Sotheby's offers voluntary redundancies to cut costs

Chief executive Tad Smith hopes to keep “excellent, less-tenured” staff who want to change the worlds of art, jewellery, cars and wine

Not for the first time in recent years, Sotheby’s is offering voluntary redundancy payments as part of a cost-cutting programme. If unsuccessful, the auction house may resort to layoffs, according to an email sent to staff on 13 November.

Sotheby’s has not said how many jobs it plans to cut. According to its 2014 annual report, the company employed 1,550 people—27 fewer than in 2013. At its peak in 2008, Sotheby’s had 1,638 members of staff, which fell to 1,323 in 2009. Numbers have gradually risen since then, but 2014 saw the first dip in five years.

Tad Smith, who joined the auction house as chief executive seven months ago, announced the cuts in an email first obtained by Bloomberg News. “I certainly understand that announcing a cost reduction program right after two weeks of dazzling sales may be unexpected,” Smith said.

In fact, the announcement came on the back of Sotheby’s third-quarter results released on 9 November, which showed a 9% decline in revenue for the period. Auction commissions were also down 12% for the nine-month period (from $64m to $56m). And despite Sotheby’s selling $1.2billion worth of art in the ten days preceding the announcement, it is not clear yet whether the house will make a profit on the Alfred Taubman collection, which it guaranteed for $515m.

However, plans to make cuts were formulated before the recent sales, according to Smith’s email, which revealed that an assessment over the summer concluded that Sotheby’s “would benefit from a lower and more flexible cost structure”. Smith added that the company wanted to give “colleagues an attractive economic opportunity to volunteer to resign, should they wish to do so”.

According to a spokeswoman for Sotheby’s there have not been any discussions about which departments might be streamlined if not enough people apply for voluntary redundancy. In his earnings call on 9 November, Smith said that many “excellent, less-tenured staff” had been earmarked as potential talent to nurture. “These people are bursting with energy to change the worlds of art, jewellery, cars or wine, and my more senior colleagues and I need to find creative ways to give them room to run and innovate,” he said. Smith also acknowledged the middle market had been “a little more sluggish than we would have liked”.

Sotheby’s main rival Christie’s declined to give employee figures, while Phillips’s staffing numbers have risen from 188 in 2014 to 225 in 2015.