Those cuts — made in response to projected revenue shortfalls — included salary cuts through the end of the year for all employees, plus a reduced workweek for hourly employees, and, according to a couple of e-mails I got over the weekend, some unsubstantiated and probably exaggerated additional steps. In his post, Paul outlined all the details, and pointed out how unfair it is to enforce a pay cut on employees because management made mistakes.
Think about it: The senior management of this 80-title company forecasts its year-end inaccurately. Then executive management accepts it. Then it turns out to be wrong. So why does every associate editor and production assistant then have a pay cut forced down their throats?
Not fair. Some of these people can’t afford a 7.5 percent pay cut, especially to cover the mistakes of others.
The whole thing is made somewhat more egregious because, according to sources I have within the company, business-unit leaders were pressured to accept aggressive budget targets from the executive management — co CEOs Carr Davis and Tony O’Brien — or face their implicit displeasure.
And now, a company that recently brought in executives with pretentious titles like "Chief Growth Officer" and "Vice President of Innovation," is finding that the growth is not only not there, but that projections are so off-the-mark that everyone has to take a pay cut or the company will be unable to meet its bank obligations.
To me, this all comes back to O’Brien and Davis, who by all accounts were successful and innovative small-company executives before they came to Cygnus a bit more than a year ago. The pair launched FDCH e-Media, a company that specialized in document distribution, b-to-b partnerships and online news delivery, in 1993, and came to the attention of Cygnus owner ABRY Partners because of their background in online content distribution. But FDCH e-Media was a lot smaller than Cygnus, a $120 million company with 80 trade magazines that generate 70 percent of the company’s revenue. It may be that Davis and O’Brien are in the impossible position of managing a legacy print media company undergoing rapid change in a highly challenged print-media environment.
If so, it would not be the first time that executives from outside b-to-b media struggled. Think Marc Teren at Cahners seven years ago, or Tom Rogers at Primedia around the same time. As one industry observer said a couple of days ago:
"This cost-cutting move is indicative that contrary to the beliefs and hopes of financial owners, hiring new CEO(s) from outside the industry is not usually the panacea envisioned by the financial guys. There are rarely magic bullets that resolve systemic challenges to a business or industry. I feel sorry for the executives who are making these decisions and the employees who must endure the consequences."