Zenefits’ Company Culture Turnaround and Employee Engagement
Following suit to so many small and big companies alike, Zenefits is yet another example of company culture turnaround, lead by a new CEO.
The company recently made news headlines with new CEO David Sacks’s email announcing a large number of layoffs. This second email follows an earlier message that covered deep company culture issues and the new leadership’s resolve to address them head on.
As we were following the news and reading about the company’s evolution so far, we engaged in an office debate on how company culture can be implemented or modified and how a leader would go about that, to ensure the success of such a big change.
Because it touches on the essence of what a company stands for and how it functions, company culture is a hard concept to define and an even harder one to implement. Encompassing company values and vision, ways of working, human attitudes and behaviors, it’s a volatile objective and it usually takes a long time to define and implement. From our standpoint, company culture is built slowly, over time, and it’s not something you can change overnight or over a few emails.
Which brings us to the Zenefits case study. In this fast-moving economy, the decision to turn around the company starting from deep inside its fabric was a decision that David Sacks surely didn’t make lightly.
Culture as a starting point for change
Culture is crucial. In a major research program, Harvard professors John Kotter and James Heskett completed an extensive research project detailing the corporate cultures of 200 companies and how each company’s culture affected its long-term economic performance. Their results showed that strong corporate cultures that facilitate adaptation to a changing world are associated with strong financial results.
The new Zenefits CEO seems to understand this all too well. Emphasizing culture as the first action is a sign of commitment to the organization.
“I’m making my first actions as CEO about culture and values because I believe these things are fundamental to a company’s success and who we are and want to be. I want to push down decision-making ability into the company. Culture and values enable us to do that by ensuring that everyone is aligned around the right goals. (…)
There is one other critical thing that I want to do, and that is make Zenefits a purpose-driven company.”
Laying out new company values
In February, when the first email went out, he acknowledged and recognized a deep problem in culture, marking this as the starting point of the change that was needed in order to save the company:
“These steps are a start to fixing the problem, but they are not enough. We must admit that the problem goes much deeper than just process. Our culture and tone have been inappropriate for a highly regulated company.”
“As an entrepreneur myself, I know that Zenefits can never lose its innovativeness and willingness to experiment. But at the same time, I believe a new set of values are necessary to take us to the next level.
Effective immediately, this company’s values are:
#1 Operate with integrity.
#2 Put the customer first.
#3 Make this a great place to work for employees.”
Laying out company values as a driver is a great strategy. But shouldn’t these companies come from the very inside of the company? Should they come top-down or bottom-up? Did he just shoot them out, or was there a process behind the selection of this values?
It’s important to consider the internal process of acceptance of these values, especially at the level of Zenefits, with over 1000 employees. As far as company culture goes, people should feel that they are involved in order to accept and rally behind a new culture.
It’s also interesting to notice the exact wording. “Effective immediately” is the strange formulation when referring to company values and culture, as values almost never become effective over night.
Overall, this looked like a good start, but what happened over months to come that led to the second email being sent out?
Getting on board with the new culture
Inevitably, a number of people and behaviors were not compatible with the new values and the new direction that the company culture was taking. Not unlike many other companies in similar situations, those who were feeling like this is not the company they were committed to work for were invited to leave.
“However, I recognize that the new Zenefits may be a very different company than the one many of you joined. I want to be respectful and realistic of that fact. And if you are not motivated by our mission to make entrepreneurship easier, or if you do not agree with the new company values, or if your role has changed in ways that you cannot support, then you can take 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 2012, Antony Jenkins began his tenure as CEO of Barclays in 2012 with a similar statement of intent in response to the scandals that has rocked the financial services industry in general and Barclays in particular. As he launched Project Transform – a corporate change management strategy designed to restore Barclays’ reputation, his message was loud and clear: “Clean-up or clear off”.
Like David Sacks and so many other CEOs, Jenkins recognised that in order to achieve broader strategic change, a company culture turnaround was needed:
“My message to those people is simple: Barclays is not the place for you. The rules have changed. You won’t feel comfortable at Barclays and, to be frank, we won’t feel comfortable with you as colleagues”.
A strong message but a necessary one. It was too late for Kodak, but it doesn’t have to be for Zenefits. Kodak is perhaps the most frequently quoted example of a business that was essentially destroyed by its culture, and its inability to change when it needed to the most. The company was reputedly stuck in a culture of complacency that it became innovation-averse and crashed, to the despair of many fans and customers.
Kodak has now recovered from bankruptcy and remains doing what it has done best: manufacturing film, but its new management and culture remembers the lessons the company learned during those rough years.
Company culture and employee engagement
David Sack’s message is a strong backup for creating a company value, and it is through hard times more than ever that teams rally together and push through. While it may be seen as a gamble should too many people take on the offer, the value of the team that remains is greater than ever, as commitment levels should be higher than before.
His email is both positively bold and open, as it is concerning for how organizations see employee engagement. Organizational culture plays a very important role in employee engagement and motivation. A positive culture helps to foster trust among your employees, making them more passionate and dedicated towards their work. This, in turn, fosters an environment in which employees are productive and enthusiastic.
It’s great to see that CEOs put emphasis on company culture as a key driver and value for turning a company around or succeeding on long term.
However, a valid concern is why was this not done earlier in the process, when it could have had a deeper impact on the future of the entire organization? And if many more of these transformational culture changes led by new leadership prove to be successful, will CEOs take this as a good case practice for troublesome times, instead of embedding organizational culture all together from day one?
Paula is a content strategist with a big passion for life and the pursuit of happiness. When she's not creating an eBook or tweeting the latest trends, she's probably petting a cat or watching a movie.
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