UNCERTAINTY makes for a difficult working environment. What Chesapeake Energy Corp. did Tuesday in letting go about 640 employees in Oklahoma City marked the end of a period of uncertainty for the company and the beginning of an era of uncertainty for the affected workers.
It had to be done.
Doug Lawler, on the job as Chesapeake's CEO only since mid-June, did what he had to do to make Chesapeake “a competitive, productive, strong and vibrant company for decades to come,” as he put it.
Chesapeake's workforce was unsustainable. Major shareholders began demanding changes at the company months ago. A new chairman and new CEO made it their first priority to shore up the firm's viability. The shareholders who financed Chesapeake's spectacular growth in recent years had a right — an obligation — to insist on a new direction for a large company with humble beginnings in 1989, the year Oklahoma City marked its centennial.
Oklahoma City will suffer along with the terminated employees. Despite the vibrancy of other domiciled energy firms here, the city can't easily absorb such a large reduction in force. Some former Chesapeake employees likely will have to relocate. As tough as that will be for the employees, their families and their friends, it's preferable to losing the company altogether.
The positive side of this reduction in force is that Chesapeake will still have 6,000 workers in Oklahoma, 3,500 of them in Oklahoma City. Restructuring should result in a company attractive to shareholders. We have every confidence Chesapeake will grow again from a new starting point. “I believe we have all the elements in place to be a sustainable, strong, growing enterprise,” Lawler said.
Enterprise. The word means a business activity directed at making a profit — not maintaining employment at a certain level if that level can't be justified.
To those invoking the populist argument that these layoffs affect only the underlings and not the executives, we can only say that Americans with a pension plan or 401(k) have a powerful, vested interest in the viability of companies in their portfolios. Their share prices are critical elements in the value of retirement plans. And good stewardship is critical to share prices.
If anyone's pockets are lined by the results of a reduction in force, it's the average American who's counting on these funds to sustain them in their golden years. The last thing they need is a business plan that doesn't maximize returns on investment.
When Chesapeake co-founder Aubrey McClendon left earlier this year, we noted it brought a measure of relief for some investors and a measure of continued uncertainty for Chesapeake employees. McClendon has started a new company that has all the earmarks of a successful enterprise. The continued uncertainty for Chesapeake employees is now greatly diminished, which of course is of small comfort to those who will no longer get a Chesapeake paycheck.
For the rest of us, a leaner Chesapeake carries short-term pain but long-term benefits. Generous charitable giving, a hallmark of McClendon and Chesapeake from the beginning, will be reduced for a time. Large reductions in force have spinoff effects in retail sales, real estate, tax receipts and other economic measures. This city faces a weighty challenge to overcome these effects as quickly as possible.
We have every confidence that we can do this. Oklahoma City lost nearly 650 workers in one fell swoop, but it didn't lose a headquarters company whose name is on our NBA arena, a company that's been an outstanding corporate citizen from its founding.
It had to be done, this retrenchment, to sustain the company and position it for new opportunities. Profitability is not a side issue in public companies. It's the issue.
Chesapeake still puts food on the table for 11,000 employees throughout its area of operation. That's a remarkable number for a company that didn't exist 25 years ago.