Pulling Back The Curtain on Unicorn Startups

Unicorns are rare, everyone knows this.  So common sense would tell you that if given the chance to hop on board and go for a ride, you seize the opportunity. If you find yourself working for a young startup that has a chance of becoming the next Silicon Valley darling, you grab onto that pony and hold on for dear life.  

That was where Shannon and I found ourselves three years ago; early employees at a tech company that was destined for greatness.  For those who aren’t immersed in Silicon Valley culture, a unicorn is a common term for a startup valued at over $1 billion. It's a coveted title in the Valley and one that is shared by the likes of Uber, Airbnb, and Snapchat.  Zenefits became a card-carrying member of the club in 2015 after a Series B valuation of $4.5 billion.  

Aware of my unique situation, I toyed with the idea of my first Tech-related blog post.  

Unfortunately, I never was able to carve out time (startups take most of your time and energy!) or able to choose the “right” topic.

Then I read Susan J. Fowler’s, “Reflecting on One Very, Very Strange Year at Uber”, and if you haven’t read it yourself then stop reading and give it a look.  Strange enough, Chris Sacca, a very successful Venture Capitalist and early investor in Uber, was the reason I came across the damning article in the first place.  He had re-tweeted Susan’s twitter post.  I figured the article would be a puff piece about Uber’s enormous growth and all the exciting work that’s going on over there.  I expected to graze the first few paragraphs, get the gist, and head back to Twitter for more Trump tweets.  I was WAY wrong.

After I read it once, I read it again.  I was shocked.  The post made me sad (nearly bringing me to tears), it made me mad, it made me feel inspired, I wanted to share it with an employment lawyer (though I’m sure she has a couple by now).  What surprised me the most about the article was that it made me feel connected to Susan.  I felt empathy for Susan.  I recalled either my co-workers or myself having felt these same frustrations and unfair job experiences.  I couldn’t relate to Susan’s sexual harassment claims, nor do I know of anyone at Zenefits with a remotely similar experience, but with that piece aside I could vividly remember the same feelings of disorganization, mistrust, unfairness, job insecurity, and uncertainty.  I wanted to reach through the computer, give her a hug and tell her, “you’ve got this, it's going to be ok”, as if we were part of a support group or something. It was surreal.

It was clear that Susan beat me to the punch.  She wrote the article I had been looking to write. She pulled back the curtain and revealed the man behind it.  When everyone else was blindly praising the powerhouse tech company, Uber, Susan stuck her neck out to give the public an unfiltered look inside of the company walls. She went against conventional thinking and proved that employees do have a voice and that employers need to take responsibility for their dysfunctional environments.  She inspired me to do the same about my office and the culture I’ve been apart of for the past three years.  This was “right” topic.

A little more info about Zenefits and my experience thus far: I started at Zenefits part-time in December of 2013, when the company was about a year old with 15 employees.  I came on as a full-time employee five months later in April of 2014.  Since its rise to prominence in 2015 with the $4.5 billion valuation, Zenefits has slowly fallen from grace, with its most recent stumble coming in the form of laying off 430 employee as part of a RIF (Reduction in Force), the 2nd in the company’s short history.  Zenefits’ rise and falls have been well documented by the media, and anyone interested in learning more should consult Google.  Since 2013 I’ve had three managers, five title changes, two performance reviews, one “offer” to quit, I’ve managed a team, and had my team taken away.  Somehow, between re-orgs, RIFs, and major layoffs, I still stand before you a Zenefits employee.

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I’d like to elaborate on pieces of Susan’s post that a struck a chord with me:

Constantly Changing Performance Metrics

Performance reviews weren’t always a thing at Zenefits.  It took nearly 16 months of employment before I received my first performance review.  Leadership finally caved after employees begged and pleaded for feedback from their managers.  At first, I didn’t much care.  I had a mountain of work waiting for me every morning and all I wanted was to plow through my tasks and go home.  I slowly realized why my co-workers were kicking and screaming for feedback.  Not only were reviews a way for employees to improve their professional skills, standardized performance metrics would confirm their value to the company.  It became clear to me that my co-workers wanted guidance and feedback but, more than that, they wanted to know that they were good at their job.  During this time, there was minimal guidance or training so employees rarely knew what was important to their managers.  Performance metrics would help clarify how employees were being judged.  Instead, all any one could do was work as hard as possible for as long as possible; a recipe for burning employees out.

Eventually, Zenefits agreed to establish a performance evaluation system and hold quarterly reviews between managers and their subordinates.  What a relief!  Except once metrics were established by HR and reviews were conducted, HR and company leadership decided to change the review process and metrics.  So now HR had to create a new performance rubric, which would delay execution of the next reviews, and employees no longer had a baseline to compare their performance against.  We had basically started over.  On top of this, in an attempt to streamline the process, Zenefits paid thousands of dollars to implement a performance evaluation system, which was then scrapped before it ever went into effect.  It didn’t seem that hard.  Why was the company struggling to create a standardized review for employee performance?  Most people guessed that the company was trying to avoid official performance reviews to allow for firing without the issue of “wrongful terminations”.  Whether true or not, having a rumor like this spread around a workplace deteriorated employee morale.

Fear of Dissolving Teams or Re-orgs

Susan writes in her post that employees “lived under fear that our teams would be dissolved, there would be another re-org, and we'd have to start on yet another new project with an impossible deadline”.   Zenefits employees commonly shared this concern.  After massive layoffs in the Sales Department in early 2016, it was clear that company priorities were about to change and, naturally, employees wondered how it would affect their team and their jobs.  Rumors began popping up about a re-org and no one could confirm or deny them.  Big changes were likely coming and employees were left to wondering if their job was safe for months.  Without any positive performance reviews to lean on, employees could only prepare for the worst.

The rumors proved to be true and the company’s first re-org took place in the middle of 2016.  For those who survived the re-org, there were still critical questions to be answered, to which managers rarely had a comforting response.  “We’re still trying to sort things out, just hold on”, “no one is really sure what’s going on with the new changes”, “a lot has changed, give us some more time”, “just trust us, once things are sorted out we’ll make sure to get back to you” …

No one knew what the organization’s priorities were at any given moment.

I was baffled at how long it took Zenefits to create a Mission statement. That was High School Business 101; all successful businesses had one.  You can understand why.  How are employees and their teams supposed to prioritize projects or their work if their employer hasn’t established a vision, a purpose, or a goal to strive toward?  After three years in business, the company had finally mustered up an actual mission: “to make entrepreneurship easier and more accessible for everyone”.  Sure, whatever, it's pretty vague but at least it’s SOMETHING.  The statement was painted on a few walls in the office and then mostly forgotten.

We could never align as an organization in part because we grew a warp speed.  Dozens of new employees would start every Monday while we hadn’t found time to fully train last Monday’s batch of new hires (or had time to create a formal training process). Zenefits was trying to juggle as many balls as it possibly could and the solution was to hire more hands instead of letting a few balls hit the ground.  The company was attempting to hire so quickly that we would lie to candidates about the job description just to get them to sign their offer letter.  You can imagine how upset employees were when they began their new job and realized they had been duped.  A poor foot to start a relationship on.

Instead of hiring blindly, Zenefits needed to hone in on a select number of important services, master them, and then strategically add more to the arsenal.  Instead of handling five things well, Zenefits handled 100 things poorly.  This logic forced the company to hire employees and contractors at an unmanageable rate (eventually leading to massive layoffs), costs the company millions of dollars, deteriorated the Zenefits brand as ex-clients and ex-employees dragged the company’s reputation through the mud, and created organizational chaos.

We were the fastest growing startup in Silicon Valley history, that was our battle cry.  “The faster we grow, the stronger the hold we’ll have on the industry”, our CEO would tell us. Zenefits built its buzz around its hyper-growth but the house of cards could stay upright for only so long.

Toxic Company Culture

“Everybody’s shit stinks” (E.S.T): that was the motto from the start.  I get the thought process; you don’t want a culture where employees are so close that they’re afraid to critique or disagree with one another.  In theory, tough problems never get solved in a workplace where co-workers are afraid to hurt each other’s feelings.  "Full transparency" was what leadership sold it as but E.S.T. drove the culture closer to full-blown turf wars between departments.  

Finger pointing and blaming became Zenefits staples and many employees spent their days bracing to be scolded.  This scolding commonly came via email from one of the executives, usually including our CEO or your manager’s manager that basically read, “How did you screw this up?”  I received this email multiple times and each time it was as humiliating and gut-wrenching as the prior.  Generally, the only outcome that came from these emails was reinforcing the constant fear of making a mistake and an increased cutthroat attitude toward your co-workers.  Finger pointing was contagious and the high-stress environment was unrelenting.

“What the F*#$” was our 2nd motto.  Not officially but our CEO said the phrase so often you would have thought he had it trademarked.  The phrase quickly became part of the office dialect.  After a week at Zenefits, WTF felt more like “what's up” than an expletive.  It was a normal part of the workday.  Our CEO said it at all-hands, he said it in side conversations, he wrote it in emails.  Instead of fixing problems and uncovering root cause, the initial response was to blame and shame.   This unhealthy “transparency” was both contagious and crippling for the company.

Questionable HR Practices

I want to be clear; the HR personnel at Zenefits that I've interacted with have always been professional and kind.  I have never had an issue with any one person in the HR department.  That’s not to say though that there weren’t suspicious HR activities taking place at Zenefits in the past.  Such activities include:

• Misrepresenting job descriptions to potential candidates.
• Diluting shares to make investors happy and promising employees Restricted Stock Units (RSUs), if they stayed until July 1, 2017, to make up for the value their shares lost.  Then laying off most of these employees to avoid actually giving them their promised RSUs.
• Multiple employee engagement surveys were conducted but results were either never shared with employees or were shared months later.  The results were notoriously negative.
• Transitioning groups of employees from Salary to Hourly without providing an adequate explanation.  Zenefits' COO at the time held an all-hands for the Operations team to discuss the changes but had little to no answers to employee questions. 
• Periods of time where daily lunches were provided for certain teams/departments but not others.

With each head-scratching HR move the company made, the trust between employer and its employees dwindled.  Today, that trust is nearly nonexistent.  

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“Alright alright, we get it, you hate Zenefits and you’ll never work in Tech again.  So leave the company! It’s a free country and no one is forcing you to work there.”

I don’t hate Zenefits.  Zenefits has been very hard on Shannon and I but it’s also provided us with amazing experiences and opportunities and has taught us priceless lessons. Though our relationship with Zenefits may be an abusive one, it's also consensual. For all that Zenefits took from us, it has also given a lot.  We were able to form great relationships and work with some of the smartest, most creative, and most driven people we’ve ever met. Alongside these great people we accomplished amazing things, making huge differences in the lives of our customers and co-workers.  

Shannon and I are also financially invested in Zenefits.  We both have vested shares and are rooting for Zenefits to succeed.  As an investor in Zenefits, yes, I am critical of some of the business decisions the company has made, but I believe the ship is mostly righted and the company still has a great deal of potential.

The most recent RIF also came with a changing of the guard.  Zenefits now has a new CEO at the helm, and though he has only been on the job for a couple of weeks, I am confident he has the experience and knowledge to lead Zenefits to prosperity. I have full faith that with the proper guidance, vision, and focus that Mr. Fulcher’s can uproot Zenefits’ internal problems and make the company a much better place to work.

 “So why write this post?  What do you stand to gain?”

Frankly, I don’t have much to gain.  Most of the close friends and connections I’ve made at Zenefits have either left the company or were caught in the RIF.  Part of me just needed to vent.  The other part of me hopes that this post falls into the right person’s hands.  I hope a younger me, a twenty-something just starting off in the Valley, can come across Susan’s or my post and learn something.  Learn what questions to ask the next time they’re interviewing at a young or successful startup (or any startup really).  

•  What's the company culture like?  
•  What's the leadership structure like?  
•  Does the company have its priorities and vision established?
•  Will I receive periodic reviews and/or feedback?

Ask for your own well-being and as a barometer for where the company is focusing its efforts.  I promise these questions are 10 times as important as the snacks a company offers or their vacation policy (Zenefits’ was unlimited and I didn’t get a full day off for over a year).  

Since Susan’s post, Uber has hired Eric Holder to lead an independent sexual harassment investigation while other Uber employees have echoed Susan’s concerns about the company’s culture. Her voice was clearly heard and she laid the groundwork for others, including myself, to speak up and start hard conversations. Instead of a third party investigation, I hope my post provokes tech employees to talk with their co-workers, talk with their managers, talk with other employees in the industry and voice their feelings and concerns.  I hope outsiders will be critical of these well-funded startups and that their CEOs will measure success based on more factors than just the company’s balance sheet. I hope employees will support each other and refer to Zenefits and Uber as examples where toxic work environments hurt the employees, the business, and the company’s brand.  If I can provoke another employee to share their feelings of mistrust, misuse of power, or unfairness in their workplace, I will consider this a success.

Unicorns are not only rare, they’re also mythical.  I would advise current and future employees to use Susan and my experience as case studies and to be wary of young startups with huge fundraising rounds.  Companies that wake up one morning with $500 million in the bank need to be very smart and very careful.  Like a Powerball lottery winner, a company that has a huge fundraising round is going to gain a lot of unwanted attention and attract people who don’t have the company’s best interest in mind.  Companies must take these fundraising rounds in stride and grow at a manageable pace, not just for the sake of their products or services but for their employees too.  Company leadership must be disciplined and remain focused on the organization’s core values and primary objectives while caring for its workforce.  If not, the wheels can fall off the wagon.  In other words, without the proper love and care, your unicorn may end up a fairy tale.

- ES