Wednesday, September 12, 2007

Layoffs at The Generations Network

The Generations Network (TGN) released 30 employees last week according to Marilyn Meyers in a post Tuesday evening on the LDS-FHC-Consultants news group on Yahoo. "My sister and brother-in-law both work for The Generations Network. They said [the] people were let go because they had streamlined their operations to the point they didn't need them."

A 3rd-hand report (poster in New York via Family History Center director via son at TGN) from the previous day claimed hearing of extremely deep layoffs at the company (75%), although several later posters refuted this report.

Confirming the reports has been difficult. TGN has made no announcement. The Insider received a message from a former employee asking why we're not blogging about last week, but didn't mention a layoff or give any other information. We searched the net for clues and found a new blog started last Wednesday by TGN's Affiliate Marketing Manager, Mark Olsen, who says he left the company Friday after he "was asked to be an affiliate." But Olsen made no mention of layoffs.

Rumors of layoffs have renewed speculation that TGN is grooming itself for a liquidity event. Liquidity refers to how easily an asset can be sold. Because TGN is a private company, its stock is not publicly traded. As a result, investors have little or no ability to liquidate their TGN stock. It's like buying a piece of real estate as an investment that is too expensive for anyone else to buy. The value of the asset is real and it does increase over time. But it doesn't do you much good if you can never get any money out of it.

For major investors in private companies, liquidity comes in one of two ways. In one method, the company goes public so that its stock can be publicly bought and sold. Going public raises the value of the company so much that a company can take advantage of the increased value by offering it for sell to the public. This is where the term Initial Public Offering (IPO) comes from.

The other time investors get liquidity is when the company is acquired, meaning someone is willing to buy all (or most) of the private stock using cash or other liquid asset.

In either case, the value of the company must be determined. Many factors are used to determine the valuation of a company, including revenues, revenue growth over time and expense levels. The last item is where the number of employees comes into play.

In today's world of hyper-productivity, business management experts generally regard regular turnover of at least 5% as healthy. Specifically, the least productive 5% of employees should be annually replaced, since even an average replacement will outperform the bottom 5%. Further, like people gaining weight, corporations pick up unnecessary positions. Theory has it that regularly shedding the least useful positions is the simplest and most direct method of identifying functions that are truly necessary.

What do you think?

2 comments:

  1. "Specifically, the least productive 5% of employees should be annually replaced"

    Unfortunately that least productive 5% usually ends up on layoff board (as the producers are generally out in the field working). Even worse, this group generally tend to layoff the people who they fear the most: that is the most productive 5% of people.

    BTW: A true RIF is about adjustments to market conditions or about positions and not about honing the workforce. Companies that try to use the layoff mechanism for settling political beefs usually ends up failing.

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  2. Dear y,

    Thanks for responding. I'm guessing it was neither about productivity nor settling beefs. I'm leaning toward the pre-liquidity explanation for these layoffs, which could be described as "market conditions."

    Do you really think the powers that be fear the most productive 5% of the people? I think there are the benign productive and the ambitious productive and only the latter share targets with the unproductive.

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