Cut Cruel But Never Cruel Enough

“‘Everyone needs to take responsibility,’ I warned. ‘We’re not going to survive unless we make tough decisions.’ But although every member of the senior management team knew that job-cuts were essential, they naturally shrank back from making them in their particular area. Over the next few days they would come to me with proposals for cuts, and repeatedly I would send them back again and again to cut further. I knew that I had to be tough for them — that I had to bear some of the load of their guilt. But there was no one I could turn to for comfort myself, no one who had been through this situation and could tell me how far it was really necessary to go. I knew I had to be cruel to be kind, but only much later would I discover that I had not been nearly cruel enough. It is one of the hardest things for an insider to judge the degree of such cuts. The likelihood is that unless he is by nature heartless, he will always err on the side of leniency. Just as I was pushing my manage- ment team to cut, cut, cut, I needed a powerful chairman with the necessary distance from the situation who could push me. It was a role that a more experienced board of directors might have fulfilled, but mine, I knew, would simply accept whatever I recommended. By far the toughest decision was Boom. While most departments”

“Three days later, on Monday, 17 January, we delivered our estimated cost reductions to the board. Over the next year our proposed cutbacks would save us $27 million. In total, 131 staff would lose their jobs. Besides Boom, most of the job cuts would be made by scaling down the customer service teams and streamlining the local offices. The figure represented over a quarter of boo.com’s total workforce. The meeting went better than we could have expected. The board approved our restructuring plan and also J.P. Morgan’s revised funding strategy: the bank now planned to raise $50 million from new and existing shareholders and then go straight to an IPO in the second quarter. We had come through yet another crisis, but it was impossible to feel happy. As the meeting broke up and our board members rushed off to catch their planes, I thought: This is the day that we lost our innocence.”