The Danger of Rumors

There has been a lot of traffic in the blogosphere about a hiring freeze/job cuts at Jobster.  The EXCELER8ion blog has a good summary of the rumor as well as some supposed internal Jobster communications.  Jobster also recently announced the appointment of a new CFO which has added fuel to the fire.

Jobster CEO, Jason Goldberg told GigaOM that 2006 revenues would be north of $20 million.  The rumors say that Jobster has 145 employees.  Let's do some simple math.  $20 million divided by 145 employees equals ~ $138,000 in revenue per employee.  There are many technology companies that break even at that level of revenue per employee.  Mature (and profitable) technology companies typically have more than $200,000 in revenue per employee.

However, Jobster is not a mature technology company.  It is a very new company (~ 3 years old) that has grown very quickly (expecting growth of more than 30% for Q406 over Q306).  It would seem unlikely that they would need dramatic cuts (the rumors indicate that potentially half of the staff would be cut) to reach profitability with even flat revenues in 2007.  

However, I would expect that they plan to continue to grow in 2007 and will, on net, add staff.  Jobster may still have job cuts or slow down the rate of hiring in certain areas.  It depends on where they think the growth will come from and the adequacy of staffing.  It may be overstaffed in some areas that are not contributing to growth and understaffed in others based on expected growth.  Jason says it himself in a blog posting about why Jobster cares about profitability; "... you cannot do everything all at once.  at least not well.  that requires tough choices". 

So, what is really going on here?  Did Jobster grow staff too quickly and now has to cut back to achieve profitability or did Jobster examine its market opportunities and decide to realign its staffing (including some job cuts) to go after the best ones?  I do not know.  I am sure we will find out soon enough.  

Often there is a desire in the media (and the blogosphere) to break a story, especially a negative story.  It attracts readers.  Negative stories do have a place.  There are certainly times when it is important to get a negative story out because it is in the public interest.  We publish research at Gartner that sometimes is viewed as negative by technology providers (I know it is hard to believe). 

However, gossip and rumors almost invariably lead to negative stories.  Bertrand Russell is quoted as saying "No one gossips about people's secret virtues".  It is easy to speculate based on gossip, rumor, and innuendo.  However, that speculation is based on information that is often wrong, incomplete, and/or misleading.  Maybe the Jobster rumors will turn out to be true.  Maybe they won't.  Whatever the case, we should all be careful of conclusions drawn from rumors.