9 ms·

The email Zenefits CEO David Sacks sent employees as it lays off 9%

70 points by rock57 10y ago

gravity13 10y ago
I think my favorite part of all this is that Sacks has dubbed his start at Zenefits as "Day One" and is dubbing this Tony Hsieh move "The Offer". I imagine that after today he will go home to The Woman and sit in The Chair and pat David The Dog on his scruffy head while feeling well accomplished.
- mgiannopoulos 10y ago
  I would quit just by reading this kind of terminology. "Day One", "The Offer", is this a company or a cult?
  - gravity13 10y ago
    I don't want to make blanket statements about any group of people, but this has been my experience with everybody I've worked with that has come from Yammer.
  - mdorazio 10y ago
    "is this a company or a cult?" That's a good question to ask of a large number of startups, in my experience. There's a fine line between "strong culture" that everyone seems to be pushing for, and "this is crazy."
  - pbreit 10y ago
    Maybe it's just a human writing some things that maybe don't resonate with you?
- mikekij 10y ago
  I had this same exact thought. I suspect the First Draft was written by Gavin Belson.
rizwan 10y ago
I think the way they framed The Offer is a good one. He makes it clear that he wants you to stay if you want to stay, and is giving you a way out if you're not passionate or happy in your job anymore. Many years ago they did that at AOL (a voluntary severance package), and IIRC I don't think it came across as that sincere.
kafkaesq 10y ago
It must suck to have to write these emails. But please, the last thing you should do is bury the bad news behind a bunch of gobbledygook about ARR, SMB, "reseting relationships with key stakeholders" and whatnot. Better to cut to the chase with the blood and gore -- being careful to take the time to acknowledge that this decision is painful for others, not just "painful to make" -- and then rebound with the potential upside.
- danvoell 10y ago
  Agree. The content of the email isn't so bad. The optional severance part is actually pretty cool. Just don't start the email talking about how everything is going well, exactly how you thought it would...
  - WillPostForFood 10y ago
    I agree that the wording was way too corporate, but he has to make a positive pitch. The legitimately want people who are still bought in to stay, and not take "The Offer"tm.
  - pbreit 10y ago
    What if things are going well? They're shutting down a remote office that sold to customers they are no longer focused on. They have plenty of money so the headcount reduction is totally unnecessary from financial perspective.
- leothekim 10y ago
  He could have phrased things better, but it sounds like he's trying to make convey to the employees who are staying that the company has a viable future and is doing things to improve itself. I'd personally prefer to have as big a picture as possible when layoffs like this occur.
- jsprogrammer 10y ago
  It must suck to read the email, about how great the work you have been doing is: Relationships are reset, all our work is about to pay off, customers are sticking with us, revenue is as predicted, and oh, by the way, 10% of you won't get to see it. As for the rest of you, please purge your self as desired. Seems like the company should be handing out shares, instead.
p4wnc6 10y ago
3 months of severance, 6 months of COBRA, and "transition assistance" is not remotely "generous" as far as severance goes. Even when I was just coming out of a bachelor's program and had no work experience, I was able to negotiate 6 months of salary (grossed up) and a full year of continued full benefits as severance, just by asking. I have friends who have gotten significantly more severance than this even, again, just by asking. And if a firm reacts badly if you ask about severance benefits, they're just giving you free info about their dysfunction, allowing you to confidently walk away knowing you're dodging a huge bullet. Many people complain about the language in these trite, lawyer-approved kinds of emails, and yes, it is sad that it evolves in such an anti-human direction. But for me, the real take away is that top to bottom, investors and executives at Zenefits should be absolutely and unequivocally ashamed of themselves for offering such poor severance benefits and having the audacity to turn around and act like it's an act of generosity. The voluntary package with 2 months of severance and 4 months of COBRA defies moral comprehension. I remember the line from the movie The Big Short where Mark Baum says "Short everything that guy has ever touched" or something to that effect, out of disgust. I think the same feeling is warranted with Zenefits' investors and executives. What a stain.
- curtis 10y ago
  Three months seems like an unusually large severance to me. And I've never heard of an employer paying for COBRA at all.
  - p4wnc6 10y ago
    It surprises me that you haven't heard of employers paying for extended benefits, since that is so commonly part of negotiated severance packages. Many employees never negotiate these things, sadly, because organizations try to create a taboo about talking about what would happen if your tenure with them ever comes to an end. As a result, a lot of people are made to accept no severance at all, or extremely poor severance, like 3 months of salary, if any.
    - WillPostForFood 10y ago
deleted 10y ago
[deleted]
designium 10y ago
You guys complain too much. You get one month in Canada. Welcome to the real world, SV bubble.
univalent 10y ago
"The Offer" - brought to you by the LeBron James school of self-marketing and endearing yourself to people.
zelos144 10y ago
By tech standards, this is an extremely generous severance. And, in the Bay Area, 3 months would be more than enough time for a young (under 30) person to find a job. Unfortunately, it may not be that way in Arizona, but that's not the CEO's fault. I have to give the CEO credit. He's probably had to fight his CFO and board tooth and nail to get that package. I view it the same way that I view Obama's work on health care. Is it perfect? No. But it's better to compromise and get something done than to get nothing accomplished at all. What do you expect Sacks to do, stand up to his board, get fired, and then have everyone get nothing? Most tech companies, when they lay people off, don't offer severance or even announce a layoff. They hide it as a "performance" based layoff or put in a stack-ranking system. Sacks is trying to do the most honorable thing that he can. This is also a way for CEO Sacks to distance himself from the Y Combinator way of doing things. YC would advise him to do the standard sleazy startup thing. He's not doing that.
- p4wnc6 10y ago
  > By tech standards, this is an extremely generous severance. And, in the Bay Area, 3 months would be more than enough time for a young (under 30) person to find a job. Wrong on both accounts. They say to factor about 1 months of job searching for every $10k of salary you seek, and I have found this to be highly accurate when searching in New York and in Boston -- certainly also true in SF. Keep in mind that most SF start-up jobs are ludicrous start-up bullshit -- yes maybe you can easily hop to these jobs, but they don't actually provide enough compensation to support living there. Being able to hop to these jobs isn't a reasonable backup plan, despite how many deluded folks try this for a while before moving away. > I have to give the CEO credit. He's probably had to fight his CFO and board tooth and nail to get that package. This is not how companies work. The CEO isn't some champion for the people. This was a careful decision with forethought by all parties, planning ahead for how it would be perceived in media, what impact it might have for future recruiting. If you think of the CEO as some kind of chivalrous champion of the common man, you have a very naive understanding of how companies work, and how bureaucracy in general works. > Most tech companies, when they lay people off, don't offer severance or even announce a layoff. In part this happens because of the taboo created to make it "bad" to talk about failure modes, like someone's tenure ending. Most people are too scared to negotiate this because they are afraid it will make them look like they're already thinking about how to leave or something, which is silly. But in general, this is just false. My experience, at least, and the experience of many tech colleagues I've had, contradicts your claim. > This is also a way for CEO Sacks to distance himself from the Y Combinator way of doing things. YC would advise him to do the standard sleazy startup thing. He's not doing that. This is a bizarre comment. While I agree that Y Combinator is sleazy, I think it's clear that Zenefits is awfully sleazy too, and that this severance arrangement is pure sleaze by Zenefits.
zelos144 10y ago
David Sacks * takes responsibility for the situation. * admits that he's laying people off, rather than disguising it as performance-based firing. * offers a severance that is generous by tech standards, and * allows people whose roles have changed to escape with severance and their reputation intact. This is very much not the Y Combinator way of doing things. Are we sure that Zenefits was once YC?
- jsprogrammer 10y ago
  Where was Sacks when the macro was running? Could Sacks have executed this strategy without the macro having been created and run?
- pj_mukh 10y ago
  "This is very much not the Y Combinator way of doing things" Bold statements require actual data. Or is this just a "feeling" you get from reading news?
- dang 10y ago
  We've banned this account for repeated abuse using sockpuppets. I explained this at https://news.ycombinator.com/item?id=11904067 https://news.ycombinator.com/item?id=11904067, but want to add here that this (seemingly in-passing, but really the point) smear of Y Combinator could not be more of a lie. Telling such lies in a persuasive-sounding way, while never substantiating them, is this troll's specialty. We go out of our way to moderate Hacker News less, not more, when people criticize YC. But that doesn't mean anything goes, and in this case the abuse crossed the line a long time ago.
mathattack 10y ago
Wow. This isn't a 9% layoff. It's 9% plus an offer for everyone else to step out. It will be interesting to see what the final # is. 20%? 30%? I'm not a fan of testosterone talk like everyone has to be "All In" when a company is more mature. The only way this helps is if engagement is a real problem, and you need to sort out who is on the bus and who is off of it. I will say that 3 months of severance for folks who involuntarily leave, and 2 months for folks who voluntarily leave is very generous for a company that is in trouble. It's very close to industry leaders like Netflix and Zappos, and much more than they would need to do.
- phonon 10y ago
  >I will say that 3 months of severance for folks who involuntarily leave, and 2 months for folks who voluntarily leave is very generous for a company that is in trouble. It's very close to industry leaders like Netflix and Zappos, and much more than they would need to do. Not really. This type of layoff (more than 50 people, and an entire location) would seem to qualify under the WARN Act (60 day minimum notice.) So two months full pay in lieu of notice would be the minimum. As for the voluntary leaving...well, why would anyone leave voluntarily unless there was a sweetener?
  - mathattack 10y ago
    Interesting on the WARN act. I didn't think it applied in Arizona. Or is because Zenefits is a CA based company? It's interesting to me in that in most companies, if you're not happy, they counsel you out (or start documenting performance) and then you get nothing. If this were a deliberate "We need to get to 20% reduction" then they would have just picked another 11% to go.
    - TheCoelacanth 10y ago
      The WARN act applies everywhere in the US. Some states (including CA) have stricter versions.
      - 10y ago
aphextron 10y ago
I went through a couple rounds of interviews with them a few months back. It was a really odd and disjointed experience in general, and the staff seemed completely checked out. I had to politely decline.
kogepathic 10y ago
Sacks has opened the first envelope. [1] Let's see when the second one is opened. My guess is if Z2 doesn't hit their goals, sometime next spring. [1] http://www.design.caltech.edu/erik/Misc/Prepare_3_Envelopes.html http://www.design.caltech.edu/erik/Misc/Prepare_3_Envelopes....
- tarr11 10y ago
  This is the second envelope. He blamed his predecessor on "Day One" a few months ago. Great link, though.
rboyd 10y ago
Has anyone ever published a study of the results after one of these offers? Seems like a good way to invite a lot of talented folks with healthy alternatives to leave.
- Eridrus 10y ago
  I would also be really interested in the actual results since I can see it going both ways; this could incentivize a lot of talented folks to leave, or if you were incentivizing your people properly, this will just get those who were coasting to move on and leave those who were actually having an impact. E.g. you're not going to take this offer if you expect your end of year bonus to be 40% already.
planetjones 10y ago
My favourite part was 'we have reset our relationships with our key stakeholders'. This kind of implies there is a button he can press and everything is ok. Personally I wouldn't send mails with such unsubstantiated nonsense, but there you go.
davesque 10y ago
"We want you staying late to help out on a project. We want you busting ass on Z2. The next few months are going to be an exciting time at Zenefits and we want everyone participating in that. But if you can't get excited about that, then frankly we need you to make space for someone who will." Seems like a strange way of lifting moral during tough times.
phamilton 10y ago
The voluntary layoff says nothing about stock. Are there still employees being held hostage by golden handcuffs?
citrusx 10y ago
I'll be another data point for "I'd totally leave if after reading this email, even if I wanted to stay before I read it." As a point of reference, a (long-established) company gave me over $50k (cash) in severance after 4+ years of service. That was what I'd consider "generous".

70 points by rock57 10y ago

I think my favorite part of all this is that Sacks has dubbed his start at Zenefits as "Day One" and is dubbing this Tony Hsieh move "The Offer". I imagine that after today he will go home to The Woman and sit in The Chair and pat David The Dog on his scruffy head while feeling well accomplished.

mgiannopoulos 10y ago
I would quit just by reading this kind of terminology. "Day One", "The Offer", is this a company or a cult?
- gravity13 10y ago
  I don't want to make blanket statements about any group of people, but this has been my experience with everybody I've worked with that has come from Yammer.
- mdorazio 10y ago
  "is this a company or a cult?" That's a good question to ask of a large number of startups, in my experience. There's a fine line between "strong culture" that everyone seems to be pushing for, and "this is crazy."
- pbreit 10y ago
  Maybe it's just a human writing some things that maybe don't resonate with you?
mikekij 10y ago
I had this same exact thought. I suspect the First Draft was written by Gavin Belson.

rizwan 10y ago

I think the way they framed The Offer is a good one. He makes it clear that he wants you to stay if you want to stay, and is giving you a way out if you're not passionate or happy in your job anymore. Many years ago they did that at AOL (a voluntary severance package), and IIRC I don't think it came across as that sincere.

kafkaesq 10y ago

It must suck to have to write these emails. But please, the last thing you should do is bury the bad news behind a bunch of gobbledygook about ARR, SMB, "reseting relationships with key stakeholders" and whatnot. Better to cut to the chase with the blood and gore -- being careful to take the time to acknowledge that this decision is painful for others, not just "painful to make" -- and then rebound with the potential upside.

danvoell 10y ago
Agree. The content of the email isn't so bad. The optional severance part is actually pretty cool. Just don't start the email talking about how everything is going well, exactly how you thought it would...
- WillPostForFood 10y ago
  I agree that the wording was way too corporate, but he has to make a positive pitch. The legitimately want people who are still bought in to stay, and not take "The Offer"tm.
- pbreit 10y ago
  What if things are going well? They're shutting down a remote office that sold to customers they are no longer focused on. They have plenty of money so the headcount reduction is totally unnecessary from financial perspective.
leothekim 10y ago
He could have phrased things better, but it sounds like he's trying to make convey to the employees who are staying that the company has a viable future and is doing things to improve itself. I'd personally prefer to have as big a picture as possible when layoffs like this occur.
jsprogrammer 10y ago
It must suck to read the email, about how great the work you have been doing is: Relationships are reset, all our work is about to pay off, customers are sticking with us, revenue is as predicted, and oh, by the way, 10% of you won't get to see it. As for the rest of you, please purge your self as desired. Seems like the company should be handing out shares, instead.

p4wnc6 10y ago

3 months of severance, 6 months of COBRA, and "transition assistance" is not remotely "generous" as far as severance goes. Even when I was just coming out of a bachelor's program and had no work experience, I was able to negotiate 6 months of salary (grossed up) and a full year of continued full benefits as severance, just by asking. I have friends who have gotten significantly more severance than this even, again, just by asking. And if a firm reacts badly if you ask about severance benefits, they're just giving you free info about their dysfunction, allowing you to confidently walk away knowing you're dodging a huge bullet. Many people complain about the language in these trite, lawyer-approved kinds of emails, and yes, it is sad that it evolves in such an anti-human direction. But for me, the real take away is that top to bottom, investors and executives at Zenefits should be absolutely and unequivocally ashamed of themselves for offering such poor severance benefits and having the audacity to turn around and act like it's an act of generosity. The voluntary package with 2 months of severance and 4 months of COBRA defies moral comprehension. I remember the line from the movie The Big Short where Mark Baum says "Short everything that guy has ever touched" or something to that effect, out of disgust. I think the same feeling is warranted with Zenefits' investors and executives. What a stain.

curtis 10y ago
Three months seems like an unusually large severance to me. And I've never heard of an employer paying for COBRA at all.
- p4wnc6 10y ago
  It surprises me that you haven't heard of employers paying for extended benefits, since that is so commonly part of negotiated severance packages. Many employees never negotiate these things, sadly, because organizations try to create a taboo about talking about what would happen if your tenure with them ever comes to an end. As a result, a lot of people are made to accept no severance at all, or extremely poor severance, like 3 months of salary, if any.
  - WillPostForFood 10y ago

deleted 10y ago

[deleted]

designium 10y ago

You guys complain too much. You get one month in Canada. Welcome to the real world, SV bubble.

univalent 10y ago

"The Offer" - brought to you by the LeBron James school of self-marketing and endearing yourself to people.

zelos144 10y ago

By tech standards, this is an extremely generous severance. And, in the Bay Area, 3 months would be more than enough time for a young (under 30) person to find a job. Unfortunately, it may not be that way in Arizona, but that's not the CEO's fault. I have to give the CEO credit. He's probably had to fight his CFO and board tooth and nail to get that package. I view it the same way that I view Obama's work on health care. Is it perfect? No. But it's better to compromise and get something done than to get nothing accomplished at all. What do you expect Sacks to do, stand up to his board, get fired, and then have everyone get nothing? Most tech companies, when they lay people off, don't offer severance or even announce a layoff. They hide it as a "performance" based layoff or put in a stack-ranking system. Sacks is trying to do the most honorable thing that he can. This is also a way for CEO Sacks to distance himself from the Y Combinator way of doing things. YC would advise him to do the standard sleazy startup thing. He's not doing that.

p4wnc6 10y ago
> By tech standards, this is an extremely generous severance. And, in the Bay Area, 3 months would be more than enough time for a young (under 30) person to find a job. Wrong on both accounts. They say to factor about 1 months of job searching for every $10k of salary you seek, and I have found this to be highly accurate when searching in New York and in Boston -- certainly also true in SF. Keep in mind that most SF start-up jobs are ludicrous start-up bullshit -- yes maybe you can easily hop to these jobs, but they don't actually provide enough compensation to support living there. Being able to hop to these jobs isn't a reasonable backup plan, despite how many deluded folks try this for a while before moving away. > I have to give the CEO credit. He's probably had to fight his CFO and board tooth and nail to get that package. This is not how companies work. The CEO isn't some champion for the people. This was a careful decision with forethought by all parties, planning ahead for how it would be perceived in media, what impact it might have for future recruiting. If you think of the CEO as some kind of chivalrous champion of the common man, you have a very naive understanding of how companies work, and how bureaucracy in general works. > Most tech companies, when they lay people off, don't offer severance or even announce a layoff. In part this happens because of the taboo created to make it "bad" to talk about failure modes, like someone's tenure ending. Most people are too scared to negotiate this because they are afraid it will make them look like they're already thinking about how to leave or something, which is silly. But in general, this is just false. My experience, at least, and the experience of many tech colleagues I've had, contradicts your claim. > This is also a way for CEO Sacks to distance himself from the Y Combinator way of doing things. YC would advise him to do the standard sleazy startup thing. He's not doing that. This is a bizarre comment. While I agree that Y Combinator is sleazy, I think it's clear that Zenefits is awfully sleazy too, and that this severance arrangement is pure sleaze by Zenefits.

zelos144 10y ago

David Sacks * takes responsibility for the situation. * admits that he's laying people off, rather than disguising it as performance-based firing. * offers a severance that is generous by tech standards, and * allows people whose roles have changed to escape with severance and their reputation intact. This is very much not the Y Combinator way of doing things. Are we sure that Zenefits was once YC?

jsprogrammer 10y ago
Where was Sacks when the macro was running? Could Sacks have executed this strategy without the macro having been created and run?
pj_mukh 10y ago
"This is very much not the Y Combinator way of doing things" Bold statements require actual data. Or is this just a "feeling" you get from reading news?
dang 10y ago
We've banned this account for repeated abuse using sockpuppets. I explained this at https://news.ycombinator.com/item?id=11904067 https://news.ycombinator.com/item?id=11904067, but want to add here that this (seemingly in-passing, but really the point) smear of Y Combinator could not be more of a lie. Telling such lies in a persuasive-sounding way, while never substantiating them, is this troll's specialty. We go out of our way to moderate Hacker News less, not more, when people criticize YC. But that doesn't mean anything goes, and in this case the abuse crossed the line a long time ago.

mathattack 10y ago

Wow. This isn't a 9% layoff. It's 9% plus an offer for everyone else to step out. It will be interesting to see what the final # is. 20%? 30%? I'm not a fan of testosterone talk like everyone has to be "All In" when a company is more mature. The only way this helps is if engagement is a real problem, and you need to sort out who is on the bus and who is off of it. I will say that 3 months of severance for folks who involuntarily leave, and 2 months for folks who voluntarily leave is very generous for a company that is in trouble. It's very close to industry leaders like Netflix and Zappos, and much more than they would need to do.

phonon 10y ago
>I will say that 3 months of severance for folks who involuntarily leave, and 2 months for folks who voluntarily leave is very generous for a company that is in trouble. It's very close to industry leaders like Netflix and Zappos, and much more than they would need to do. Not really. This type of layoff (more than 50 people, and an entire location) would seem to qualify under the WARN Act (60 day minimum notice.) So two months full pay in lieu of notice would be the minimum. As for the voluntary leaving...well, why would anyone leave voluntarily unless there was a sweetener?
- mathattack 10y ago
  Interesting on the WARN act. I didn't think it applied in Arizona. Or is because Zenefits is a CA based company? It's interesting to me in that in most companies, if you're not happy, they counsel you out (or start documenting performance) and then you get nothing. If this were a deliberate "We need to get to 20% reduction" then they would have just picked another 11% to go.
  - TheCoelacanth 10y ago
    The WARN act applies everywhere in the US. Some states (including CA) have stricter versions.
    - 10y ago

aphextron 10y ago

I went through a couple rounds of interviews with them a few months back. It was a really odd and disjointed experience in general, and the staff seemed completely checked out. I had to politely decline.

kogepathic 10y ago

Sacks has opened the first envelope. [1] Let's see when the second one is opened. My guess is if Z2 doesn't hit their goals, sometime next spring. [1] http://www.design.caltech.edu/erik/Misc/Prepare_3_Envelopes.html http://www.design.caltech.edu/erik/Misc/Prepare_3_Envelopes....

tarr11 10y ago
This is the second envelope. He blamed his predecessor on "Day One" a few months ago. Great link, though.

rboyd 10y ago

Has anyone ever published a study of the results after one of these offers? Seems like a good way to invite a lot of talented folks with healthy alternatives to leave.

Eridrus 10y ago
I would also be really interested in the actual results since I can see it going both ways; this could incentivize a lot of talented folks to leave, or if you were incentivizing your people properly, this will just get those who were coasting to move on and leave those who were actually having an impact. E.g. you're not going to take this offer if you expect your end of year bonus to be 40% already.

planetjones 10y ago

My favourite part was 'we have reset our relationships with our key stakeholders'. This kind of implies there is a button he can press and everything is ok. Personally I wouldn't send mails with such unsubstantiated nonsense, but there you go.

davesque 10y ago

"We want you staying late to help out on a project. We want you busting ass on Z2. The next few months are going to be an exciting time at Zenefits and we want everyone participating in that. But if you can't get excited about that, then frankly we need you to make space for someone who will." Seems like a strange way of lifting moral during tough times.

phamilton 10y ago

The voluntary layoff says nothing about stock. Are there still employees being held hostage by golden handcuffs?

citrusx 10y ago

I'll be another data point for "I'd totally leave if after reading this email, even if I wanted to stay before I read it." As a point of reference, a (long-established) company gave me over $50k (cash) in severance after 4+ years of service. That was what I'd consider "generous".