Neoforma Lays Off 80 People
Just days after announcing the abandonment of previously announced merger agreements that would have added Eclipsys and its healthcare Internet affiliate HEALTHvision to its holdings, Neoforma.com has announced that it is laying off approximately 80 employees . . .
AuctionWatch, May 26, 2000
Each time I gave one of my heartfelt, but often rambling, talks to the employees about the bizarre state of our company and the world crushing it from the outside, most of the employees seemed oblivious to, or cynical of, my words. I was as perplexed as anyone by what was happening around us, but I felt obligated to share my core of rebellion and optimism.
Each time I gave such a speech, a few employees would send me a message expressing their appreciation for my talk. This was the extent of my personal connection to the majority of the staff. But that was all I needed to get up the nerve once again to speak, unrehearsed, in front of the increasingly large and unfamiliar group of employees. If my own limited experience was helping a few, that was enough.
Thalia didn’t write me messages. Instead, she would nervously approach my office, peek in, and say, “Thank you for your talk today. It meant so much to me. You’re so . . . humble.”
Well, gosh. What could I say to that? “Oh ... um ... thank you. I’m glad that my perspective on things helps someone.” And that’s about how our conversations went, the times we spoke. Not much else could be said without us both going out of bounds. Thalia was an administrator who worked on the other side of the building. I didn’t interact with her at all during the normal course of work.
I was not flirting with her and she was not flirting with me. At a very guarded, yet deep level we were fulfilling a need in each other. I felt increasingly isolated from the company I had formed. And she felt increasingly overwhelmed by the company I had formed. Her brief comments after my talks helped make my segregation bearable.
I was giving a lot of talks these days. Many of the employees were freaking out. They had almost no information on what was happening with the merger or the Novation agreement. Bob tried to communicate often, but he could only say so much about nothing. And nothing was certain.
Neoforma stock continued to fall. In fact, just about every company’s stock continued to fall. And, entire companies were beginning to fall. Especially Internet companies.
After an excruciatingly long time (two months), Neoforma was able to announce the break-up of the merger plans and reaffirm a ten-year partnership with Novation.
At long last, we had the deal we had wanted in the beginning, but under much less favorable terms. As part of the deal, Neoforma was giving up more than half of its stock to Novation and its owners. The stock would be used to help member hospitals cover the expense of converting from their inefficient paper processes to Internet-enhanced processes.
We expected an enthusiastic public reaction to our announcement. In one deal, we had secured business with more than a third of the country’s hospitals. After our IPO, the analysts covering Neoforma had been adamant that Neoforma must do a deal with one of the two lead GPOs to continue to justify the current company valuation.
Now that we had achieved that huge landmark, these same analysts were complaining that Neoforma would get too much of its business through one partnership.
Regardless of what the analysts or press thought, it was a huge deal. We needed to convert a company focused on developing, marketing and selling stuff to a few hospitals into a company focused on implementing, installing and supporting stuff for thousands of hospitals.
Now that there was no longer the possibility of selling additional stock to the public markets, we needed to do this with fewer resources than we currently had.
Our accounting team had run the numbers many times. The good news was that we would be able to survive the gap between when we implemented connections to hospitals and when we derived revenue from them.
The bad news was that we would only survive if we immediately cut our staff by more than twenty-five percent.
Long before most other young, previously popular companies began to trim their own expenses, Bob refused to delay the inevitable. There could be no reduction in the amount to be trimmed. Now that we had a single focus, it should not be very difficult to figure out who should stay and who should go. He instructed every senior manager to make a list of which employees in their area would go.
Tim and Ajit put their own names on the list. They both knew that their high salaries and aggressive, outwardly focused styles were unnecessary for the company in the next phase. They knew that they were not popular with most employees. They also knew that they were not going to make the fortune that they had expected.
Once the lists were made, we got together in an off-site conference room and laid it all out on whiteboards and large sketchpads. We drew up a new organization chart and moved the names of employees around. If someone did not fit anywhere, their name was set aside.
Nobody liked what we were doing. Nobody joked around. But neither did anybody shirk their responsibility. New leaders began to emerge from the flattened organization. Some previous leaders moved themselves down the ladder—just because they knew it was the right thing to do.
When it was done, many great employees were left without a place in the new company. I was able to feel okay about that. My years in an architecture office had shown me that not only did most people survive layoffs well, but many thrived in their new jobs.
Once everything had been laid out, there was one more set of employees to allocate. The pool of administrators needed to be trimmed and reassigned to newly formed departments. None of these choices was going to be easy.
The administrators formed the social core of Neoforma. They were the ones with flowers and photos and homemade snacks at their desks. It was around their desks that the business of Neoforma most often joined the people of Neoforma.
Several of the choices were obvious. In the end, though, we were left with two administrators and only one position.
One of the two was Sheila, my team’s administrator. Sheila’s efficiency, support and loyalty had been unflinching for the year that she had worked for me. I liked her and respected her. She had made me feel special and she had taught me that it was okay to depend on someone else to get things done.
The other administrator was Thalia.
One of them had to go. And since Sheila had been my administrator, Bob and the others agreed that it was my choice.
They were both very good at their jobs. Sheila had worked at Neoforma for much longer than Thalia, so it was logical that Sheila should stay.
Nobody knew about my special bond with Thalia. I knew that I could ask to swap Thalia with someone else, but there was no rational reason to do that. The very trait that Thalia had complimented me on was the trait that kept me from using my influence to change the course of this decision. I was unwilling to use my position in the company to unfairly or inappropriately influence a decision.
Bob was never one to shrink from taking responsibility for his decisions. It was very important to him that he be upfront with the people who relied on him.
The day before the layoffs, Bob gathered the company together and announced that a large number of employees would be laid off the next day. He wanted everyone to be together when they heard this sad news.
The next day’s activities were very orderly. But it was dreadful—a factory of pain.
Sheila eyed me nervously that morning. I knew she thought that she was going to lose her job. I pulled her aside and told her that she was not losing her job, but that she would not be working for me anymore. She was both terribly relieved and saddened by this news.
Thalia hadn’t reported to me, so I wouldn’t be the one giving her the bad news. I kept glancing out my office window that day, expecting to see her on her way out with short, awkward steps and hunched shoulders, crying at my cruelty.
But I didn’t see her that day. Or ever again.