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Answering Your Questions
As part of my commitment to improve transparency and ensure that everyone in the company knows what and how we are doing, I have been encouraging Incisive staff members to send me comments and questions, whether through this blog or privately. And I'm pleased that some of you have taken me up on the offer.
One strain of questioning has concerned the way in which we are reducing our costs and, particularly whether senior management in the company are sharing in those sacrifices. We are. To be specific:
1. Every member of the senior management team is taking a week of furlough, just like everyone else at Incisive North America. That includes me.
2. Every member of the senior management team has had their salary frozen, just like everyone else at Incisive North America. That includes me.
3. For 2009, senior management understands that there will be no bonus payments for anyone unless the company as a whole beats its budget. In addition, our plan for this year calls for a staff discretionary bonus pool to be created in proportion to senior management bonuses, so everyone at all levels of the company has an opportunity to benefit from our hard work during this difficult year if we succeed in beating our budget.
I should note that, for most members of senior management, their individual bonus targets represent a very high portion of their total compensation--generally 25-35%. To go two years without a bonus represents a significant loss of income for the senior management team, but one which we understand we need to accept in order to protect the financial well-being of the company.
My point here is simply to reassure those who wonder whether everyone, at all levels, is pitching in. We are. And we will continue to do so until this current economic downturn has passed and our businesses return to full health.
Any further questions?
Not to be cynical, but couldn't artificially low budget projections be set in order to "beat" the budget and earn a bonus?
Matt--yes, in theory. But our owners and board of directors are pretty wise to that trick. I think a look back at our budgets would show that they have generally been tough to achieve and not "gimmes", with very little room for error. These really are bonus plans that require performance and value creation.
--Bill
I received a private note from someone who, while appreciating the fact that senior managers had given up their bonuses, said we should still give bonuses to remaining staff "because we need the money more than you upper level people".
This may come as a surprise, but need is not a factor in determining compensation. Never was, never will be. We pay for the value of a position, determined by internal measures and external comparisons with what similar jobs pay elsewhere. For the future health of the company, we strive to make sure that our compensation plans reward contribution to the company and hold up well in comparison to the outside world. Even in this recession, we're being very careful to make sure that the cost-savings plan we've put in place compares well to what other media companies are doing, at all levels of the organization. So far, I think we compare very well.
Yes, senior managers get paid more than others. Those pay levels are based on the value to the company of the positions that are held, and reflect the education, experience and performance of the individuals who hold those jobs. Even as I ask those individuals to reduce their compensation for the good of the company, I'm also very mindful of not pushing them so far that they will look for employment somewhere else (if not now, then when the recession ends) believing that their reward will be greater elsewhere. That would not be good for the long-run success of the company.
For the short-run, we will be able to restore at least some staff bonuses to the extent that we beat our annual budget. So that gives everyone an incentive to help find ways to boost revenues and reduce costs. That's where I think we should be focusing our energy right now.
--Bill
Kudos to you Bill. Thanks for the openness and willingness to answer the toughest questions and topics.
I've seen other companies implementing policies that weigh heavily on the workforce, while the senior management do not feel any pain. I personally feel good about the current plan, and am comfortable asking my team to sacrifice because I am making a proportionate sacrifice.
Can you share some of the ways the UK side of the business is handling cost-cutting?
Kevin--The situation for the UK side of the company is very similar to what we have experienced in North America. Incisive UK has implemented cost savings plans across all of their business lines that include closing down unprofitable magazines and turning others into digital-only publications. They have reduced their staff through layoffs and a hiring freeze, and have implemented furloughs, salary freeze and bonus elimination at all levels in the company. And they have come up with a long list of other costs which they have pared in order to protect as many jobs as possible.
Like us, our UK colleagues are trying to make it through the economic downturn while launching new products and preparing for a turnaround which we all believe will come in the next year or two. And they are doing that while also relaunching many of their websites on a new platform and adding to their overall digital capabilities.
So the bottom-line is that everyone, on both sides of the Atlantic, is making sacrifices, tightening belts and looking for more economical ways to conduct our business. And, at the same time, we are all looking ahead and planning for the products and services we'll need to be offering our customers when the turnaround comes.
--Bill