Why change management?

[25005175]

I've read a lot of complaints about the high cost of the executive officers and that the management needs to be replaced. The CEO alone has a cash payout each year between half a million and 1 million USD between salary and bonus payments.

But what incentive is there to actually change? Named executive officers, except CEO and President, are entitled to 6 months' base salary severance (12 months if fired within 3 months of a scheduled change of control such as resignation or stepping down). CEO and President get 12 months and 18 months severance under the same conditions. According to an April 2022 Proxy filing, the average cost of replacing top officers will effectively result in an annual increase in executive payroll of $297,000, since it should be assumed that the replacements will cost just as much.

This image shows the basics of the severance packages for the top 3 "named" executives. Note that the left side is a standard firing. On the right is the firing within the 3 months prior to a scheduled change in control (again, things like resignation or agreed demotion, as I understand it).

So, there has to be some EXTREME financial incentive to warrant getting rid of the top staff, because doing so increases costs for that role by at least 150% for the 6-18 months following termination. (Yes, that assumes immediate replacement).

Not justifying keeping any of them. Just stands to show that corporate executives for massive companies know how to make it prohibitively expensive to remove them.

[williamtcooper]

Jonathan,

The CMO, CFO and HR postions according to news releases have all been replaced within the past month. Outside of the CEO and CIO, those are the most important C-Suite jobs. There appears to be a major shake up of management in 2023.

[25005175]

Huh. Were those replacement decisions made 3+ months ago or last month, following the announcement of the fee change?

[williamtcooper]

Jonathan,

I was a little surprised there have been so many recent changes on the site with the management turnover unless these were the changes that the new management was hired to implement including many yet to be announced changes.

I am very up-to-date on how AI is going to completely change Upwork from 2023 going forward and it's very possible it was decided that a new management team was needed to execute these changes.

I am part of a select group of experts by invitation for LinkedIn professional articles on AI, machine learning, quantum computing, cybersecurity, nanotechnology, OpenAI, etc. - basically all the new stuff. In my expert opinion, Upwork will have to make MAJOR changes to what they are currently doing to stay relavant because business requirements are in the process of completely changing.

[celgins]

I'm not sure about the CMO and HR folks, but the new CFO was appointed on March 22, 2023 and her first day of employment was expected to be April 25, 2023. I'm guessing the replacement decision was made long before that because the outgoing CFO hadn't been there long.

The incoming CFO's initial annual base salary appears to be higher than the departed CFO's intial annual base salary, but I'm not sure what his outgoing salary was. LIke you said, his departure means Upwork shells out more dough for the incoming CFO.

Either way, the severance packages, common stock, continuing medical benefits, etc. does appear to be cost-prohibitive when Upwork chooses to remove the C-Suite folks. And your understanding is correct (based on my understanding 😂), with regards to the left and right sides of your chart when a termination with cause (firing) or a termination without cause or resignation occurs outside of a change of control or within the three months preceding a change in control. For both occurences, it looks like the departing employee receives a lump sum severance payment of 12 months base salary, and all the other financial perks that accompany a C-Suiter's departure from a large corporation.

What's interesting to me, is that all of this are included the offer letter and severance agreements when the C-Suite folks are hired, so it's not like Upwork is blind-sided by the amounts they pay when someone departs.

Like you said, there has to be some financial incentive to warrant getting rid of top staff. Upwork needs to have plenty in the coffers to fire top staff and if top staff resigns voluntarily.

[6bfcdaf8]

Do we know if they resigned or got fired?

I dont think you fire a c-level because you dont have any money to afford them. These people are there to meet certain goals. So when they cant achieve the goals or for some reason companys goals have changed you need new people. 

Otherwise we could fire everyone in the company and we would have zero payroll but also no company either 🙂

[6bfcdaf8]

Partially, the CEO explains what's happening in todays announcement :

https://www.upwork.com/press/releases/a-message-from-our-ceo

[williamtcooper]

Alper,

I attended the 1st quarter 2023 stocksholder meeting yesterday and the same message plus much more was delivered about the direction of the company. It's very interesting yet very expected with more to come in my opinion.

[25005175]

Thanks for sharing, Alper.

[25005175]

we have been proactive in adapting our plans across hiring, vendor spend and brand media budget—which we are reducing by 94% for the second half of this year... we are reducing our workforce by approximately 15% of full-time employees, or 137 roles. We are also eliminating a number of hybrid workforce (independent team member) positions... The majority of these reductions are on our Enterprise team.

That's a lot of chopped expenses. Seems like most, if not all, of the cut jobs are in the Enterprise and Marketing departments. The Enterprise stuff is disconcerting - it shows a tremendous misprojection of the company's market. Which, I guess, is the reason for the removal of name #3 in that list from their position. But it's not like those direction decisions were made in a vacuum. So, evidently, Upwork's analysts and business managers severely failed to monitor the pulse of the HR market, even though they should have one of the firmest grasps on that in North America, if not much of the world.

[ravi_iitian]

---

Jonathan L wrote:

But it's not like those direction decisions were made in a vacuum. So, evidently, Upwork's analysts and business managers severely failed to monitor the pulse of the HR market, even though they should have one of the firmest grasps on that in North America, if not much of the world.

---

That says a lot.