Anatomy of a layoff: At Onyx, bad news was swift
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Phone chatter and keyboard clacking had died down. Word was out that first-quarter sales were way off, and big cuts were coming.
One by one, 125 people were called to managers' offices around the world and, face to face, in a few cases by phone, told the gut-wrenching news that they no longer had jobs.
For nearly two hours, the managers' job was to explain clearly, candidly and quickly that it was a financial move; workers had done nothing wrong.
Those who were let go handed in company keys and cards, got a packet with benefits, severance and job hunting information and, in most cases, had about 15 minutes to put personal things in boxes and leave. There could be no hugs and goodbyes.
Most who survived rode out the two-hour storm in stunned silence. Many lay low in cubicles, minds racing about what was happening and why.
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Most explanations speak tersely about "streamlining" or "restructuring toward profitability" while tossing out a batch of financial numbers. But beneath that public veneer are the company's people - how they treat each other, how they deal with adversity and how resilient they will be.
Onyx Chief Executive Brent Frei, who said the experience was "incredibly emotional," compared it to "kicking your kids off the bus and telling them to walk." He and other Onyx managers and employees agreed to be interviewed, they said, because they felt it was handled respectfully, and the company thinks it has learned some lessons.
"You learn a lot about a company by how it buries its dead," said Chief Marketing Officer Kevin Corcoran.
Handling a layoff
Onyx prides itself as a good place to work and one that lives by the Golden Rule. After doing its first layoff, it still wanted to be able to say that.
Employees say they were big believers in the company vision, and those who were laid off were clearly shocked and shaken. They say Onyx did its homework, handled the layoff with orchestrated precision and had managers who looked them in the eye. Some who were let go accepted it as part of business, and that instead of being herded up into a hotel room - as were employees who were laid off from Amazon.com - they were treated relatively humanely.
But some left with their value systems in a state of shock, re-assessing their role in the work world. Some questioned their faith in management, were angry at how quickly it was done, and wondered whether the severance could have been more generous.
"It's a vivid demonstration that the `all for one, one for all' ethic isn't the case anymore," said one former employee. "We're all valued employees, but if things go a little wrong, this is what can happen."
Some who remain say they miss their friends. A few bristled when technicians moved in to clean out cubicles hours after the departures, Corcoran said.
But most are past that. The company will make its first-quarter financial results official tomorrow, and it wants some good news to show the shareholders for the second quarter. Dave Cook, an independent software contractor for Onyx, summed up the mood, saying remaining employees see it as sad and unfortunate, but "we've got important stuff to get done. This is a bad situation, but we can't spend time thinking about it."
A fateful Saturday
Trouble sank in with Frei and other senior executives gathered at the Bellevue office on a Saturday night, March 31, the last day of the quarter. The numbers were ugly. The quarter's sales were a shade over $26 million. Operating loss was 31 cents to 33 cents a share. Wall Street wasn't going to be pleased, because it was expecting $39 million in sales, and a penny-a-share profit. For a company that prided itself on triple-digit revenue growth and for never missing an earnings target in two years as a public company, it was shocking. Contracts, negotiated and counted on, were stuck on customers' desks, unsigned.
In the end, Frei heard all sorts of customer explanations. They ranged from "our CFO vetoed it today," to "half our board just got fired," to "we just found out we're missing our quarterly targets."
When all of those deals were postponed on the last day of the quarter, Onyx had exceeded its own worst-case scenarios. Wall Street was going to have to be told soon, and investors would need to see evidence of deep cost-cutting.
Gathering on Sunday
After a few hours' sleep, executives in marketing, finance, law, sales, human resources and other departments came in at 6 a.m. Sunday to figure out a plan.
Questions flew. How do we make cuts to satisfy shareholders and still meet promises to customers? How many employees need to be cut? Who gets cut? How do we treat employees with dignity while still watching out for company assets? Can we still hit sales goals? Are we overreacting? How do we keep morale from bottoming out among surviving employees? How do we answer questions consistently so we don't get sued for a wrongful termination?
The group brainstormed and debated for 3½ days. It did a painstaking "autopsy" of operations that was like a whirlwind budget process. It was decided to cut 17 percent of the work force, 125 employees, bringing the head count to 660 worldwide. No overseas offices would close. Top-priority projects would stay; less-critical jobs, or those that didn't produce as much cash, would go. Employee seniority and experience weren't factors.
Jill Maguire-Ward, vice president of human resources, was one of the few executives who had experienced a layoff and was familiar with the do's and don't's. She and her crew helped put together benefits packets and a severance package that called for two weeks' pay for each year served.
Most significantly, human resources worked late into the night coaching other executives and managers on how to break the news to employees. They would tell employees face to face to be respectful, Maguire-Ward said.
The script was short. One key message employees heard was that it was unfortunate their position had to be eliminated.
The managers were ready for the inevitable follow-up questions and shocked looks. Human-resources people prepared managers with a Q&A on essential matters. The first and most elusive question every employee either asked or wanted to - why me? - would be answered by saying it wasn't personal or because of job performance.
Maguire-Ward told managers that some employees would want to send a departing e-mail or walk around to say goodbye. Some did ask and were told no, or they were told to consider the feelings of the surviving employees. Some wanted to know if they could pick up things later if they made an appointment, and many did.
All of this planning was developed and rehearsed in a matter of three days. The news was slated to hit when the markets closed at 1 p.m. Tuesday, April 3. Once the markets were told the news - first to avoid any insider-trading problems - it was the cue for managers to pair up with human-resources partners to make the rounds to employees on the list.
In the middle of it all, Frei stopped by Maguire-Ward's office to ask whether he should personally call everyone who was laid off. The answer was no, just keep walking through the building. Don't hide from people.
By all accounts, there was no yelling or slamming of items. Some cried, some wondered aloud how they'll support their families, Maguire-Ward said. Everyone was shocked, but most kept their feelings to themselves and quietly walked out.
"We had to make the best of a bad situation," Maguire-Ward said. "You test a company's colors on how they behave when the stakes are down. Do your values go out the window, or do they still have a place? We kept that in mind."
Sense of relief
When it was over for most people at nearly 3 p.m., remaining employees received a companywide e-mail.
"There was such a sense of relief," Corcoran said. "It was kind of like an earthquake, with people wondering if it was over. When we said it was, you could just see body language relax."
The next day, Frei gathered employees in a room and on a worldwide conference call, inviting them to ask him anything.
Although it seems hard to believe, Corcoran said many employees asked how Frei was coping with the cuts. The other big question: "Does Brent still believe in the company vision?"
Frei did his best to reiterate that vision the next day. It was an uneasy audience that needed some convincing, but Frei said he was able to settle people's nerves.
He made the point to employees that their markets weren't evaporating, but business customers were postponing software purchases during the slowdown. The sales pitch would stay the same; they still had a great product, and they were in the same boat as workers at 80 percent of the other enterprise software companies. Now, they would just have to start convincing people higher on the corporate ladder.
Employees who remained had mixed reactions. Some questioned their value to the organization, some missed their friends, some felt an odd mix of relief and guilt. Others were determined to look forward and make sure it wouldn't happen again.
Frei tried to put a positive spin on the downturn. In an interview a week after the cuts, he noted how Onyx gained market share in Singapore during the financial crisis of 1997, because companies learned they needed to improve customer retention during a downturn. He thinks the same force could help Onyx now.
Frei said there's a grim determination among many at Onyx to bounce back from adversity, but he acknowledged it gnaws at people.
"It's incredibly emotional and de-motivating in some ways, but there are going to be great victories and great defeats in every battle," he said. "It's how a company responds that defines them."
The aftermath
In the nearly three weeks since the layoff, there have been some signs peeking through the gloom. Onyx stock fell from a high of $44 in March 2000 to $2.20 in the last month but picked back up to $4.30 at the close of trading Friday.
A new chief financial officer took over in the midst of the earnings turmoil. Les Rechan, the new president and chief operating officer, came on board in January after a 16-year tenure at IBM.
The company's PR machine has picked up, turning out news on sales Onyx has made to Safeco, Airborne Express, the Phoenix Suns and others.
Like many other companies, an earnings forecast still hasn't been set for the second quarter, partly out of caution to get it right, Corcoran said.
He said the layoffs have forced the company to focus more on profitability and on convincing customers that Onyx can still deliver as a smaller organization.
Customers have been understanding, Corcoran said.
Now people who already work long hours are trying to absorb the work of those who were laid off, essentially doing more with less.
There hasn't been a whole lot of talk between those laid off and those who survived. At least five who were let go caught on immediately, two at Microsoft, but many are still job hunting.
Not much appears different around the office now. The shiny awards representing fast growth and workplace excellence are still displayed on a counter. Company softball and soccer teams still get together, even with some who were laid off.
But the place is a little quieter. The attitude is different.
"When you grow, you have this feeling of invincibility," said Dan Mahowald, a regional vice president of sales. "Now we realize we have to be very careful about how fast we grow."
Luke Timmerman can be reached at 206-515-5644 or ltimmerman@seattletimes.com.