The Incredible Shrinking AOLS

Just in time for Christmas, AOL is asking 2,500 of its workers to volunteer for buyouts starting Dec. 4 (layoffs come after) as the company separates from Time Warner and a shadow of its former online conglomerate self.

AOL CEO Tim Armstrong (pictured) said in a memo to staff (below) that the company is looking to lose 2,500 workers, or a third of its total staff. He'll be forgoing his own 2009 bonus, and is offering executives up to nine months pay if they volunteer for buyouts, according to Business Insider. Interestingly, rank and filers are being offered a weaker deal than their recent colleagues over at Time Inc.; AOL will pay them three months severance, whereas Time Inc.-ers get that plus two weeks for every year of service. Apparently unions are nice things to have in situations like this.

As it prepares to offer shares to the public next month, AOL has been on a diet plan in other ways, too:

Pic above by Yaniv Golan.

Armstrong's memo to staff:————-

AOLers –

"Employees First" is the way that we have run the company since April and that mantra is something I take very seriously because our company is a collection of people and our brands are the work of our teams. We started by working together to determine AOL's strategy, then the correct structure for the strategy, and, as we have discussed, we are now faced with making sure we have the correct cost structure for the strategy. You have seen daily and weekly updates on Project Everest and many of you have been involved in trying to align our resources to maximize AOL's opportunity.

AOL's cost structure is something we have worked on for the past four months, and we have spent hundreds of hours reviewing ways to fix the cost structure as well as the revenue growth engine. As we are coming to the conclusion of this work over the next few weeks, it is clear that we will need to have a significant reduction of costs at the company and across almost all functional areas and geographies. Headcount costs are going to be a majority of the cost reduction recommendations coming out of Project Everest.

As I mentioned in our last Project Everest update, the idea for a voluntary layoff was suggested and we agree that it is an option that gives people more choice and decision-making ability instead of waiting for the final cost recommendations and involuntary layoffs. Starting December 4th in the United States and ending a few days after we spin out from Time Warner, we will allow employees to choose a voluntary exit from AOL. Additionally, tomorrow we anticipate beginning the communication process for voluntary layoff programs in certain international locations. We will be looking for up to 2,500 volunteers. For context on the target volunteer number, over the next several months we will be looking to reduce approximately one-third of our overall workforce at the company. We will need to do an involuntary layoff if we do not reach the target numbers through the voluntary option.

The reduction in costs is aimed at making AOL competitive for the future of the Web and it will allow us to focus the company on growth in the non-access areas of the business. After the cost reductions, we will have a company that is aligned and structured to drive our strategy in a competitive way. The number of potential reductions isn't aimed at getting us through 2010; it is aimed at resetting AOL at the correct baseline for the future.

As a member of our team and the person who takes accountability for the results of the company, I am making the decision to forego my 2009 bonus. That decision is a personal one and is not a sign for the future payout of the overall bonus plan for employees. That plan is based on performance and overall company outcomes and it will be management's recommendation to the compensation committee of the Board to approve our performance-based bonus payouts for 2009. These are challenging times and today's news is difficult. But every day we are making changes and progress and we are on our way to re-engineering AOL for success. – TA