Sotheby's staff face cuts
November 16 2015
Picture: Google Finance
Sotheby's new CEO Tad Smith has emailed employees offering voluntary redundancy packages, in a bid to cut costs. If not enough people go voluntarily, redundancies may have to follow. Smith says Sotheby's is 'not as efficient a company as it could be'.
Here, however, are some wise words of caution from Wendy Goldsmith, of Goldsmith Art Advisory, who told Bloomberg:
“It seems short sighted to make it a blanket letter including the specialists who are the essential money makers [...] There’s a risk losing the wrong people.”
Quite. The right kind expertise is so vital in the art world. Cutting experienced staff for cheaper ones might help the balance sheet in the short-term, but it will cost money in the long run.
Sotheby's share price has gone down a bit lately - $29 today against more than $46 in the summer. In early 2014 it was over $53. Still, it was around $29 in late 2012, so the decline is nothing too dramatic. And it's not as cheap as the $6.47 it fell to in 2009 - when, daftly, I thought about buying some shares, but didn't.
Charlotte Burns in The Art Newspaper has a more in depth report on the figures here, and notes that auction margins are becoming slimmer. But I was intrigued by this paragraph:
A $6m “indirect expense” logged in the general and administrative expenses for the nine month period “is almost entirely due to higher costs in the second quarter associated with a client authenticity claim”, according to the accounting notes.
I wonder what work this refers to?
Update - a reader writes, sagely:
In the Art Business it isn't simply “what you know” but “who(m) you know” and how much those whom you know trust you. You can't grow talented connected people quickly and when they go some business will follow them to their next gig. That said, I know that the Sotheby's organization is vast and deep and that it might manage a few early retirements without harm to the brand. The difficulty for Sotheby's is that in the current world retirees become consultants to growing competitors rather than playing golf and living in Italy or wherever.
It has been shown that the newbie driven volume in contemporary art has lower margins than the old boring stuff. The sellers of too lots are sophisticated and have choices that reduce or eliminate the profit and leave only the bragging rights for he auction firm. It’s the boring midrange lots that yield premiums and fees and don't risk the firm’s capital with guarantees. These lots are often consigned based on long standing personal relationships.
Update II - here's Colin Gleadell's take, in the Telegraph, on Sotheby's performance, and a wider look at the contemporary sales. He thinks we're in 'bubble burst' territory.
