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Has Z2 Turned Zenefits Around?

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Has Z2 Turned Zenefits AroundZenefits has taken extreme measures to repair its tarnished image. On October 18th it unveiled Z2, its revamped business model. Positioned as an “all-in-one HR platform” for small to midsize businesses, Z2 houses a marketplace of apps for HR, benefits, and for the first time payroll (available in California with plans to expand).

For other services, like expense tracking and performance management, there are 17 integrated apps available.

One of the biggest enhancements is in its approach to benefits shopping, treating open enrollment like an online shopping experience. Plans are offered by more than 250 carriers and choices are reviewed by a licensed broker before they are recommended to a customer. There is also an interactive map so that employers can see available providers in relation to where their employees live.

The pricing model has changed as well. While it still offers some of its insurance software for free and takes a cut of the commission paid by insurance companies, it is now selling its other services for a monthly fee.

Does this announcement mean the company’s growing pains are behind them? To say that Zenefits has had a rocky start is an understatement. Under direction of former CEO Conrad Parker, the company experienced unrelenting controversy including a slash in valuation, two rounds of layoffs, and allegations of drinking on the job and sex in the stairwells, stemming from what has been called a “frat-house culture.”

Out with Parker, In with Sacks

But the most damaging blow came in February 2016 when compliance accusations forced the resignation of Parker. David Sacks (COO of the company since 2014) was quickly elevated to CEO.

Investigations revealed that a computer system was used to fraudulently skip required study time for insurance licensing. The software let sales staff avoid spending the 52 hours of required preparation for their licensing test, in violation of state requirements.

While the findings pointed the finger at Parker, it cleared current Sacks of any involvement. According to the investigation, Sack’s responsibilities at the time (product management, finance, partnership, and operations) were such that he was unaware of Parker’s illegal practices.

The Road Ahead

Turning around a failing company is a challenge, especially one that’s riddled with ethical and cultural scandal, but that’s what Sacks was thrust into when he was named CEO.

Just weeks before the rebranding announcement, Michael Lujan, California Association of Health Underwriters (CAHU) past president sat down with Sacks at the Silicon Valley chapter of the National Association of Health Underwriters (NAHU) for a candid conversation about the future of the company.

Listen to him speak and his optimistic attitude may leave you thinking he’s got a fighting chance. Sacks calls the new Zenefits “a more mature company,” emphasizing that they have gone above and beyond to remedy their compliance and cultural issues.

Still a Disruptor?

Since its first media buzz, Zenefits has been seen as a disruptor to the insurance industry. Parker fueled brokers’ unease by declaring “If you’re an insurance broker, we’re going to drink your milkshake” back when the company was looking for funding.

Sacks approach is much different. He expresses regret by calling the relationship “needlessly adversarial” and says that the company might have been more successful if they had partnered with traditional brokers rather than take them on.

He even went on to declare that “he is lactose intolerant and won’t be drinking anyone else’s milkshakes.” Note: Zenefits is now an active member of the National Association of Health Underwriters (NAHU).

Here we go again…

Just when things are looking up, Sacks is in the news again, this time for a decades-old indiscretion. According to a Business Insider article, while Sacks and PayPal co-founder Peter Thiel were students in Stanford the friends wrote a book which contained some controversial statements about date rape.

Sacks retorted with “This is college journalism written over 20 years ago. It does not represent who I am or what I believe today. I’m embarrassed by some of my former views and regret writing them.”

It will be interesting to see what happens next.

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