BetterWorks Hires CEO to Help Startup Reset After Harassment Claims

(Bloomberg) -- BetterWorks Systems Inc., the human-resources startup that has become a poster child for the wreckage a sexual harassment scandal can inflict on a company, hired Doug Dennerline as chief executive officer to lead a comeback effort.

Dennerline, the outgoing CEO of Alfresco Software Inc., has served on BetterWorks board since last year. Bloomberg reported last month that he had been selected to replace co-founder Kris Duggan, who stepped down after a former employee accused him in a lawsuit of sexual harassment and physical assault.

The new CEO addressed employees for the first time in his new role at an employee meeting Wednesday at the Redwood City, California, headquarters. Dennerline said the venture-backed startup had lost about half of its 80 employees since the scandal, as well as several customers, resulting in lower revenue and bookings last year than expected. “When you enter a new chapter, you leave another one behind,” Dennerline told some two-dozen employees gathered for his address.

The company may have trouble moving on. After the first lawsuit, a second ex-employee filed a claim with the state of California alleging sexual harassment. And now, people familiar with the matter said yet another claim was made with the state's Department of Fair Employment and Housing. This former employee alleged that she was retaliated against for speaking out about the initial lawsuit, said the people, who asked not to be identified because the information is private.

In an interview after his speech, Dennerline confirmed the new case but declined to provide details. He also declined to comment on settlement terms of the original lawsuit, which was about $1 million, people familiar with the matter have said. Dennerline said the second claim has been settled.

In the coming weeks, Dennerline plans to meet individually with every employee, now 79 in total after filling vacant positions. His priorities are improving morale and helping establish a discrimination and harassment-free workplace, he said. Since the scandal, the company has administered unconscious-bias training, formed a companywide diversity and inclusion initiative, and instituted an alcohol policy designed to limit consumption to two drinks at company events.

BetterWorks, which makes software to track employee performance and manager feedback, was founded in 2013 and has raised about $35 million from venture capital firms including Kleiner Perkins Caufield & Byers and Emergence Capital. John Doerr, the chairman of Kleiner Perkins, sits on the board and had been working on a book with Duggan. After the lawsuit, Doerr dropped the entrepreneur's name from the book, which is planned for publication next month by Penguin Random House.

The startup is running low on funds and plans to raise more in the next month from existing investors at the same valuation as the last round, Dennerline said. The new CEO is eager to move the company past the harassment claims and said a “weirdly positive” result is that staff is hyper-sensitive to culture issues.

“You need to move aggressively and swiftly to address the issues and rid the company of the bad stuff and then put policies and procedures in place that are real,” Dennerline said. “The last thing you can do is ignore it.”

To contact the author of this story: Lizette Chapman in San Francisco at lchapman19@bloomberg.net.

To contact the editor responsible for this story: Mark Milian at mmilian@bloomberg.net, Andrew Pollack

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