This week Cirque du Soleil announced that they were laying off 400 employees, which considering their unprecedented success for almost 25 years has come as somewhat of a shock. Unfortunately this is again a cautionary tale for firms that begin to believe that they live in a fairy tale, and that no matter what, they will continue to live happily ever after.
The Cirque spin doctors are twisting themselves in pretzel formation, just like the performers in their shows, so as to provide the media with a rational for their financial health.
Some of the reasons (or as I wrote in a previous blog Excuses Masquerading as Reasons)
- The strength of the Canadian dollar. But this is not new news, so why would they continue to expand and not revisit their assumptions on a continual basis, or at least have contingencies based on various scenarios? It seems that 95% of it's expenses are in Canada, while 95% of revenues come from outside of Canada, ergo the problem, according to them, but this has been their situation for many years...so again why is this a surprise to them?
- Their next statement quite honestly floored me. Their spokesperson said "This is not a revenue issue, it is an expense issue." Huh? Isn't that like saying that it isn't a car issue, it is an engine issue?
To consider that revenues and expense live in separate universes seems to me to be a fantasy worthy of the Cirque group. Have they not been looking at their expense base? Expenses become an issue when companies have had lax controls, but also when they have continued growing with nary a concern over the cost of the expansion because their expectation is that the revenue will come, regardless and offset the expense base. It is corporate arrogance which we have seen happen time and time again (Read The Danger of Innovative Arrogance) and the end is not pretty.
Cirque has become to believe that audiences will buy expensive tickets to no matter what type of programming they put out. Please understand, I have enjoyed most of the Cirque shows that I've seen (mostly in Las Vegas), however, when they put out the show Delirium in 2006, I stopped going. This latter show was a frenzy of disjointed performances, which did not lead to anything and certainly was not worth the money spent. There have been several attempts to get into new markets and with new type of shows, but several of these attempts have failed, or at least not had the run that would result in the expenses being offset by the revenues (Banana Shpeel, Zed, Zaia, Viva Elvis and Iris).
Cirque needs to do some navel gazing to determine the best approach to the market place. The need to constantly grow is sometimes a distraction to quality. And I believe that is the issue with Cirque. If they had managed growth more effectively, with a keen eye to bottom-line (and not just the top-line revenue), they could have avoided the current layoffs.
Maybe I'm new, but I have never understood the need to grow, grow, grow. This seems to be a market fuelled expectation, that growth will continue, forever. Not only is this not realistic, but it can be damaging. Sticking to the core, and having a solid, bottom-line rich company, with astute growth expectations, and innovative approaches, would be my preference. A comparable scenario is the unending expectation that in a career you keep going up, and up, and up. The problem is that a)there are only so many "up" jobs and b) not everyone is equipped to be in a leadership role. Too many people have been terminated due to the fact that the corporation promoted them, because of prior excellent performance, to a job which they are not competent to handle.
I truly hope that Cirque finds their way out of this. It is a great Canadian success story and too many of these have spectacularly spiralled downward.
Cirque du Soleil should stop clowning around and making excuses. There is no magic wand to get them out of this situation. It is proper, realistic strategy in today's marketplace that they now need.
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