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Zenefits confirms 250 layoffs, 17% of company workforce (venturebeat.com)
132 points by stygiansonic on Feb 26, 2016 | hide | past | favorite | 54 comments



  > Human resources and insurance software startup Zenefits
  > has announced that 250 employees are being made redundant,
  > representing 17 percent of the company’s workforce.
Before "being made redundant' became empty buzzspeak, it had a very specific meaning: When things are restructured in such a way that two people end up doing the same job, one becomes redundant. For example, if you have an in-house recruiting team, and you become aqui-hired by BigCo, they may decide that all recruiting will be handled by their existing team, and your recruiting team becomes redundant.

Notice that the job to be done is still there, it's just that the company has more people doing it than necessary.

But in this case, the company is laying off a lot of its sales force and recruiting team while mumbling further content-free buzzwords about refocusing its strategy. Meaning, they aren't growing any more, so they won't be selling as much or recruiting as much.

The job to be done is no longer there. Therefore, those aren't redundancies, those are layoffs, pure and simple.

The distinction is important, because "redundancies" can arise as you grow (e.g. acquiring), but "layoffs" imply that the engine is sputtering. Eliminating redundancies is a matter of optimization. Laying people off is a matter of scaling back your ambitions.

The company is obviously trying to spin this, and VentureBeat is regurgitating their press release word-for-word without any editorial oversight whatsoever.


I think "made redundant" has been the British term for laid off for quite a while; though this is, IME, far less common in American usage. I think the distinction you are positing between them could be a good one to make, but I don't think its one that has ever been consistently applied in general usage of the terms in reference to business.

> In this case, the company is laying off a lot of its sales force and recruiting team while mumbling further content-free buzzwords about refocusing its strategy. Meaning, they aren't growing any more, so they won't be selling as much or recruiting as much.

Given that affected parts of the company are those most directly implicated in the regulatory violations that have produced the immediate problems, I wonder if there isn't another level of spin here, and whether this isn't more a set of firings to purge the problem units than a layoff.


>I think "made redundant" has been the British term for laid off for quite a while; though this is, IME, far less common in American usage.

A big part of the plot in the British Office tv show was watching Ricky Gervais fumble his department through a merger that ultimately made him redundant. He kept assuring the employees there would be no redundancies.

Zenefits using the term redundancies may just be colloquial British phrasing. They've got much greater PR problems now that make the semantics of layoffs vs redundancies seem a minor concern.


Normally in British English the phrase "made redundant" implies there is a payment made to the departing employees, normally of several months salary. The phrases "sacked", "fired" and "let go" do not imply that. It is unclear which applies from the article - it sounds like lay-offs in prose, but the words "made redundant" muddy this.


> Normally in British English the phrase "made redundant" implies there is a payment made to the departing employees, normally of several months salary. The phrases "sacked", "fired" and "let go" do not imply that.

The same is generally true in American English, with "laid off" replacing "made redundant" and "sacked" being uncommon for the other alternative (but "fired" and "let go" being quite common.)


I agree with you that the current usage of the word is now empty, as is most business jargon designed for press releases. Thus my opening phrase "Before 'being made redundant' became empty buzzspeak, ..." :-)


I think that's great you caught on to that. I used to work for a British company and they used the same lingo. Thought it sounded a little harsh at the time.


Yep. It's a general pattern: any term for "termination of employment" goes through the euphemism treadmill much, much faster than any other word or than we expect it to.

It used to feel like there was a distinction between being laid off (can't afford you anymore, have to scale down) vs being fired (you messed up and they don't want you anymore at any positive price). But gradually I heard "laid off" get used to mean any firing for any reason.

And it makes sense: anyone is going to want to make their termination reason sound better for them, while retaining plausible deniability -- "well, the word is ambiguous anyway". Plus, it's a sensitive topic where people don't want to reveal details of the reasons about third parties. So, expect any term for any termination reason get applied to broader and broader cases, to the point of absurdity.

"He was made redundant after groping the secretary."

"He was retired after they lost their major customer." But he's 35! "So?"

"She was downsized after using illegal accounting practices for the 15th time."

"The junior partner was let go after appearing drunk at a client presentation." (Note:"let go" can be a meaningful distinction in a case where leaving might have major penalties for the leaving employee but the managing partners waive those penalties.)


Not necessarily. It probably means they just overhired, which is a problem at a lot of companies.

They could just plan to get more out of a lower staffing level, this was fairly common in the "re-engineering" triggered layoffs of the early 90s.

My bet is we will see more layoffs like this because managers have erred on the side of overhiring. Now teams are overbuilt and there's no way they need as many employees as they have to achieve their goals.

So they lay them off. We'll be seeing more of this. Management will start erring on the side of cutting staff.

The one constant here is that management is always in error, it's just the direction that has implications for employees.


It doesn't appear (from this article, at least) that the company ever used that word. As far as I can tell it is an editorialization by author of the article.


Not necessarily. If MS decides to build Windows 12 from the ground up they may have a separate team work on Windows 11. After that project is done most of the Windows 11 team would be redundant. Edit: They even did something like this with NT 4.0, ME, and XP.

Similarly, if a catalog transitions to a website once that's done the legacy catalog team could simply be redundant.


"Redundant" is not a pure synonym for "unnecessary" or "obsolete," and in business-speak it used to have the meaning I shared above. It used to arise a lot in mergers, where "efficiencies" arose by consolidating functions and making entire departments "redundant."

If buggy-whips were to disappear as a business because Buggy 2.0 (a/k/a the automobile) comes along, it was not commonplace to say that buggy -whip manufacturers or their employees were "redundant," but to say they were "obsolete."

That seems closer to the Windows 12 vs. Windows 11 teams analogy to me.


What I think your missing industry leaders often can't grow market share. In that situation R&D is often focused on lowering costs which in some industry's directly translate to people. In this case the skill set is still valuable, you just need fewer people.

EX: ATM's did not remove the need for all bank tellers, but they removed the need for huge numbers of them.


I don't see what's missing. Those people are laid off.


If you go from 10 Windows Administrators to 2 Windows Administrators then the other 8 are redundant. If you go from 10 VAX administrators to 0 VAX administrators they are obsolete.

The difference is if you still need anyone with the skill set or not.


> The job to be done is no longer there. Therefore, those aren't redundancies, those are layoffs, pure and simple.

I would presume that there are still sales and recruiting jobs at Zenefits. Maybe "the jobs were made redundant" isn't quite as accurate as "Zenefits realized that the jobs were already redundant."


We are using zenefits and gusto right now.

Gusto is pushing to switch for benefits management, but it's a bunch of work.

I feel a little gross about staying with zenefits after hearing about their company, but it's mostly free and seems to work.

They are also offering some other services like 401k, shift management and stock options planning.

I'm sure at some point I'll consolidate on one of these platforms, but right now they don't seem stable.


I don't know if I am alone in this but I have had job offers where the deciding factor on yes/no from my perspective was whether the company uses Zenefits.

Everyone I have spoken to on the subject has at least one horror story, and this was prior to the recent revelations. Add that to the general behavor of the company and the employees. Although the CEO "took the fall" for it, it simply cannot be the case that everyone else is blameless - the culture there is rotten to the core. Andreesen Horowitz, and Lars Dalgaard in particular should shoulder much of the blame for encouraging business practices which are shady at best and downright illegal in all probability.


Meanwhile, ADP is an absolute joy to use. clicks 80 times to add 8 hours of PTO for each day of the 10 days I'll be on vacation

Nevermind, I can't actually do that because my account NEVER FUCKING WORKS. Between portal and ipay, the passwords at least used to be shared, even though you had to reset it literally every time you use the site. Now they're not even shared, you need to contact your HR department to get it reset, and even once you DO set a new password, it doesn't work.

Talk about a dumpster fire of a company.

Other than the website, I don't get why a normal employee would care about the difference between providers. What does one do with Zenefits that's so painful? Literally all I ever want to do is see pay statements and enter PTO. ADP's Oracle Forms implementation is a special circle of hell, so I don't really see how it could be worse.


well, I'm 7 emails and 4 phone calls (on two of which those assholes hung up on me) deep into trying to get zenefits to approve a commuter parking reimbursement, including having to send screenshots of the submitted claim in their system to one of their employees because he couldn't see it. And I still don't have my money.

Also, apparently I was rude to the supervisor I spoke with two days ago. Yet somehow their behavior -- wasting my time and repeatedly hanging up on me while on hold -- is totally cool.


Layoffs are never fun... sad :(

For the more biz-minded commenters out there: does laying off sales + recruiting signal a specific scenario (other than the obvious recent legal woes)? Rather than laying off engineers?


Zenefits is a classic enterprise sale, meaning you staff the sales team at: # of reps X average quota = expected sales.

The recent problems will hit their sales hard, and leadership knows it. With the growth they've had, there's a chunk of their sales team that's not fully ramped (meaning not producing revenue). Laying off reps + recruiting says they think they can't grow as fast as they previously could.

Not laying off engineers is probably more about how hard it is to hire engineers today, and knowing that when they get past these problems, it'll be easier to re-hire reps than re-hire engineers.


This may also be an easy way of firing people for culture fit.

David Sacks's original letter was heavy on the need to change the culture at Zenefits, and there's usually some degree of culture change at a company whenever a new CEO takes over. It could be that this is a convenient way to fire the ringleaders of the party culture, the people having sex in the stairwell, the most egregious rulebreakers or those who're disgruntled about having to go through all the regulated training, all without needing to build the paper trail that safely firing for cause would require.


> Not laying off engineers is probably more about how hard it is to hire engineers today, and knowing that when they get past these problems, it'll be easier to re-hire reps than re-hire engineers.

I don't think labor hoarding is a good theory for why they're keeping their product team. If they don't have work for them now and are winding down they would be getting rid of them.

Rather, I think they believe they don't have a product they can sell right now, but they believe they can change it to make it viable. You need engineers to change your product.


From what other articles have said, they've actually been doing a ton of paper shuffling on the backend using human labor (by hiring a ton of people with all that VC cash), which means that engineering has a lot of work to do if Zenefits is going to be profitable at scale in the long run.


Why exactly is it so hard to hire engineers as opposed to sales people? Isn't it just as hard to find a 10x sales person as a 10x engineer?


Without commenting on the possibility that 10x engineers exist, I can tell you from experience in sales that 10x salespeople are extraordinarily easy to identify, but nearly impossible to hire.

The problem is that the market for salespeople is very efficient. So your 10x salesperson is nearly always already earning an outstanding amount of money working for an excellent company. They are already selling a product with a demonstrable value-add, and they are employed by a company with a good reputation.

Why would they want to come and work for a start-up that stumbled and then at some future date tried to turn itself around?


> 10x salespeople are extraordinarily easy to identify, but nearly impossible to hire

Doesn't that just mean you need to offer a higher percent commission, more equity, or whatever it takes to sweeten the deal?


Well, now you're into a different problem: If the market is efficient, what makes you think you can afford to pay them that much?

Your equity isn't magically worth more than the equity of the company that already employs them. And if you give them a tremendous chunk of every sale they make, your COS is through the roof and you aren't making any money.

You might go raise a ton of cash and spend it buying great salespeople so you can buy some MRR and ARR, but everyone else is playing the exact same game, so you don't automatically raise more money than anyone else to spend on better salespeople.

In the end, what I am saying is that there is an efficiency in that market for salespeople such that anything you might think of doing to bring them on board, their existing employer has already done. And possibly better than you ever could.


Presumably, you're targeting an opportunity that is very lucrative with a product that is very compelling, such that a sales person can generate more value per unit effort than at their current position.

Or perhaps the issue is that, in sales, there isn't the same multiplier phenomenon you see in engineering from massive scale/market opportunity. And this nonlinear effort-to-output relationship is what enables the market inefficiencies (sometimes in favor of companies, and sometimes in favor of engineering employees).


Presumably, so is anyone else who can afford to hire a 10x salesperson.


i've known enterprise sales guys making $1m+ per year, cash comp.

a YP seed would get you 30 work days...


Perhaps offer them more than the outdated model of a fraction of a percent of equity.

And of course be a company with a convincing path to success, which is as a rare an entity as those 10x salespeople.


A 10x salesperson will make ten times as many sales, but I doubt they will close sales that no amount of normal sales people can close.


They will close specific sales, and at a higher price, than other salespeople.

If you are limited by number of solid leads, putting great salespeople on the leads will get a greater amount of value than putting a larger number of weaker salespeople on it.

Great salespeople aren't just taking orders. They are finding and closing opportunities which others would miss, and making those opportunities far more valuable. You can have 10x the value on a single sale in enterprise by having the right team on the deal.


Some possibilities are: 1. They have been trying to automate their sales infrastructure so less staffing needs. 2. Business is down but they feel confident to work on the product development.


Or a "Sales ALL THE THINGS" manic ex-CEO, who used massive rounds of funding to hire uncontrollably fast, was replaced by a more product-oriented one.


Sad news. Sorry if you were affected by this.


From the CEO: "These changes are almost entirely in the Sales organization, with about a dozen employees in Recruiting."


I wonder how many of them were thrown under the bus for cheating on the insurance broker licensing exam using Conrad's script.


In that case, I wonder if they'd have any luck with suing him, or if the onus is entirely on them for having used it? Not being a lawyer, I'd imagine this would be a civil case where they'd go after his money / stock.


Doubtful. Even if they could claim they were 'pressured' into doing so, there was no real coercion - they made the choice to not go through the process.


This is too bad, I feel sorry for the company in a way. This was a company I kept up with because it was fun seeing their growth. I didn't see the negative side of the culture until after Conrad stepped down and all hell broke loose.


How does a company, especially a nascent one like Zeenfits, survive in a space when they've suffered this type of hit? An industry all about trust and conservatism and a company playing fast and loose with the rules? Can it work out?


They could survive. My guess is they'll basically focus on retaining as many current customers as possible, get through any investigations about their practices, and hope that once those are finished people will mostly have forgotten about what happened and be willing to give them a chance if their product is on par with others out there.


I wonder if that has anything to do with the success of Benefit Focus?


If any of the layoffs were in the engineering groups, drop me a line.


[flagged]


Meet me in the well. It's going down.


It irritates me that engineers never get laid off.

This means companies still view their engineering workforces as "scarce" and hard to get, because they aren't paying market wages. Why is it only sales that gets the ax?


The license requirement cheating (in one jurisdiction) and outright selling without a license (in other jurisdictions) were problems occurring in Sales (which may implicate some problems in Recruiting, as well.)

I don't recall any of their problems being traced to engineering. So, while these are for PR purposes styled as redundancies, I think its at least worth considering that it may be more of a purge of the problem parts of the company.


Here is what may be the reasons: - Because sales team is more easily replaceable than core engineering team. - There is less any redundancy in engineering team when compared to sales. - Zenefits is reducing their sales operation.


Why do you assume they aren't getting paid market wages? Your statement, in a way, is contradictory. Engineers are perceived as scarce, but they aren't paid market wages.


Sales has probably gone through the pipeline of customers and engineering is probably still working on building out everything that was promised to customers?


I can't tell if this is sarcastic or not, but there have been lots of engineering layoffs as well. Twitter and Yahoo, for example.




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