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JPMorgan Tech Conference: Siebel Says Cuts Preserved Company's Profit Culture

Tom Siebel had just six weeks left to get his job done when he started to get scared. But don't feel too bad for the guy. He managed to get the job done and take home a fat paycheck to boot.

By the middle of last quarter, he knew business was slow enough at his eponymous software firm, Siebel Systems (SEBL), that it risked missing its quarterly numbers for the first time in its history as a public company.

"I wasn't concerned about the shareholders or the stock," Siebel told a luncheon crowd at the JPMorgan H&Q Technology Conference, likely to his listeners' chagrin. "But if we didn't make our numbers, the culture of the company would never be the same. Never again would we be seen as the company that digs in and does what it takes to get the job done."

Using that as his justification, Siebel detailed how he took out the ax at his company, and in doing so demonstrated the Draconian focus on profits that has made him a hero on Wall Street, and given him a reputation among his Silicon Valley employees as a martinet.

"I had a bigger number than you could even imagine for the first quarter," said Siebel, who revealed that initial plans for 2001 called for the company to double its headcount to 15,000 employees. Instead, the company announced on April 18 that it had cut 10% of its workforce.

Siebel said it was through the use of his company's own software that it detected, and adjusted to, economic changes so quickly.

"Most companies don't know they're going to miss the quarter until 11:10 on the 31st," Siebel said. "We find out we're going to miss with six weeks to go."

If that's true, though, things must have changed very quickly indeed. Because with exactly six weeks and three days left in his quarter, Siebel was making outrageously bullish claims about his company's business at another investment conference. In fact, he said things were better than ever.

Nonetheless, Siebel said his company's awareness of changes in the economy, culled from his software, helped it to adjust along the way.

"We replanned the business by [the middle of the quarter]. We reduced headcount, eliminated every product not generating a profit, got rid of all unprofitable businesses and sales units, cut executive pay by 20% and eliminated all executive bonuses. We cut everything that didn't contribute to profits," Siebel said. "And the results are clear. We're going to gain market share."

In case you're wondering, Siebel's salary in 1999 was $3.1 million. So he'll be out a cool $620,000 with the 20% pay cut.

That's great for investors. But the angry ex-Siebel employees who have been emailing their gripes around Silicon Valley in the last two weeks might see things in a different way. When Siebel announced its job cuts two weeks ago, it said it simply cut off the bottom 10%, performancewise, of its workforce.

That statement probably isn't helping those folks as they go job-hunting now.

It's ironic, then, that after the zealous detailing of his company's cuts, Siebel launched into a product demo on his company's latest new focus: an area of software known as employee relationship management, which Siebel believes will be even bigger than his company's current bread and butter, customer relationship management software.

Employee relationship management software, or ERM, allows companies to distribute a wealth of information to employees, ranging from individual sales goals to recommended hotels to use during travel to performance feedback. Siebel says he wants his firm to be the No. 1 company in that space.

Interestingly, embedded in Siebel's live demo was a document that showed Siebel's companywide objectives for 2001. The top priority listed on that sheet: the firm's human capital.

It was an interesting juxtaposition: The CEO who said making the numbers is crucial to the company's culture following it with a visual statement that puts employees at the top of the list. In Siebel's case, he's made clear which is most important.

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