While the resignation of Parker Conrad, CEO and cofounder of Zenefits, may be a surprise to some, this doesn’t surprise me at all. Despite the circumstances that are unique in this case, it is not uncommon for investors who pour $500 million into a company to eventually put in their own management team – often with more experience in running larger organizations. David Sacks, Zenefits’ new CEO and a Zenefits investor, was a past executive at PayPal.

In addition to a new CEO, the firm has added some notable members to their board, including Peter Thiel, co-founder of PayPal. I have referenced Theil’s book, Zero to One, in a few of my past articles, including, “Market disruption is coming to the benefit business — and it will come from the outside.”

Parker Conrad (left) and David Sacks.
Parker Conrad (left) and David Sacks. Credit: Bloomberg

Theil is focused on being different, but not simply for the sake of being different. One of his quotes from his book is, “All failed companies are the same: they failed to escape competition.” I encourage people to read it because it will certainly shed some light into the type of person and experience Zenefits is adding to their board and management team.

Also see:What the changes at Zenefits could mean for benefit advisers.”

So what is next for Zenefits?

In a letter to Zenefits employees Sacks states, “I believe a new set of values are necessary to take us to the next level. Effective immediately, this company’s values are: No. 1, Operate with integrity. No. 2, Put the customer first. No. 3, Make this a great place to work for employees.”

Those are his words, not mine. It is clear that while Zenefits was seeing record growth, their culture was not aligned with what the new CEO and others on the management team along with their investors more than likely had in mind.

"Zenefits investors were not going to wait around until things blew up. It is their job to protect the investment."

And what comes after version one of something is version two. And version two will be better. Zenefits will get much better. I think they will become one of the most efficient small business benefit brokers/technology companies in the industry. Their value proposition is strong and in great demand.

Business focus
I found it curious that articles I have read on the changes at Zenefits referred to the company as a technology business for small businesses. In fact, Sacks is quoted as saying, “I'm glad that Zenefits is one of the fastest-growing business software companies. …. We help them (small business) achieve something larger than themselves, by making it easier to hire, onboard and manage employees.”

It doesn’t say they help employers provide financial security for their employees by providing great benefit programs. The benefit advisory services still appear to be secondary to the Zenefits main purpose — though don’t count on them keeping their head in the sand. I am sure their management team is well aware where their revenue comes from and will see even greater challenges in the event that small-group commissions get reduced or even go away.

But Zenefits is here to stay and, I think, is going to be bigger and better.

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