Sunday, September 30, 2007

Things get ugly at Cygnus

There's some depressing news out of Cygnus Business Media. The B2B publisher is slashing workers' pay by 7.5 percent and cutting hours for hourly workers. Cygnus says senior executives will also have their pay cut. But the company -- seemingly deaf to the public-relations implications of not being transparent -- won't say how much of a cut the big boys will take.
The cost reductions may be related to debt covenants, according to Folio magazine. Cygnus, like many a B2B publisher these days, is controlled by a private equity firm. And as anyone who follows B2B publishing knows, such investors often find themselves owing more than they can pay.
And as we've seen before at Primedia, Ziff Davis and elsewhere -- it's the workers who bear the burden of poorly structured investment deals.

When I launched my consulting business several years ago, Cygnus was one of my first clients. And although I haven't done business with them for a few years now, the company retains a place in my heart. So when I heard the news about the salary cuts, it hit me sort of hard.
The story broke late on Friday as I ended a multiday trip in which I gave two presentations on the future of B2B publishing. And, as I often do, I suggested in both presentations that journalists would need to work harder than ever before to succeed in the fiercely competitive new world of new media.
But as I read the Folio article about Cygnus I was struck by three rather remarkable items that suggest that hard work -- perhaps even extraordinarily hard work -- may not be enough at some companies.

Consider this:
First, it appears Cygnus has seen online ad sales rise year-over-year by more than 50 percent.
Second, the co-CEOs of Cygnus told workers that a decline in print advertising"has accelerated and is significantly larger than we projected during our business reviews, held less than three months ago."
Third, one source expressed dismay that the company's management and owners would be "willing to make the company go through this trauma in order to avoid the modest costs and pain of a bank amendment."
Or in other words:
1. There is evidence that the staff at Cygnus is working harder online than before.
2. Senior management made an error in their projections.
3. The staff is being asked to cover the costs of senior management's mistake -- even though there is another option (reworking the bank agreements.)

I have little doubt that the situation at Cygnus is more complicated than I have portrayed it. Perhaps the debt covenants are unusually tough. Perhaps the creditors are unusually cruel. There are probably dozens of things that I know nothing about that contributed to the decision to cut wages.
Nonetheless, I'm comfortable agreeing with the source in the Folio story who called the salary cuts a "desperate and short-sighted move."
This isn't going to end well.

(Footnote: Speaking of working "harder than ever before to succeed in the fiercely competitive new world of new media," it's worth noting that Folio published its story after the close of business on Friday. But Folio's primary competitors -- BtoB Magazine and min -- still don't have anything on their sites some two days later. )

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  1. This is not surprising. This is only the worst of usual year-end punishment inflicted on the employees at Cygnus. As a former employee, I remember dealing with travel bans, massive budget cuts, hiring freezes and mandatory unpaid "vacations" in the second half of the year nearly every year when management realized they could not hit their ridiculous profit goals necessary to pay off the staggering debt the company has incurred.
    There's a reason nobody wanted to buy the company last year. It's been bled dry and the best talent continues to leave for more stable companies.

  2. Paul,

    I don't think that the "upper management made a mistake" comment is 100% on target. I think that this is more of an indication of how quickly print advertising is in decline. Look at this in context... Ziff Davis missing a debt payment, CMP laying off 200, etc.

  3. anonymous said...Obviously a breech of contract, isn't there some form of retaliation? Class action lawsuit? At least laying employees off for a week in the past they were able to collect unemployment...and though they are being given a 37.5 work week til the end of the year, they could barely get their work done in 40, no less 37.5. Solution...don't like it, leave, however, and management knows it, the job market is slim pickins.

  4. The decline of the industry continues to put pressure on the surplus of talent still employed by it, enabling ham-fisted management tactics like this to have less dire consequences than in other markets. That's not to say Cygnus gets off scot free, but if a certain % vote with their feet and leave on their own, that's probably what has to happen anyway. However, the resulting environment of survivors and/or cynics doesn't bode well for the company (or the industry, for that matter, as this is just one bad example of a larger trend).

  5. Jeremy Greenfield, min/min's b2b here: Ouch, Paul, regarding the btobonline/min dig. First of all, Folio has always had several deep sources within Cygnus that I've not been able to match. Kudos to them. Second, Davie Ianonne, who was snr mgmt at Cygnus left for Folio over the summer--that's deep source number two. Again, kudos to them.

    We could have put up a "me too" story, but that's not our style, which you should know from freelancing here. So, eventually, we put up a short story, added what we could (which was very little...folio did a good job), and linked to my blog, which has a long entry on it.

    You're right, they got the jump on us, and we could have worked harder on this one, but you can't win em all, though we try. I'm interested to see if you include in your blog all the times we scoop them, which, considering our much smaller staff, is perhaps a larger accomplishment.

    Sorry to be so reactive here...I get sensitive about minonline....

    Anyway, good post. I'd love to hear what you have to say about what I wrote on it at theminsider.

  6. Jeremy,
    I don't know who Folio's sources were on this story. Nor do you. But given that several hundred people must have received the memo on the pay cuts, I don't think that breaking the story required any sort of remarkable sourcing.
    Regardless, the point I was trying to make in the final section of my post was that Folio had demonstrated the sort of beyond-the-9-to-5 reporting that everyone in B2B needs to do more of. Folio's story went up after the close of business for the week. So at least one person decided to work late that day. That's a move worth applauding.

  7. Thanks, Paul. Always nice when someone notices. The credit goes to Bill Mickey. I forwarded the link to your post around our company.

    As for our sources, as I said in my blog post yesterday, there were a variety of incoming messages from a variety of sources on this story, from within and from outside the company. We used our best judgment in weeding out those with an ax to grind.

    BTW, you've done an impressive job with your blog, having created a vital, dynamic community.

  8. I will comment that I wasn't remotely the source. I may be a former employee of Cygnus and now work for Red 7 Media (which owns FOLIO:), but I'm certainly not a source for the FOLIO story. FOLIO is one of the most respected publications in the publishing space, they surely have plenty of resources and sources for stories -- from Cygnus to beyond.

    The FOLIO: team does a great job on tons of stories, in print and online -- and from an educational perspective at the FOLIO: Show. It is disappointing anyone would feel the need to make uninformed presumptions in an effort to defend why a competitor was scooped.

    Good journalism speaks for itself, not how you criticize others, publicly or privately.

    I have many friends at Cygnus past and present, and I do wish them the best.

    - Dave Iannone
    Director, Interactive Business Strategy
    Red 7 Media

    and ironically, one of MIN's Most Intriguing in 2005 ... so I still have some respect for MIN too :)

  9. Jeremy from min's b2b again: I'd like to apologize for what I said in my post regarding Dave. Not only was it unprofessional and poor journalism, but it was also inaccurate. Furthermore, in no way did my statements reflect the thoughts and feelings of the min brand as a whole, or Access Intelligence, the company that owns min.

    I hope you will accept my apologies and know that I will endeavor to do better in the future.

  10. Ten years ago, Johnson Hill management cut all the fat out of the company now known as Cygnus. The last few iterations of management have continued to cut lean muscle, but they can't quit now because of massive debt from turning the company three too many times. All that's left to do now is sell magazines off piecemeal to willing buyers who will take better care of them. Anyone who has worked at Cygnus over the past decade can attest to the most remarkably incompetent management.

  11. I don't know what people expect... we're talking about a company who:

    1. Thinks not employing a receptionist is cheaper than the missed calls, confused customers and unprofessional image not having a receptionist creates;

    2. Can't afford a full-time mailroom worker to sort mail and get important documents to staff in a timely manner;

    3. Repeatedly cuts travel budgets for important sales and editorial events, but flies publishers out to Las Vegas for meetings;

    4. Hands out pink slips instead of Christmas bonuses;

    5. Arbitrarily makes half the employees hourly instead of salaried, then tells them any hours they work over 40 to meet deadlines must be off the books, since overtime is strictly forbidden;

    6. Strongly stresses the need to be "professional" by dressing nice and being at one's desk at 9am; yet continuously engages in unprofessional and unethical practices towards these very same people;

    7. Firmly believes that 'cheaper' workers are far better than 'qualified' workers, and has proven this time and time again.

    I think the term "hates the company" is pretty accurate, but not just because of this isolated incident; it's been brewing since the days management decided to go to a permanent 40-hour workweek without compensation. Since then it's been an ongoing stream of morale-crushing blows.

  12. This is a problem that combines poor management with high expectations. The two CEOs came in with good intentions but (for unknown reasons) could not wait for the results. They then chose two managers - known to manage through fear and intimidation - thinking this would get results. The result is backlash with employees ready to walk! The only way Abry's $260 million investment and many careers can possibly be saved is to eliminate the current management team and replace them with someone that can treat people with respect; someone who will let the well-trained, hard-working employees of Cygnus do what they do best. Further, the ridiculous concept of "Brand Managers" should be abandoned and the circus performer positions such as "Chief Growth Officer" eliminated. We were once proud of our company, and want to be proud of it again!

  13. To the previous poster with the laundry list of company blunders; you missed one: locks the front entrance with an electric key fob system and has no one at the front desk to let in visitors, making the company look extremely unprofessional.

  14. After 5+ years of being treated with no respect for the work the Cygnus employees have performed on behalf of incompetent managers and an investment firm trying to sell a company they obviously paid too much for to begin with, perhaps it's time to stand up and stage a walk-out. What do you have to lose?

  15. You talk about unrealistic expectations...Shortly after the 2 CEOs came on board, they announced to their workers, that "We anticipate interactive budgets to EQUAL print budgets within 2 years."

    So, you want to double your profits in just 2 years in this struggling economy? That's just plain nonsense and the fact that management agreed with their unrealistic goals is even worse!

    Anybody want to start a pool as to when Cygnus declares for Bankruptcy?

  16. It's amazing that anyone at Cygnus can dragged their depressed selves into work each morning when confronted with the facts:

    1. Management thinks cutting salaries is an incentive program.

    2. The executives are unwilling to reveal what, if any, salary cuts they have actually taken.

    3. The ultimate goal is to upgrade the interactive side of the company in order to sell it from underneath the employees. How is that an incentive to come into work? So that the employees can make more money for execs while making less for themselves? Shame on you Cygnus for being an exploitative company. I don't envy your employees.

  17. The new CEO's came in with the expectation that if they "invested" in the properties revenue would automatically increase. We all know that spending more money doesn't necessarily generate more revenue. Now they're scrambling because they've made the fatal sales mistake, overpromised and underdelivered. Instead of cutting off the very hand that feeds them maybe they should have looked into "laying off" some of these big salaried boat anchors who do nothing more than act as mere cheerleaders. Another brilliant move Cygnus!

  18. Here's another problem- what about the few properties at Cygnus that are profitable- even growing? We've had to take the same cut as everyone else... that's some way to tell us to keep up the good work.

    Fortunately, when this implodes and Cygnus files, we will likely be sold as a profitable unit.

    92.5% Cygnus Employee
    7.5% Pissed

  19. Abry: How to fix Cygnus.

    Fire the President. (250K+ savings). Fire the Vice President (200K+ Savings). Eliminate the Brand Manager positions and allow those former group publishers to manage their area of expertise (Savings from more productivity out of those people), Fire the CGO (200K+ savings), Fire the CEOs (500K+ savings). Hire a new President with a vision for a future of the company. Hire a VP of Sales, and VP of production. Demote the CFO to head accountant and have him report to the new president. Allow publishers to run their businesses without endless reports, interruptions and meetings. Then reinstate the 40-hour work week.

    Total Savings - over $1.2 million -Peace of mind and happiness - Priceless!

  20. I feel for all of the employees working for Cygnus. The 37 hour work week will not change the demand.

    Management will demand meeting the deadlines or stay home. What are you going to do? Either work w/o pay or look for a job. It is not viable for some to look for a job. Many of those folks are lucky if they make 30K per year. That is a $173 pay cut per month.
    Guess if you skip your utility bill you can make it work.

    Cygnus historically has no issue with cutting pay or telling people to go home. But you know what.. those same people still work ( granted if they still have a job ).. unpaid.

    I think of all the kind hearted people that are being taken advantage of for the almighty dollar. Would like to believe that a nice audit of business practices would straighten things out.

    If Cygnus and Abry really want to do something they need reduce the expense of the print side, drop or sell the unprofitable pubs, and expand/exploit those parts of the company that are strong. And for goodness sake give the people of Cygnus that are being sold or cut and have worked so hard to make Cygnus what it was -- some time to find a job. To the CEO's...grow some MhMhs. Forcing people out with pay cuts and over working them is ruthless.

    As far as bankruptcy.... Abry will not allow that. They will piece meal prior to that.

    Personally... given the recent news.. if the brain children do not have an Ace in their Pocket would say another year with severe downsizing in '08.. Early '09 Cygnus will go from $120 million to about $40 million and say mmm.. 10 pubs and sites. The 10 pubs will more than likely be the weakest, which no conscious human being would buy unless they were looking to lose money or had some secret sauce to revitalize.

    Who knows maybe Cygnus will spawn into 60 small businesses and taken over by each publisher... after all isn't that what Cygnus is .. 60 Small Businesses!

    Cygnus Staff watch out for pink slips rather than a paycheck!!

  21. I hope the folks reading these blog comments are also aware of Paul's more recent blog entry, "Things Get Really Ugly Really Fast," which comments further on the absolutely mismanaged fiasco that is Cygnus Business Media:

    Since the comments on this older blog entry are building up, but not those on the one linked above--which is even more poignant than this one, I think--I have a feeling a lot of Cygnus folks are linking in from the story, which links to this entry and not the newer one.

    Cygnus readers--be sure to check out the more recent blog entry (click on Paul's header graphic at the top of the page if the link in my post isn't working). And, if anyone is reading this, I suggest changing the link to the more recent blog entry so no one overlooks it.

  22. As a former Cygnus EE I can attest to the disaster first hand. The private equity rodents (ABRY) took a cash cow (35% margins) and sucked every last breath out of it. ABRY does not know a thing about buying or adding value to a media company. They should have taken the multiple offered in 06. They will be lucky to get 50 cents on the dollar. Last laugh is best.

  23. All that's wrong...

    Let's just say this 7.5% cutback strategy works. What's going to happen? Executive management will be lavished with praise and bonuses, Abry will sell at a profit and somebody new will come in and do it all over again...another cycle of the same short-sighted exploitation built on the backs of the people who drive the sales, write relevant and worthwhile editorial, and creatively produce professional trade pubs.

    The only strategy that could preserve the great company that Cygnus employees have built is to somehow take the company employee-owned. Any suggestions or advice to that end?

  24. Dear Anonymous,

    Regarding your thoughts on an employee-owned Cygnus: from all these threads it sounds like no employee at Cygnus would be able to afford to buy a portion of it, even at 50 cents on the dollar. Unless of course one of the higher up bloodsuckers has that idea. Nice thought tho

  25. Here is a good idea... Let's take all those big wigs (who won't let us "underlings" know what there pay cut is) and put them on the verge of losing there house, cars and all things important and then let's see how they feel! But then again why would they care it's only 7.5% and we should be able to get by on that. What ever happend to bosses that actually cared about there employees? I guess that went out the window along with the respect. Thanks to all those who thought this was a grand idea. Do me a favor, make sure the spare bedrooms in your beautiful house is ready, so when we all can't pay our morgage becasue of YOUR stupidity we have somewhere nice to stay!

  26. Let's not forget the publishers, sales people, and their spouses/significant others that went to HAWAII earlier this year!!

  27. As a young person just out of college I was so excited to begin my career at Cygnus. I was eager to move up in the company and prove myslef. I was so proud telling my friends and family about my new job in publishing. It's hard to believe that was just a year ago. Today I feel hardened, disappointed, and in a word raped. I feel like Cygnus has raped it's employees of not just their hard earned money but of their pride and hope for their futures.

    As a young adult with many bills and much debt from my college years, I honestly do not know how I am going to continue to make ends meet. It was hard enough doing it on a salery which was more than $6,000 below normal levels in the industry.

    Cygnus strings its employees along, making empty promises and shattering dreams. I am disgusted with the level this company is so willing to stoop to. It makes me ill.

    I realize now that no matter how hard I work, how much I try to prove myself, this company is never going to aknowledge my fact they actually end up punishing them.

    I hope the big boys are enjoying their dinners out tonight, driving around in their luxury cars...I'll be eating ramen noodles and starring at the wall wishing I could afford cable or internet or even a night at the movies.

    Thanks Cygnus.

  28. Ever since Abry bought Cygnus for $275 million in 2000, it has gone downhill and the employees--many now ex-employees--have suffered. The fact is that Cygnus was not worth $275 million then, and it is not worth that much now. As in the case of F+W, Abry made a mistake in paying so much for Cygnus, and the employees are paying the price. This is a classic case of Wall Street speculators raiding and destroying a once-thriving company.

  29. It's also disconcerting for Cygnus employees who are trying to get information on what the cut in hours means (does everyone leave at the same time? can each individual cut their hours on a day that works for them? can you continue to work a regular workweek and bank the hours for a vacation day?) that Cygnus HR is not giving clear answers or, in some cases, not answering employee emails at all. The employees have been called to a town meeting on Wed., Oct. 10, so it is to be assumed that these questions will be answered then, but that is a whole two weeks after the initial pay cut/hour cut came down....

  30. And then there was the mandate that all editors had to complete a certain number of on-site reader calls by Sept. 1, 2007, or they would not get a raise at their next performance review. So I guess the work done for that got thrown out the window as well -- not only are employee raises thrown out the window (at least for the time being -- who knows if current salaries will be reinstated in Jan. 2008), but now employees are actually getting their salaries CUT...They might as well take our work at the end of every workday, throw it in a big fire pit, and set it ablaze, it feels like the same thing...

  31. I think someone went on a huge limb about Hawaii...that certainly is not true. Most of the blogs I've read are pretty accurate in how the atmosphere has been. As a seller and a publisher, there was not a trip to Hawaii for publishers, sales or their spouses. That is a fabrication. Let's not start making wild accusations, stick to the truth.

    Through all this griping, do you not realize you have given every single competitor of your magazine ammo to sell against you? Bad timing considereing this is the fall planning season.

  32. I stand by the Hawaii comment. But you're right about the selling season. We should all quit griping and get back to work. At least we have jobs. Look at the people in Detroit, losing their jobs, losing their homes. It could be worse.

  33. Having worked in b2b advertising on the agency side, this doesn't surprise me at all. I rarely, if ever saw the same sales person two years in a row. Never saw an editor. Most of the books I considered were 2nd or 3rd or worse in their sector. You asked about editorial and got a blank stare. Very aggressive on pricing, very pushy, lot of negative selling vs. competitors, no apparent plan other than to make this sale today. Not a company, as a whole, I hold in high regard.

  34. It's a pay cut. It's 7.5%. It's not a dream now, but we can make it happen. If Cygnus is doing so bad, why hasn't everyone walked out? The Answer: Because the people at Cygnus work hard and have pride in that work. As long as they continue in the face of adversity to move forward, then the situation will turn around and make for a dream come true.

    Kudos to Cygnus employees who contnue to bring the best information it can to it's audience when so many others would just give up and walk out.

  35. "Kudos to Cygnus employees who contnue to bring the best information it can to it's audience when so many others would just give up and walk out."

    You have to understand.. some of them can't just walk out. There are those people who may not be able to get new jobs becasue of there age, although now a days that's not to be an issue. It's a pay cut and yes they have jobs now, but what will happen next year? They really are in a tough spot... Work for a pay cut and hope it's enough to make ends meet or try to get another job in a job market that hasn't been stable for years.

    Try watching someone you love go through the decision on what they can and can't afford. Trust me, it is something that you never want to see.

  36. I agree with you, its a paycut, its 7.5%. Its not a dream, but it can be survived. In reality, the paycut might just have saved a few jobs. The problem at heart is everything that led up to this. Moral is and has been at an all time low...well before the cuts happened. The daily beat downs have pushed all of us to the edge, the paycuts sent us over this edge. Senior management fails to acknowledge this. They still believe they are doing things right and can't see the problem. Maybe they are getting bad info from the Pres and VPs?? Cygnus is still a solid company, some of the players need to be benched...

  37. To the previous poster Re: Facing Adversity....Keep dreaming!!! If you think it's going to get any better, I have got some swamp land I am looking to sell!!!

  38. Current management is following the style of past management. My question is: When did the employees at Cygnus finally "get it." Ten, twelve years ago, I was screaming at management, screaming at employees, about the very issues you all now seem to recognize so clearly. One day, while I was having it out with my Publisher in his office, at a fairly loud decimal, about closing down over the holidays but still expecting employees to fulfill their quotas, all the office employees in the outer cubicle area scattered. Rather than stick up for me, for themselves, for justice, they didn't want to get involved. After that, I quit fighting for Cygnus employees because I came to realize they were too docile, or "too nice" to know when to come in out of the rain. So now, while I want to feel bad about their situation, I can only affirm that they have gotten exactly what they have earned.

  39. Cygnus employees aren't going to walk out, because we have to eat. Most of us live in a little town in Wisconsin. There isn't a huge market for our skills here, and the salaries we can command elsewhere don't make it worth relocating. We chose this lifestyle and standard of living.

    We are being fattened up for auction. The buyer will decide whether we will go to the slaughterhouse or continue to work on the farm. Either way, Cygnus' people and the fruits of our work are commodities. The CEOs care about us the way that Frank Perdue cared about chickens.

    I've seen this before in a movie. We're working for Blue Star Airlines and our CEO is Gordon Gekko.

  40. AnonymousMay 11, 2008

    I'm late to this party: Cygnus has very poor staffing for most of its magazine and depends almost entirely on freelancers who are topic experts and "Contributing Editors". The pay is lamentable and they buy First Rights only but exploit their articles by selling reprints and to database providers. They have a huge exposure for copyright infringements
    against dozens of these freelancers.

  41. Anonymous,
    I'm sure that Cygnus isn't a great place for freelancers. A quick look through the comments to this post would indicate that it's not a great place for workers of any kind.
    However, I find it very, very unlikely that the company has "huge exposure for copyright infringements."
    It's more likely that Cygnus, like every other publisher in the world, either hires freelancers on a work-for-hire basis (where Cygnus would own all rights to the work produced) or it buys all rights to stories from freelancers.
    Back in the old days it was pretty common for companies to buy only "first North American rights" to an article. But those days are over.

  42. AnonymousJune 17, 2008

    Does anyone have information on there events division. I was a former employee and can relate.