Update: We have AOL’s layoff package details.
Earlier: AOL CEO Tim Amstrong has asked 2,500 employees to step down as part of a voluntary buyout program. Info from AOL below. Peter Kafka had the news early.
The program begins on December 4th, just a few days before the company goes public. If voluntary buyouts aren’t taken up, they’ll become involuntary cuts.
According to an SEC filing, AOL is letting go a third of its staff which will save it $300 million. It will incur a $200 million charge from the time of the spin-off through the first half of 2010.
This is a sad but necessary move, and Tim avoided what could have been his first big mistake: Not cutting deep enough. The only thing worse than a mass layoff is death by a thousand cuts, which is the strategy AOL has employed in recent years. Tim could easily have fallen into that trap.
Our analysis suggested AOL needed to reduce headcount by at least 2,000. Early reports pointed to a figure of only 1,000-1,500, which wouldn’t have been enough. By laying off 2,500, Tim is cutting deep enough that he is giving AOL the proper cost structure in one brutal move. This reduces the likelihood that he’ll have to have to do it again.
As a consolation to employees Tim is giving up his 2009 bonus, worth around $1.5 million. This is also a smart move.
Here’s a note from AOL explaining the moves:
I wanted to follow up on the conversations we’ve had about AOL’s restructuring plan and let you know that this morning we provided employees with more details about what’s planned and when. Below are the highlights. This was announced to employees via a video from Tim, an email from him, as well as information from HR. We also filed an 8K.
- Overall restructuring: Over the next several months we will be looking to reduce approximately one-third of our overall workforce at the company.
- Voluntary layoff program announced: We announced a voluntary layoff program that begins 12/4 and extends to Dec. 11 (post-spin). Looking for up to 2500 volunteers. We will need to do an involuntary layoff if we do not reach the target numbers through the voluntary option. We believe the voluntary program gives people more choice and decision-making ability instead of waiting for the final cost recommendations and involuntary layoffs.
- Tim’s bonus: Tim also announced as a part of his communication to employees that he was foregoing his bonus for this year. He noted in his email: “As a member of our team and the person who takes accountability for the results of the company, I am making the decision to forego my 2009 bonus. That decision is a personal one and is not a sign for the future payout of the overall bonus plan for employees.”
- Project Everest: As you know, AOL’s cost structure is something we have looked at for the past four months, and we have spent an enormous amount of time reviewing ways to fix the cost structure. Tim has been in regular contact with employees during this period providing candid progress reports on the approach to our strategy, structure and then cost structure process as well the anticipated outcomes.
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