Zenefits Sells No Benefits!
Responding to its well-publicized troubles, Zenefits now has its third management team in two years. And they’ve done more of an “about face” with the famous small company HCM vendor than a mere “pivot.”
You remember Zenefits: the high-flying HCM vendor for small companies, once valued at a staggering $4.5 billion and called the “fastest growing SaaS company in history.” I first wrote about it in November 2014, just before venture capitalists created that valuation by investing more than $500 million when Zenefits had fewer than 500 employees and about 2,000 tiny customers, none of which were paying for its software.
Storm clouds appeared on the horizon the following year.
Briefly, the company made its money selling health insurance to its subscribers. It had allowed its brokers to sell in states where they weren’t licensed, and some company employees used a software program to speed up state-insurance-licensing tests. Plus the office evidently felt like a frat house.
With dangerous and expensive legal issues and so much money at stake, somebody had to fall on a sword or get thrown under the bus. That somebody was founding CEO Parker Conrad, who left the company.
His replacement as CEO, former COO David Sacks (of PayPal fame), spent almost a year focused on fixing the compliance issues and reforming the culture. He led a company re-launch called Z2 (like Ver 2).
The tough changes, however, were left to the next management team announced in February. It’s led by two experienced executives, who know start-ups and that HR does not mean “home run”: CEO Jay Fulcher, a former executive vice president at PeopleSoft in the late Dave Duffield days; and Jeff Carr, who has worked almost continuously for HCM vendors for nearly 30 years. (He began his HR career as a young salesman at Dave’s company before PeopleSoft, Integral Systems.)
Jeff’s work history seems to have prepared him for this job: CEO at PeopleFluent, president of Saba, COO at Taleo, CEO at Motiva, president at RightWorks and EVP at PeopleSoft.
In July, Jeff recruited Kevin Marasco, who worked with him at Taleo and is widely recognized as the most creative marketing executive in HCM. Other executive hires include a new product head from Workday, along with a new CFO, CTO, CHRO, and heads of engineering and security. (Maybe the same janitor still works at Zenefits?)
The biggest change at Zenefits, of course, was its getting out of the insurance brokerage business, effectively cutting off its largest revenue stream and the reason for its name! But it is still retaining its sophisticated benefits software, continuing to offer functionality for FSA and HSA that many of its customers don’t have—at least not yet.
Clients that used Zenefits as their insurance broker are being transferred to OneDigital, which has 1,000 benefits advisors across the country and will use Zenefits’ benefits software. Other brokerage partners are being sought for what Zenefits now calls its Certified Broker Partner Program. Zenefits will still get its cut, but it won’t be on the bleeding edge of the digital brokerage business.