Watch CBSN Live

Novartis CEO Denies Layoff Rumors, Staff Still Worried

Novartis (NVS) says it does not plan to lay off thousands, as I predicted recently. That's good news, if it's true. But perhaps CEO Joe Jimenez should communicate this to his staff, many of whom are convinced that a swathe of job losses is imminent. It's easy to see why Novartis employees fear that Jimenez is about to wield the ax. He told investors that:
Novartis will continue to optimize its marketing and sales (M&S) spending by re-allocating resources geographically as well as simplifying current processes. M&S spend since 2007 has continually decreased as percentage of sales from 29.2 percent to 25.2 percent of sales as of third quarter 2010.
And His Q3 2010 earnings statement said the company would be (emphasis added):
... improving profitability through productivity by streamlining and simplifying our processes.

The key contributions to productivity were purchasing savings with an increasing portion of purchasing now being done through global cross-divisional programs and e-sourcing, and the continued trending down of sales and marketing costs.

Jimenez now needs to explain how he will decrease sales and marketing costs as a percentage of sales, and how he can continue the "trending down" of those costs, without laying off sales and marketing staff. Sales and marketing are Novartis' biggest quarterly expense, more than R&D. Those costs consists mostly of an army of salaried pharmaceutical sales reps, and their employment benefits, driving around the countryside in company cars.

Such an explanation will help him allay the remarkably detailed discussion about layoffs on Cafe Pharma, the gossip site where pharmaceutical industry employees post anonymously. This post says "layoffs will certainly happen the week after Thanksgiving." This one speculates on specific numbers:

... the number I heard is 1600 nationally minus 400-500 current vacancies. So who knows?
Another commenter in that thread also believes the post-Thanksgiving period is crucial:
We will be asked to stay home for the phone calls after thanksgiving. Same way they have done it in the past.
And this one argues that the neuroscience and psychiatric sales divisions will be merged. Whatever the truth, Jimenez needs to talk to his troops. The problem here -- that Jimenez's employees have received a different message than the one intended -- is that Jimenez has spent too much time communicating with Wall Street and not enough communicating with his own staff.


Image by Flickr user American Idle, CC.