Question

In: Operations Management

What does it say about the leadership of Mr. Siegel that he called each person individually...

What does it say about the leadership of Mr. Siegel that he called each person individually via videoconference? What are the ripple effects that this story will likely have throughout his company, to ZipRecruiter's customers, and the industry in which it operates?

This is the reading:

The toll the new coronavirus has taken on an economy that was healthy at the start of March came into clear relief when the government said Thursday that 6.6 million Americans had applied for unemployment benefits the week before.

No one weeps for the corporate bosses behind the decisions to lay off many of those people, but these bosses are struggling as they make the toughest calls of their careers. Marriott International Inc.'s CEO told analysts this surpasses the magnitude of 9/11 and the 2008 financial crisis combined. In a letter to employees , General Electric Co.'s CEO said this is an era where the unknowns outweigh the knowns.

Business leaders live by the calendar, attaching forecasts, projects and goals to a specific date or period of time. No one knows when state-issued mandates to stay at home will lift, and that renders a calendar about as useful in 2020 as an eight-track player. It is like stumbling around in the dark.

As quarterly earnings conference calls take place in the coming weeks, expect to hear a lot of "we don't know," "it's hard to say," and "I wish I had a crystal ball." These terms aren't typical for the managing class.

"CEOs are wired to take action," Jerry Colonna , a former venture capitalist who now counsels top executives, told me this week. "It's really hard when they don't really know what action to take. It's like taking a bucket to extinguish a fire and not knowing if the bucket is full of water or confetti."

Bahram Akradi, the Iranian-born founder of the Life Time Inc. health-club chain , is one of those CEOs looking for water in the bucket. I've talked with Mr. Akradi often in recent weeks about how his company is navigating the crisis.

The answer: It isn't pretty. Revenue has all but dried up, nearly $1 billion in new developments are on ice. "These are the facts," he told me during a Wednesday FaceTime session from his Chanhassen, Minn., office. "Empty parking lots are a fact."

Like many honchos I talk to, Mr. Akradi would like political leaders to set a firm date to reopen businesses and end rigid sheltering rules—even if that date is several weeks in the future. He also wants everyone's bills across the country to be postponed in April. For instance, mortgages or car payments due this month should be deferred to May.

Topping the list of concerns Mr. Akradi can control: the 38,000 people on his payroll. He likens Life Time to a boat in troubled waters. "We are in a big, massive storm," he told employees March 25. "We have no idea how long the storm is, or how bad it's going to get. What I'm trying to do is make sure I keep everybody on this ship staying intact and alive. That's all."

Eight days before, when he closed more than 150 clubs in 30 states, he recorded a video message telling employees Life Time could weather a two-week shutdown without breaking much of a sweat. After that, he'd have to get creative.

Last week came another video in which he had to explain why roughly 36,000, or about 90%, of employees were going on furlough as of Wednesday. The move included a commitment to pay 100% of affected workers' insurance premiums and an extra $10 million for a fund to help employees with essentials that unemployment checks won't cover.

This isn't how he wants it. "They've been with me 28 years, busting their rear ends." Now he's encouraging them to buy only the basics and try, if necessary, to negotiate favorable terms with potential creditors.

Mr. Akradi, 58, cut jobs before , during the financial crisis when a slowdown in discretionary income slammed several industries, including fitness. Even cutting under 200 jobs "felt like death, the ugliest thing I've had to do in my life." How much worse is it this time? "It is not even in the same orbit."

The day after my last chat with Mr. Akradi, I talked by phone with ZipRecruiter Inc. founder and CEO Ian Siegel as he kept an eye on two children at his home in Southern California. Mr. Siegel's had just finished a roller-coaster of a month that included laying off or indefinitely furloughing 500 people, roughly a third of the staff.

"All the way up to March 9 we were in a boom economy, and then literally overnight we were in a recession economy." Job seekers use ZipRecruiter to search and apply for jobs posted by companies on its website. Not all hiring has stopped, but listings rapidly declined starting March 10.

He had to decide whether the abrupt decline was a "shock to the system or the new normal." Without an accurate compass, he decided to plan for the worst-case scenario. "We knew we were going to have to make hard choices fast or harder choices later." He intentionally cut to the bone.

Mr. Siegel, 46, and his management team took about a week to figure out what to do. Keeping 700 employees would be manageable considering the company's liquidity and revenue levels. It likely gives ZipRecruiter enough head count to pivot back to growth if there is a sharp boost in hiring at the end of this crisis.

The process was gut wrenching; "definitely the hardest decision I've had to make." Mr. Siegel informed each displaced employee individually via videoconference, making it clear that each one was considered valuable. He hopes to rehire many of them.

Here's an important thing Mr. Siegel takes away from this process: A red hot startup like the decade-old ZipRecruiter can be sobered at a moment's notice.

"I really thought we were hardened, that we were operationally invulnerable," he said. The steps he took last month were "humbling."

These CEOs believe they will emerge and their businesses will eventually resemble what they looked like a month ago. Mr. Siegel said making necessary cuts now means the enterprise can continue to live another day and Mr. Akradi says CEOs like him are as crafty as they are tenacious.

"I'm never going to be faster than the bear," Mr. Akradi told me. "I just have to be faster than a lot of other folks."

Good advice, but outrunning the other guy just got a lot harder to do.

Solutions

Expert Solution

Its very kind and heartening to see Mr. Seigel calling each person on video conferencing. It shows how much he values his employees and how hard a decision it was for him to furlough them. Though the times are tough, I am sure it will give a renewed hope to his employees that they will sail through it and will be recruited by the company once again since the founder found them worthy enough to personally call them and tell them the company's decision.

The ripple effects will be present too for the move made by CEO Siegel. This is because it shows stakeholders that all is not well within the company. However, it will not be a surprising discovery since the pandemic has ensured that many big companies had to take necessary steps to prevent a complete shut down of their businesses. I am sure the loyal customers of the company would feel saddened by how their favorite companies are finding it hard to stay afloat and they will try to help them with business once the economy and normal lives revive.


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