Recently, bit by bit, Disney has been downsizing. One area
after another has seen their jobs outsourced, with the employees either
being redeployed elsewhere or given their walking papers outright. Custodial,
information technology, and even core businesses such as animation and
Imagineering have seen major cuts of late. What’s the deal?
Let’s take a look at the overall trend and the possible reasons for this,
look at each area and see what the effects of the downsizing might be,
then consider what this means for Disney and its future.
Why is Disney doing all of this outsourcing? Don’t they realize that
the people are what makes the company so successful? Aren’t they going
to destroy the company by getting rid of all of the people?
Let’s start with the simple one first. Disney isn’t getting rid of all
of the people. Yes, many are being let go, but there are quite a few more
who are not going anywhere. And, to some extent, I believe that they do
know the value of the employees. However, in many cases, the people that
are let go are continuing to do the same or similar work for the company,
only as contractors instead of employees.
So if Disney is keeping a lot of these people around as contractors,
why are they let go in the first place? Well, this is the 21st century.
Business has changed quite a bit from when Walt was running the company.
Long gone are the days where 50 years and a gold watch were the norm,
replaced by job mobility, with most people now working for a half-dozen
or more employers during their career. Disney is just adopting standard
business practices.
In many cases, it is cheaper to hire a contractor or consultant than
a permanent employee. In slow periods, you renew fewer contracts and spend
less. Contractors are paid a flat fee, allowing a company to avoid the
complicated work of providing benefits such as health insurance, paying
payroll taxes or carryyin liabilities such as employee vacation on the
books, or even worry about pension funds. In addition, you can point to
the lower employee head count when people (such as shareholders) ask how
you’re saving money.
But is that the best idea? Let’s take a look at the four areas of downsizing
that I mentioned before, one at a time.
Custodial
As reported in this week’s Walt Disney World Park Update on MousePlanet,
effective next month third-shift custodial positions at all resorts at
Walt Disney World are being outsourced. Current third-shift custodial
workers will be given other positions at Walt Disney World at the same
salary that they currently earn.
So what is the net impact? A number of people who perform manual labor
in the middle of the night will be able to perform other jobs, perhaps
during normal business hours, with their former jobs contracted out to
“leaders in the field” who will be held to the same standards
as the employees had been held to. The employees will now be able to be
deployed to help with the critical shortage of workers at other positions
around the property.
How will this affect resort guests? Since the positions are third-shift,
most guests never saw these people in the first place. And if they did,
they most likely did not interact with them, as they were busy cleaning
the hotel lobbies and other areas. Since Disney says that the contractors
will be held to the same high standards, it is likely that guests will
not notice any changes at the resorts. In the locations where the employees
are redeployed, there will be less of the understaffing that is currently
plaguing Walt Disney World.
While the union representing the workers is protesting and planning to
file an unfair labor practices charge against Disney, I’d say that this
really looks like a decision that will likely have a positive effect when
implemented, assuming that they can successfully redeploy these people
into jobs that they are capable of performing.
Information Technology
We reported a few months back that a large portion of Disney’s corporate
Information Technology (IT) work was being outsourced to two companies.
IBM took over the back-end systems, while Affiliated Computer Services
took on the end-user support and front-end devices. Affected IT workers
were given the opportunity to hire on with the two firms.
Does this decision make sense? More and more companies and government
agencies are contracting out IT services, either in part or in full. This
cuts costs and lowers employee head count while still having the same
people work for them. However, this ignores potential knowledge base and
contributions of permanent employees who know the business inside and
out by sheer virtue of their loyalty to the company and their wish to
make things better. In this case, Disney is more likely counting on suggestions
for system improvements to come from end users.
This decision will likely benefit Disney without too many ill effects.
And for outsourced employees, they will likely have more options in their
employment with the larger IT firms.
Animation
Over the last few years, Disney shuttered animation facilities around
the globe, selecting a few hand-picked animators to labor at the one remaining
facility in Burbank with the target of one CGI-animated feature per year.
All other animated films released by Disney will be drawn (or rendered)
by outside companies. In some cases (like the Asian animation studios
that are replacing DisneyToon Studios), they will create inexpensive animation
that will be released under the Disney banner. In others (like Vanguard
Animation, creators of Valiant), the pictures will be “presented
by” Walt Disney Pictures.
Is this a good thing? There’s not much downside looking at the latest
animated releases from Disney. Story and character depth have lately been
meticulously smoothed out by marketing “geniuses” who try to
make decisions on plotlines and character development based on the potential
of selling merchandise. The result is bland entertainment that rarely
inspires the repeat viewing necessary to make a blockbuster. The rare
exception to this was Lilo and Stitch, which was created in Florida
and somehow escaped the attention of the marketeers until the film was
already completed.
So now, Disney believes in buying cheaper work from outside. The problem
with this is that the legendary Disney attention to detail will likely
slip, and the issues of a lack of coherent story—due to the meddling
by the who are more concerned with selling product than a good story—will
persist.
The fault with this logic is immediately seen in the success of Monsters,
Inc. merchandise. Pixar was able to do its own development work on
the movie without interference from marketeers. Is it likely that a market
research specialist would think that a Mike Wazowski doll would sell?
C’mon, the guy is a big eyeball. But because the story was endearing and
the character was so well-conceived, Mike merchandise flew off of the
shelves. Story and character sell merchandise, not marketing.
Another issue is that all of these talented animators that Disney had
amassed and trained are now out there, available to work for Dreamworks,
Pixar and all of the other competing animation studios. So while Disney
goes with “the lowest bidder,” these guys—assuming the
competitors let them develop stories and characters without meddling—will
be helping beat Disney at its own game.
We’ll call this one a mild negative. While the downsizing will likely
negatively impact the quality of Disney animated releases and boost competitors’
works, chances are that the meddling by Disney’s marketeers would have
done much of the same damage, anyway.
Imagineering
This is the decision that has caused the greatest furor. Disney fans
across the Internet are discussing stories posted at Jim Hill Media and
D-Troops.com, lamenting the layoffs as the end of quality at Disney theme
parks and the beginning of the theme park Apocalypse.
Walt Disney Imagineering (WDI) has been expanding and contracting based
on project loads for a long time. After huge projects such as EPCOT Center,
Tokyo Disneyland, Euro Disney, Tokyo DisneySea and others, large numbers
of Imagineers have been laid off as the projects wound down and there
was less to do around the WDI offices in Glendale, California. With Hong
Kong Disneyland opening on Monday, many new attractions at Walt Disney
World being completed and Expedition: Everest moving toward the final
stages of completion, this appears to be just another situation of getting
rid of people who would have nothing to do otherwise.
But what about who they’re choosing to let go, you might ask. Bruce Gordon
literally wrote the book on Imagineering. Nina Rae Vaughn even drew the
big 50th anniversary map for Disneyland. That’s true. But even bigger
names have been let go or encouraged to resign or retire. People like
Marc Davis. Like Bob Gurr. Like Herb Ryman. Sometimes, it might be internal
politics. Sometimes, it might be because Imagineering management wants
to try a different direction. Sometimes, it might be a way to cut costs
by letting high-priced, long-tenured folks go in favor of younger, cheaper
recruits. But this is something that has been going on for a very long
time, and it is not really out of character at WDI. Were the current layoffs
due to reductions in force, internal political issues, budget cuts, or
something else? Does it really matter? A large number of Imagineers are
losing their jobs.
Of course, there are always long-timers still there. And many of those
let go do come back as contractors or consultants. However, the former
Imagineers, just as with the former animators, are also free to work for
other companies. So, while it may or may not hurt to have fewer long-term
Imagineers that understand Disney culture and the storytelling ethic that
makes Disney “Disney,” Disney will definitely suffer from the
increased quality of storytelling by many of the competitors.
For example, many people say that they enjoy Universal’s Islands of Adventure
park in Orlando, Florida, as much as they like the Disney parks. And why
not? The park was designed by former Imagineers let go as work on Disney’s
Animal Kingdom wound down.
General Electric is considered a breeding ground of quality executives.
And while many go on to lead other companies, including its competitors,
GE retains its strength because many of its executives do stay with the
company, and it grooms more executives everyday.
Similarly, WDI is considered a breeding ground of creative attraction
developers. However, as with GE, WDI needs to keep a strong bench and
groom more top-notch Imagineers after the layoffs. One might question
how many top Imagineers are being retained, and that’s a question that
I don’t have an answer to. However, it is certain that the competition
is gaining access to a horde of quality folks.
Of course, even that has gone on for a while. Examples include Kirk Design,
Inc. (link), formed by Tim
Kirk, Steve Kirk and Kathy Kirk when they were laid off following the
construction of Tokyo DisneySea. Entertainment Engineering, Inc. (link:
http://www.entenginc.com/index.html) is headed by Kent Bingham, with a
staff that includes Bob Gurr and George McGinnis. These companies are
available for contract work from Disney, but also from Disney’s competitors.
So is this a good decision? WDI has done a lot of good work following
previous layoffs, so the current purge doesn’t necessarily mean that quality
will go down. More importantly, when does Disney stop cutting, who will
be left when that’s done, and how much creative freedom will the remaining
Imagineers be given? As with animation, if misguided decisions are allowed
to compromise the quality of attractions beyond Disney standards, that
will be a problem regardless of who is on staff.
Disney has always trimmed “extras” from attraction concepts
during the development process. The key for Disney will be to challenge
the remaining Imagineers to provide innovative new concepts in entertainment
within a budget, without damaging show quality. As with animation, we’ll
have to wait to see the results on this one.
Reflection
So we’ve got two smart moves and two moves that will require some time
to evaluate. In the meantime, let’s hope that the animators and Imagineers
who are getting their walking papers find new jobs that give them the
opportunity to create more entertainment for everyone to enjoy.
In the meantime, Disney bosses will proudly point out the reduced head
count and lowered overhead costs to the institutional investors and brokerages
as a reason for Disney stock to be a good investment and for the executives
to be allowed to keep their jobs.
What the long-term effects will be are anybody’s guess.
