AOL Employees Don’t Exit Voluntarily
People don’t want to leave their jobs, especially when the economy is tighter than usual and unemployment numbers are already high. But that’s what AOL asked its workers to do in a recent effort to downsize the company and control costs. AOL asked for 2,500 volunteer separations and only received 1,100. That left a gap of 1,400 workers. The goal was to reduce the firm’s workforce by more than 30 percent, from 6,900 to about 4,400. AOL, which had been struggling for several years under the merger with Time Warner, finally spun off as an independent company—but a damaged one. AOL management decided that the only way to turn the company around was to trim as much expense as possible, from every limb of the organization. The turnaround initiative, dubbed Project Everest, was led by new CEO Tim Armstrong, a former sales executive for Google. After downsizing the workforce, Armstrong planned to refocus AOL’s business in a few select areas, including content, online advertising, and communications. “Project Everest is the completion of phase one of AOL’s turnaround,” noted a company spokesperson. If all of this sounds a bit cold-hearted and short-sighted to you, it does to others as well. One of the greatest blows to a company in the wake of layoffs is to the remaining workers’ morale. Layoffs are devastating to those who are let go and just as traumatic to those who remain. Productivity often slides, as does the image of the company. “There’s substantial research into the physical and health effects of downsizing on employees—research that reinforces the notion that layoffs are literally killing people,” warns Jeffrey Pfeffer of Stanford University. In the case of AOL, the firm actually hired new salespeople to ensure continued advertising client coverage. In addition, AOL managers held meetings with advertisers to inform them of the actions being taken, and sent notes to certain clients containing private contact information for top executives. Despite these measures, some advertising clients have decided to take their business elsewhere. In an effort to rebuild its business, AOL may have lost one of its most valuable assets—its best people.
Questions for Critical Thinking
1. Do you think it was a good decision for AOL to ask for volunteers to resign before making layoffs? Why or why not? 2. Could AOL managers have better prepared their clients for the downsizing?
Sources: Dustin Ensinger, “Why Layoffs Are Not Beneficial to Companies,” Economy in Crisis, February 8, 2010, http://www.economyincrisis.org; Nicholas Carlson, “AOL Is Hiring Sales People to Make Sure Layoffs Don’t Interrupt Coverage,” Business Insider, January 13, 2010, http://www.businessinsider.com; “AOL Layoffs Begin: 1,400 Jobs to be Slashed,” Mashable.com, January 11, 2010, http://www.mashable.com; Miguel Helft, “AOL Begins 1,200 Layoffs,” The New York Times, January 11, 2010, http://bits.blogs.nytimes.com; Juan Carlos Perez, “AOL Voluntary Layoff Program Falls Short,” ComputerWorld, January 5, 2010, http://www.computerworld.com.
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