Zenefits says that it’s always hiring, but could one of the next people it brings on be the successor to current chief executive David Sacks? The company is reportedly looking to bring on senior managers to help grow the workplace benefits service, and one could take become its newest head, replacing Sacks who was elevated to the post about 10 months ago after the resignation of founder Parker Conrad.
According to The Information, if there was a new CEO, Sacks would not be leaving the company that he has worked to navigate out of its past troubles. One possible role for him would be executive chairman.
“David Sacks is still the CEO of Zenefits and remains very committed to the company. The Board has total faith in him and appreciates the turn-around that he has executed,” a company spokesperson told VentureBeat in a statement. “As you know, this is not a role that David sought, but he accepted it without any compensation at the request of the Board to get the company past a crisis. Now that the crisis is over, David is leading a process to determine what senior talent the company needs to get to the next level. David has always put the company first, and if there’s any change in his role, you will hear that directly from him.”
Things certainly have not been smooth sailing for the company that competes against Gusto, ADP, and other services that those in HR and benefit administrators use in their small businesses. It was less than a year that Sacks took over at Zenefits after multiple reports around compliance issues surfaced, highlighting the fact that salespeople were selling insurance to companies without the proper licenses. Soon after, 17 percent of the workforce was laid off.
Under his leadership, the company sought to reframe its narrative and show it was a serious and legitimate entity, settling with various states and regulators.
But was everything really that great there? According to a report from BuzzFeed, Zenefits is hemorrhaging cash, losing $200 million in the past year with $100 million gone just in the first half of its current fiscal year. A spokesperson sought to downplay the loses, telling the news outlet that the company has since made efforts to reduce the burn rate and has been making strides to cut down on costs.
“Our losses in the first half of the year include a lot of restructuring charges, stemming from headcount reductions that started 3 weeks after David Sacks became CEO, as well as restructuring of our real estate and legal related expenses. A significant amount of our operating burn in the first half are due to these non-recurring charges.”
Ahead of the company’s launch of its Z2 platform, the next-generation product that not only would expand Zenefits’ capabilities, but also held a symbolic meaning of a startup turning the page on a troubled past, Sacks was adamant that things were better and that any criticism of its demise was outrageous. He repeatedly stated that much of the issues plaguing Zenefits happened “under previous management” and that he’s “very confident in saying that our problems are over.”
There are certainly multiple ways to look at this report: Do investors not have confidence in Sacks’ ability and want to replace him? Or is this a natural course of business whereby Zenefits is about to enter into a phase where everything believes that someone else should man the helm for a while? Bringing on senior managers is not unexpected because of the company’s expansion into multiple areas, including payroll, insurance, and more.