies I wouldn’t work for that make for good clients, do great work and are otherwise outstanding.

Zenefits’ culture sucked. Its recklessness was destined to fail in an industry where precision and compliance are table stakes. While the tech press lapped up stories about disruptive HR technology, the many red flags were ignored.

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It’s safe to say the company won’t get that benefit for a long time, and it’s hard to see a path forward that doesn’t look bad, at least in the short term.

I’ve been down on Zenefits for a long time. The agency I work for published a scathing post right after Zenefits’ funding round closed. I’ve heard too many stories from former Zenefits clients about its shoddy work. Meanwhile, everyone else was going wild over how it was going to make HR obsolete.

The first step to get the company back on track

Shaking up Zenefits is the right thing to do. Killing its crappy company culture was step No. 1 of 546 to get back on track.

The moves from Zenefits and its new CEO so far gives me more confidence in the company’s future. Who knows whether Zenefits will eventually become a bust? A lot of things have to go right in any case to make back that sort of investment.

Eliminating one failure point can’t be a bad beginning, right?

A version of this article first appeared on the Lance Haun blog.

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