What’s Life Really Like Inside An Ailing Unicorn? 20+ Former Zenefits Employees Weigh In

As Zenefits cuts 17% of its staff in hopes of a fresh start, a look inside the growing pains of a startup that went from 15 employees to 1,400 in less than two years. 

Behind every salacious headline are always several untold stories. Zenefits’ dramatic media takedown is no exception.

“Zenefits Once Told Employees: No Sex in Stairwells,” the Wall Street Journal first reported, followed by aggregated reports from CNBC, Business Insider, Vanity Fair and many, many others. The story, which uncovered an internal company memo sent to employees at the HR startup after their landlord complained of lewd conduct in common areas, followed a lengthy investigation led by Buzzfeed’s William Alden into the resignation of co-founder and CEO Parker Conrad and a pattern of ignoring or cutting corners on state regulations.

While the coverage so far has focused on a fraternity-like culture within Zenefits’ sales organization, I reached out to nearly 200 former Zenefits employees from all divisions to get their take on what really led to the startup's fall from grace. Everyone I talked with agreed to talk only on the condition of anonymity out of fear of retribution from their current or past employer; more than 20 former employees told me that the alleged sex in stairwells doesn’t effectively capture the lows — or the highs — of working at Zenefits. The employees I spoke with ranged from entry-level account executives to vice presidents; from engineers to marketers; and located in both Arizona and California.

What emerged was a tale that I’m hearing more and more as the startup environment becomes increasingly challenging: a seemingly gilded company that inside was full of leadership churn, bad decisions and stressed-out young employees. But Zenefits also had its own unique problems because it operated like a consumer tech company in a highly regulated industry. When a gaming unicorn runs into problems, its users move onto some other addictive app. When an insurance provider valued at $4.5 billion hits the wall, thousands of small businesses could be left without proper coverage for hundreds of thousands of employees.

“Nobody had any clue what the hell was going on. There were managers, who had never really managed, overseeing teams of 100-plus people. Favoritism was absolutely rampant. But mostly, nobody had a clue.”

In a statement provided to LinkedIn, a Zenefits spokesperson said newly appointed CEO David Sacks “has made clear it is time to turn the page at Zenefits and embrace a new set of corporate values and culture.” The message comes on the heels of an announcement on Friday that Zenefits will lay off approximately 250 employees from its sales and recruiting organization, roughly 17% of total headcount.

“It is no secret that Zenefits grew too fast, stretching both our culture and our controls,” Sacks wrote in an email sent out to the company. “This reduction enables us to refocus our strategy, rebuild in line with our new company values, and grow in a controlled way.”

Controlled growth is something that the old Zenefits would have laughed at: the startup went from 15 employees at the start of 2014 to 1,400 employee by the end of last year. Employees say that management didn’t scale alongside the additions. As new employees joined, managers got shuffled and priorities changed, leaving people to discover that the role they thought they had signed on for was gone or radically changed. And even when it didn’t change, the managers did.

“Nobody had any clue what the hell was going on,” said a former HR and benefits coordinator who left the company in 2014. “There were managers, who had never really managed, overseeing teams of 100-plus people. Favoritism was absolutely rampant. But mostly, nobody had a clue.”

The confused management had dramatic implications for the former employee. When a family member was hospitalized, he was communicating his absence from the office with the wrong team lead for over a week. When he finally tracked down who his actual manager was, he says the higher up told him he was underperforming and had two options: take unpaid leave until his mom’s operation in two months or keep working and meet his performance goals. He chose the latter, met his goals, but was still fired.

“Growth for growth's sake took priority over anything else,” he added. “It's telling that an HR company didn't have an HR department for a few years.” (A spokesperson confirmed that Zenefits did not have an HR department for a "period of time," explaining that “with Zenefits software, there was no need for additional HR admin help at that time.”)

The lax management and influx of new, post-college grads led to a rambunctious workplace culture with little structure. A former employee recounted going to a club only to watch an entry-level employee dance on top of a table with her manager. That kind of behavior wasn’t unusual. “The morale was so low,” he said. “You were focused on hitting your sales quotas, then you’d have a beer, then you'd get another deal and go out and party super hard with directors and managers and go to sleep and do it all over again.”

(One former sales developer told me that while the culture was stressful and run by managers who communicated poorly, the “Wolf of Wall Street culture” — as he called it — just didn’t exist. The only time he ever drank at work was on Friday afternoons, so recent reports felt inaccurate to him.)

Growing fast meant doubling down on things that seemed to be working well, an issue for people who had been recruited when the company's priorities were different. A former product operations analyst in San Francisco said everything he was told during recruitment about his role —  his job title, work description, and the potential for growth — changed once he was hired. Another account coordinator in Scottsdale shared that while the role he applied for sounded great when he was being recruited, nothing about the job held up to its description, he said. And when new hires tried to raise a red flag about the lack of leadership and maniacal focus on sales, their first-time managers would tell them to just keep their head down and hit their targets.

“When you are head over your skis and falling all the time, at some point you have to get to the bottom of the mountain. That is where they are now.”

With little focus on training and management once new employees were in the door, a few employees reached out expressing moral discomfort with their jobs. A former account executive based in San Francisco shared that he was routinely asked to make insurance plan decisions for potential clients that he felt he wasn’t qualified to be making. When he expressed those concerns to his similarly untrained manager, he told him to just close the deal and move on. At the time, the account executive wasn’t even a registered broker in California, a legal requirement to sell health insurance to clients in the state.

“I was crafting new insurance plans for a company with 50 people. That is a big deal. I was really worried if I was doing right by, say, Mary in Iowa. I don’t think I was,” he said. “When you are head over your skis and falling all the time, at some point you have to get to the bottom of the mountain. That is where they are now.”

Many employees say that their peers better get ready to see their dirty laundry get aired. Zenefits, they say, isn’t an outlier.

“Certainly there are rambunctious young people working at Zenefits, just like there are at a hundred San Francisco startups. Some of them probably party, sleep with each other, drink, and do stupid things,” a former vice president said. “I think that Zenefits is probably not any better or worse than what one would expect in comparison with its peer set of companies.”

Another San Francisco-based employee working in sales left the company not because of poor company culture, but because of limited work-life balance. People worked around the clock, he said, which Conrad himself encouraged. A former employee in product operations echoed comments about an excessive work culture, but more in a positive than negative way.

“I'm proud of the amount of work and long hours those team dedicated to the Zenefits product and customer,” she said. “The recent coverage of the company only sheds light on one small group of people.”

That comment reminds me of some of the coverage of the banks who crashed during the financial crisis or the startups that evaporated during the last recession. VC firms invest in just 1 percent of the companies that pitch them, and even in that elite bunch, a majority of the companies are moonshots. Yet once funded, real work gets done and real bonds emerge — even among those companies who don’t make it. After weeks of negative media coverage, former employees are either tired of waking up to clickbait headlines or sick of having to relive their bad experiences working there. To them, the real story isn’t about sex in stairwells or admirable Silicon Valley disruption — it’s about the first inning in what’s going to be a long, dreary game.

“I do not really wish to waste any more time and effort thinking about that place,” one former employee said simply.

Update: This story has been updated to clarify the period of time that Zenefits did not have an HR department. 

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For more news from LinkedIn's New Economy Editor Caroline Fairchild, click the follow button at the top of this post and follow her on Twitter here. You can also subscribe to her weekly newsletter featuring her favorite posts on Pulse from the world of venture capital and startups.