I Wish Zenefits Laid Me Off: What companies need to take away from “The Offer”
CFO asks CEO, “What happens if we invest in developing our people and then they leave us?”
CEO: “What happens if we don’t, and they stay?”
Any regular LinkedIn user has likely seen this show up in their feed at one point or another. I believe the point is pretty clear: companies need to develop their employees to keep them hungry or else you are left with a complacent team going through the motions ultimately hurting your company instead of growing it. And while this fictitious exchange is between two members of the C suite, it’s no surprise that those who typically “share” or “like” this post are the rank and file employees who often crave something bigger than what their current company offers them.
This past year has not been especially kind to Zenefits, the one time darling of Silicon Valley. The SaaS startup, designed to help small businesses manage their insurance and payroll needs, came under a series of state led investigations concerning unlicensed brokers selling insurance and creating shortcuts through mandatory online courses. Just this past week, the company made headlines when former COO and newly minted CEO David Sacks presented his employees with “The Offer”:
“The Offer is a voluntary separation package consisting of 2 months severance and 4 months of COBRA. Every employee who joined before Day One (February 8, 2016) is eligible and has until noon on Thursday to consider it.”
In the end, about 10% of the workforce accepted the offer, (approx. 129 people), which delighted Sachs. Why? Because that means that 90% of Zenefits stands behind his new, ethically focused direction.
Of course it’s never that simple but first, let’s touch on the genius of this proposal.
In my former life, I was a quota carrying sales rep tasked with selling everything from microbrew to legal translation services to marketing software. I have worked for start ups where I helped bring a product to market, family owned businesses struggling to punch above their weight and multi international companies with thousands of employees. These companies have been VC backed. Some have been acquired. Some have gone public. Some have shuttered their doors. The one common thread connecting most of these former employers is that I would have gladly taken this offer had it been proposed to me.
Now I don’t believe that admission makes me a complacent, negative employee. Rather I believe it suggests that I am self aware enough to always know when it’s time for me to leave an organization, when I was no longer in a position to learn something new or I had lost inspiration and confidence in management to guide the company through unchartered and exciting waters. The sole reason I stayed with these companies- in some instances giving the better part a year of my life- was to collect unpaid commissions; commissions that each company made abundantly clear would not be paid unless a sales person was still there to collect it. Virtually every talented sales person I know has played this game before, circling that last day on their calendar and waiting for that check to clear. However, the opportunity cost is two fold and inevitable.
First, regardless of when you leave, if you ever leave the company, a sales person is likely leaving unpaid commissions on the table. I have easily left over six figures worth of due commissions over the life of my career solely for the desire to pursue new challenges (an admission that would only shock someone who has never worked in sales).
Second, is the shock and disappointment that employers feel compelled to make clear to the departing employee once notice is given. It matters not if the unspoken two weeks are offered or a buttoned up transition plan is presented, the reality remains the same: it is always business and never personal when the business is delivering the bad news but when its reversed, that betrayal is as raw and vengeful as a Greek tragedy. An individual can do everything possible to maintain that relationship but that bridge will not only be burnt, but the departing party will be accused of tossing gasoline on the fire, all because someone wanted to collect money owed to them.
To be clear, I am not suggesting that this arrangement ever once took me by surprise (any good sales person knows their comp plan inside out…) and in some ways it makes sense. This tacit agreement is something that sales professionals have just had to accept as the law of the jungle despite contracts being inked and delivered, services being rendered to satisfaction and even when portions of the clients bill have already been collected. This settlement is something that companies hold over their employees and view as a win-win:
If a salesperson is forced to stick around to collect a substantial commission that suggests that 1) they are high performers, 2) they will continue to close more business while they wait and 3) if they decide to leave, well, we don’t have to pay the commission and are bottom line just got a tiny bit fatter.
The irony is that the company loses so much more by keeping these people around instead of just settling their books. These types of employees can quickly deteriorate morale whether by complaining to every employee with ears at happy hour about why the company sucks or by neglecting their work so much so that their colleagues are forced to pick up the slack. This affects morale and sometimes teams’ end of year bonuses. Soon these once happy employees get burnt out and you have another disengaged employee starting the cycle all over again. It also doesn’t help that short tenured executives receive separation packages in excess of 3x the value of Zenefits offer for failing at the job they were hired to do, solely because they are equipped with a different type of bargaining chip in negotiating their compensation package.
I have seen this play out time and time again and too often senior management doesn’t want to address the core issue.
Sacks says he “wants to work with people who want to be here and who are unified in the purpose of what we’re trying to achieve.” I applaud Sacks for observing that the company he is now leading is not the same boiler room cum party house that many may have signed up for, so it was right to give people an out. But what I criticize him for is conveniently missing the bigger picture. People leave jobs for so many reasons, most never shared during an exit interview or with a manager.
There are a lot of comments floating around from former Zenefit employees about this offer, many pointing out that the people who left were in critical roles with long tenures at the company. “Only” losing 10% of your employees doesn’t mean that 90% of the people working there want to be there. It’s likely most of them are “just there.”
Some may look at the offer and think two months is not enough time to find a new job. Some may be okay trying to fly below the radar and ride this transition out while collecting a paycheck. Some may be waiting for a commission check and like the saying goes, “it’s always easier to look for a new job when you already have one.”
David Sacks succeeded in temporarily changing the narrative about his embattled company in the press and I applaud him for taking a different approach. He drew a line in the sand that I wish more companies offered yet I suspect that Zenefits’ attrition is just beginning.
I believe the real issue with Zenefits was not the illegal compliance issues currently under investigation but rather a systematic hubris where the company’s leadership placed its industry buzz and valuation above its obligation to lead by example. Mind you, I say this as someone who vocally resents being labeled a millennial at 35 and who doesn’t equate culture with an office ping-pong table or a rotating keg. The culture I respond to is built around hard work. It is about solving difficult challenges. It is about creating something from scratch and not being afraid of failure. It is a company full of people terrified of being the weak link on a team of strong players.
Very few of us are irreplaceable- I know I certainly am not. But Sacks set a tone that failed in seizing the larger opportunity to connect and re-inspire his people.
And you can’t put a price on that.