Organic Changes At Top, Cuts Staff, and Offices

Organic Inc. trumpeted the announcement of a new CEO today, but also announced big layoffs and a curtailing of its recent expansion.

In total, some 270 positions, or about 25 percent of the international Internet professional services staff, is being let go. San Francisco-based Organic also announced it’s closing its recently opened Atlanta and Boston offices. As a result of these actions, Organic expects to record a restructuring charge of approximately six to eight million dollars over the next two quarters to cover severance, the office closures and other related costs.

“Despite letting people go, we have grown a lot over a very short period of time,” says Cathy Taylor VP of corporate communications at Organic. “Certainly the entire (Internet professional services) sector is going through a difficult time, and the downturn has happened more rapidly than anyone could have anticipated.” San Francisco-based Scient laid off 460 on December 6, last month, marchFirst cut 1,000 employees, or about ten percent of its staff, and a raft of other Internet consulting firms have cut back on staff of late.

But one Web consultant says Organic, like other consultancies, simply grew too fast without much insurance.

“They’re depending on the dotcoms but when those businesses go south, who do companies like Organic have left to do business with?” asks the consultant who asked not to be identified. “They made a bet to go full speed ahead, but didn’t think of the repercussions.”

He points to the new headquarters Organic spent months retrofitting as a big fixed cost that probably contributed to the decision to layoff personnel in the light of a downturn in revenue. Organic just moved into its new headquarters at 601 Townsend Street last week.

NEW CEO

Effective January 15, 2001, Organic announced that Mark Kingdon is joining the company as CEO. Kingdon was most recently with Internet incubator idealab!, and formerly with the consulting division of PricewaterhouseCoopers LLP where he held a variety of senior roles. He was a member of the Global E-Business leadership team at PricewaterhouseCoopers responsible for building the practice from approximately $250 million to $1.2 billion in less than two years.

Jonathan Nelson, Organic’s co-founder and largest shareholder, will remain as Chairman, focusing his efforts on long-term strategy and business development.

“We are energized about having someone with Mark’s operational and tactical experience to augment our management team,” says Organic President Michael Hudes. “We believe that Mark’s appointment will allow Jonathan and I to focus our time on our strengths in strategy and client development as we collectively work to build Organic’s business.”

The company expects the recent cutbacks to result in significant savings and eventual profitability.

“While our long-term outlook for our industry remains optimistic and our business development reorganization efforts are gaining momentum, current market conditions have dictated that we make the difficult decision to streamline our operations in order to achieve profitability in 2001,” says Sue Field, Chief Financial Officer of Organic.

“By eliminating overcapacity on a sustained basis across our network to better meet the immediate demands of the market, we anticipate realizing annual savings of approximately $25 million through improved utilization and lower selling, general and administrative expenses.”

David Needle is managing editor at siliconvalley.internet.com.

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