The Party Is Over at Zenefits

'Institutionalized cheating' finally caught up to software firm
By Luke Roney,  Newser Staff
Posted Feb 28, 2016 12:43 PM CST
The Party Is Over at Zenefits
   (AP Photo/Petr David Josek)

Just two years ago, Zenefits was heralded as one of the fastest-growing software startups ever. Earlier this month, "institutionalized cheating" finally caught up to the San Francisco-based firm that has raised more than $500 million at a $4.5 billion valuation, and hard-partying co-founder and CEO Parker Conrad, 35, was forced to resign, BuzzFeed reports. Now Zenefits is laying off 250 employees (17%), Tech Crunch reports. So how did a Silicon Valley darling go so wrong? BuzzFeed and Business Insider take a look at some of the risky (and risqué) things that have happened at Zenefits.

  • Zenefits, which also has an office in Arizona, offers free HR software, and then makes money through commissions selling health insurance. To close insurance deals, sales reps reportedly threatened customers with an imaginary implementation fee.
  • Zenefits reportedly used a program, called a macro, which helped sales reps skirt California requirements that health insurance brokers must have 52 hours of pre-licensing training. The macro allowed reps to stay logged into an online course, "even while they were sleeping or doing something else."

  • While Zenefits' software seemed slick on the front end, it was glitchy. Much of the actual work was done manually. Mistakes and carelessness led to some clients unknowingly going without insurance for stretches of time.
  • Health insurance brokers in California must score at least a 60% on a state exam to get a license. Anyone at Zenefits who scored much higher than that was branded a nerd. The closer to 60% the better—after all, "D is for done," managers would say.
  • Boozing and raucous behavior were mainstays at Zenefits (the new CEO has since banned drinking at work). On a conference stage in 2015, 30-year-old sales executive Sam Blond (aka Agent Blond or 007) recalled being "over-served" at Bobo's steakhouse and engaging in a wrestling match with Conrad. In general, as the Wall Street Journal puts it, there was a "frat-house" atmosphere at the company that included partying in Vegas and celebratory shots. Though there was an attempt at moderation: One email sent to employees read, "Do not use the stairwells to smoke, drink, eat, or have sex."
(More startup stories.)

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