Zenefits announced on Friday that it would reduce its workforce by 250 employees, or about 17% of the total. The benefits firm positioned the cuts, which were made almost entirely within the HR tech firm’s sales organization, as part of its effort to refocus its operations on small businesses.

Calling it a “reduction in force,” Zenefits co-founder and new CEO David Sacks wrote in an internal memo that “Within the sales organization, we are eliminating the Enterprise team (although some members will be offered other roles). We are also making a large reduction in Sales Development Representatives (SDR), the organization that prospected for the largest accounts.”

Zenefits office in San Francisco
Zenefits office in San Francisco

About a dozen employees in recruiting have also been cut. A company spokesman says no advisers/brokers were included in the layoffs.

“We are not cutting these jobs for performance reasons,” Sacks notes. “We are letting go of many great people today, and it is not their fault. It is no secret that Zenefits grew too fast, stretching both our culture and our controls. This reduction enables us to refocus our strategy, rebuild in line with our new company values, and grow in a controlled way that will be strategic for our business and beneficial for our customers.”

Sacks took the reigns as CEO of Zenefits earlier this month when its former CEO Parker Conrad, who co-founded the tech firm along with Sacks, resigned amid regulatory compliance issues.

"It is no secret that Zenefits grew too fast, stretching both our culture and our controls."

The company has been under investigation by the California Department of Insurance since last year, the state agency disclosed two weeks ago. California Insurance Commissioner Dave Jones said he had directed the agency to use additional resources to investigate whether Zenefits had complied with regulations that require the licensing and training of insurance agents and brokers.

"We are communicating and cooperating fully with regulators regarding compliance issues that we discovered and self-reported to them," Kenneth Baer, a Zenefits spokesman says.

Late last week the company said it had implemented a new system of checks and balances to ensure compliance with broker licensing issues.

The “sophisticated new controls,” launched inside the company’s CRM Salesforce.com, will “ensure that every one of our sales representatives is licensed to sell insurance in the state where [a] current or prospective client resides,” the company said in a blog post announcing the new controls.

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