AOL Planning Further Job Cuts

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AOL says 1,100 people took voluntary job elimination packages in December 2009, not the 2,500 people the company had hoped for

AOL is pursuing its transition to being a more content- and media-driven company by restructuring its work force, something that has openly been in the works since the company asked for volunteers to take job elimination packages in December 2009.

On 11 Jan, AOL began laying employees off in small numbers, but layoffs will steadily increase over the week with the bulk expected to come on 13 Jan, reports Silicon Alley’s The Business Insider. A total of 1,200 to 1,400 employees are expected to be let go this week, said various reports.

According to AOL, 1,100 people accepted the packages in December, but that wasn’t enough to help reach its goal of saving $200 million (£124m). The company had wanted the number of voluntary layoffs to reach 2,500, but not enough employees stepped forward, hence the cuts now. Other efforts include the closing of offices internationally; at least two will be shut down this week in Sweden and Spain.

“We will begin notifying a limited number of individuals impacted by the involuntary layoff today, with the majority of notifications taking place in the U.S. on Wednesday,” an AOL spokesperson told The Wall Street Journal. Employees are being offered severance with a minimum of one month’s pay, while those who took the voluntary package in December received anywhere from three to nine months severance, reported The Washington Business Journal.

So, what will happen to AOL next? Media specialist company speculates: “Now that these layoffs are in the process of happening, AOL will … take a closer look at what businesses it should shed or rebuild. The entire process of cost cutting and determining what to do with the uncertain business operations is known as Project Everest. The ill-conceived purchase of Bebo is the … item [most expected] to be sold off, while the messaging service ICQ and MapQuest have also been under consideration. The latter two may be safer these days, as [AOL CEO Tim] Armstrong has been mentioning the importance of promoting greater integration among its communications and local services with mobile.”

Here is the AOL memo about the layoffs: “In November, we announced that the company would take a $200 million (£124m) charge and that we planned to decrease the size of our global workforce by one-third. Late last year, we offered [the] Voluntary Separation Program to enable employees to decide what was in their best personal and professional interest. We had approximately 1,100 employees opt to join the Voluntary program. At [the] time we announced the Voluntary program we noted that if we didn’t reach our target reduction of a third we would need to follow the voluntary program with an involuntary action. We did not reach that target.

The next phase of our restructuring plan will include an involuntary layoff. Our process internationally varies by country and is subject to local laws. We began meeting with employees throughout Europe today. For example, meetings have already taken place in the UK, Germany and France, and we announced plans to shut down many of our offices in Europe, beginning with those in Spain and Sweden. In addition, we will be beginning the consultative process with the Workers’ Councils in relevant countries this week.

In the United States, we will begin notifying a limited number of individuals impacted by the involuntary layoff today, with the majority of notifications taking place in the U.S. on Wednesday, 13 January. As of this point, this layoff will not trigger the Worker Adjustment and Retraining Notification Act (WARN) in any of our locations. For many of the employees impacted in the U.S., Wednesday will be their last day in the office.

Since April, we have been moving through a process that started with strategy, then focused on structure, and has most recently been centered on aligning our costs with the company’s strategy and structure. As a part of this process, we’ve looked at every aspect of this business. We evaluated our competitive position and product portfolio in every market—and we asked the hard questions about areas that were no longer core to the strategy and our profit profiles in the businesses and countries where we operate.

We will be offering packages to impacted employees in the U.S. that will include severance, benefits and outplacement assistance, among other things.

All of our cost alignment work is about ensuring AOL’s sustainability and future success. Project Everest is the completion of phase one of AOL’s turnaround.

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