Tuesday Buzz: A Startup’s Lesson on Compliance

A cautionary tale from the company Zenefits highlights the importance of not cutting corners with compliance. Also: A new startup eyes a plan to make virtual reality a mainstay of events.

Take a cue from the human resources startup Zenefits: When it comes to compliance, don’t cut corners.

For months, the prominent Silicon Valley startup, which offers a service that automates the drudgery of human resources work, has become the subject of scandal and controversy, ironically, for human resources issues. The stories about the company have required Zenefits to quickly switch gears, drop its founder and CEO, lay off hundreds of employees, and get rid of the alcohol in the office.

But the biggest problem, as highlighted in a new Bloomberg Businessweek story, is all about compliance. In California, insurance brokers are required to pass a state licensing exam before they can legally advise or sell insurance. (The company gave away its product for free, but made money on the backend, through revenue on insurance and other benefits offered through the service.) However, Zenefits Cofounder Parker Conrad didn’t like the requirement that employees spend 52 hours taking online courses before they received their licenses.

So Conrad programmed a Chrome plugin, known around the office as “the macro,” and used the tool to make it seem like employees were busy taking the courses when, actually, they weren’t. This fateful decision came back to bite the company, leading to investigations against it in multiple states and to Conrad’s resignation.

“The fact is that many of our internal processes, controls, and actions around compliance have been inadequate, and some decisions have just been plain wrong. As a result, Parker has resigned,” the company’s chief operating officer, David Sacks, said in an email addressing Conrad’s departure, acquired by BuzzFeed in February.

Sacks, who later became the company’s CEO, has taken many steps to right the ship, including laying off anyone who played a part in distributing the Chrome plugin to employees. Still, the investigations continue.

Zenefits’ recent failings, including a missed sales target and the possibility of significant fines, have cut its value roughly in half. The situation also offers a great cautionary tale on the importance of compliance.

Crazy Event-Tech of the Day

Could the event industry become the first place a lot of folks get to try virtual reality on for size? The makers of the Infinitus Prime tVR sure hope so. The U.K.-based company Infinitus Global announced this week that its high-resolution virtual reality system would specifically target the conference sector.

Learn more about the device over at Digital Trends and read up on the company’s plans for the event industry at Conference & Incentive Travel.

Other Links of Note

Today in unusual branding: Budweiser has changed the brand of its namesake product to “America”—at least until the election season is over. Fast Company explains why.

Just getting started with social media? On VolunteerMatch’s Engaging Volunteers blog, Brad Wayland, VP of business development at BlueCotton, offers tips on how nonprofits can get going.

What if your speaker bails on your event? If you can’t find anyone else, there’s always a way to turn a disaster into a success. At Frank J. Kenny’s website, Christina Green has some suggestions.

(Zenefits press photo)

Ernie Smith

By Ernie Smith

Ernie Smith is a former senior editor for Associations Now. MORE

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