Zenefits to Lay Off 17% of Work Force

The cuts will mostly affect the company's sales teams and represent about 17 percent of employees.

"This reduction enables us to refocus our strategy, rebuild in line with our new company values and grow in a controlled way that will be strategic for our business and beneficial for our customers," Mr. Sacks said in a statement.

The cuts follow weeks of turmoil at Zenefits, a company that makes software intended to make it easier for small businesses to buy health insurance. The start-up's trajectory is being closely watched in Silicon Valley because the company is a "unicorn," a highflier valued at more than $1 billion, and its troubles are hitting as tech start-ups in general face a tougher road ahead with a funding pullback and broader questions about the economy.

Mr. Sacks said the reductions were not a reflection of individual performance but were being made because the company grew too fast, "stretching both our culture and our controls," he said in an email to employees. "This reduction enables us to refocus our strategy, rebuild in line with our new company values, and grow in a controlled way that will be strategic for our business and beneficial for our customers."

The company's co-founder, Parker Conrad, stepped down as chief executive this month and left the board after it was discovered that he had created software intended to flout insurance brokerage rules. The company also failed to comply with health insurance regulations in some markets.

Mr. Sacks joined the company a year ago as chief operating officer. He previously founded the start-up Yammer, which Microsoft bought in 2012.

"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," Mr. Sacks said in an email to employees after Mr. Conrad left the company.

Zenefits has been valued at $4 billion by prominent investors, including the venture firm Andreessen Horowitz and the mutual fund giant Fidelity.