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New Relic CEO scolds employees in internal memo: ‘We are a company with an urgent need to get back on track’

By Mike Rogoway, oregonlive.com
Published: July 3, 2020, 8:51am

Software company New Relic, one of Portland’s largest technology employers, is lagging behind rivals and needs more from its employees to catch up, the company’s CEO warned his staff in an all-company memo last month.

The blunt letter exhorts employees to work harder and rejects their calls for the company to take a more active role in the nation’s resurgent civil rights movement.

“We are a company with an urgent need to get back on track,” CEO Lew Cirne wrote in a June 19 memo to all employees.

The Oregonian/OregonLive obtained a copy of the memo, which describes a company at a critical juncture after a year of disappointing financial results. Cirne writes that New Relic is in dire need of a turnaround and he puts the onus on employees to deliver.

“Our growth rate is far behind that of our competitors, and also behind the growth rates of the cloud providers,” Cirne wrote. “History has not been kind to technology companies who do not continue to grow. Technology companies either grow or they die. There is no middle option.”

New Relic’s headquarters are in San Francisco, where Cirne works, but it employs more than 600 in Portland on the upper floors of the U.S. Bancorp Tower (“Big Pink”) downtown.

New Relic’s software enables organizations to track activity on their own websites to monitor the performance of their online products and services. Cirne, 50, started the company in 2008 – “New Relic” is an anagram of his name, “Lew Cirne.” He previously worked as an engineer at Apple and Hummingbird and founded Wily Technology, which sold to CA Technologies in 2006 for $375 million.

A decade ago, New Relic made the unusual decision to put its software engineering team in Oregon at a time when old-line computer hardware still dominated the state’s technology sector. The office grew quickly and played a key role in the transition of Oregon tech to contemporary software and web services.

New Relic raised $114 million in its 2014 initial public offering. The company reported sales of nearly $600 million last year and a loss of $91 million.

New Relic’s growth has slowed considerably in recent years, though, and it forecasts sales will increase just 13% in the current quarter compared to the same period a year ago. The stock has lost about a quarter of its value in the past year.

Cirne’s letter begins by acknowledging the strains employees face during the pandemic and the horrors conveyed through new awareness of systemic racism.

“As if that weren’t enough, things are also particularly difficult for our business at New Relic,” Cirne wrote. He quotes two stock analysts who have sell ratings on the company, one of whom groups New Relic among industry “laggards.”

“Reading reports like these feels like a punch in the gut,” Cirne wrote. “But it also inspires me – and hopefully all of you – to prove these doubters wrong.”

New Relic shook up its executive ranks during a downturn last year, replacing chief technology officer Jim Gochee, the company’s top Portland executive, and another senior leader. And earlier this week New Relic laid off “less than 20” engineering staff in a modest restructuring.

Employees describe declining morale and say last month’s memo and last week’s layoffs exacerbated the situation. Some workers first learned of their pending layoffs from email notifications that they were losing their access to their work accounts.

In a note to remaining employees, New Relic said it had intended to notify all laid-off workers individually “where the news could be communicated with the dignity and respect these employees deserve.” The company blamed the premature emails on an unspecified “internal systems” issue.

In his June memo, Cirne wrote that the company is preparing to launch a new product this summer, codenamed Hercules. He didn’t detail the product’s features but indicated it is key to New Relic’s revival. He said Hercules’ release will “begin the turnaround this company urgently needs.”

Like other large companies, New Relic has tweeted its support for the Black Lives Matter movement and pledged donations to support civil rights and the fight against racism.

Yet Cirne’s memo indicates a degree of internal dissension within New Relic over how the company is responding to the movement. Cirne wrote that employees are pushing New Relic to stop doing business with some clients, but he said there is disagreement about “exactly how we attack systemic racism.”

“New Relic is a public software company, not a political organization,” Cirne wrote.

While Cirne wrote that “Racism is evil, real and cannot be tolerated under any circumstances,” he then added “Any public stance we take on sensitive political issues (may) alienate major constituents.”

Many employees wish New Relic would take a more public stance on these matters, Cirne acknowledged, but he then added that it’s not the company’s job “to be the moral arbiters of who deserves to use our software.”

If employees choose to leave for another company “more driven by social issues, we respect that,” Cirne wrote.

“But from now on,” he scolded, “this matter is off the table for further discussion.”

Switching topics, Cirne said the company needs more from its staff in the weeks leading up to the Hercules product launch this summer. While employees are the company’s top priority, and New Relic encourages a healthy work-life balance, Cirne said that policy has “become increasingly misinterpreted.”

For example, he cites an online message board post that describes a manager working late – and having someone else suggest that might set a bad example for the manager’s employees. Cirne said the company never intended someone to be chastised for working harder or longer.

“In this sense, we are not a lifestyle company,” Cirne wrote. “We are a growth company.”

Asked for comment on Cirne’s letter, New Relic said Portland continues to be an important location for the company and said it is committed to societal issues.

“From the beginning Lew founded the company with a values-driven culture, wanting to be supportive of employees and a place where they can do the best work of their careers,” New Relic said in a written statement.

New Relic said company matching programs helped employees raise $70,000 for civil rights organizations and $155,000 for COVID-19 relief.

“We have always empowered employees to be their authentic selves because we believe you are at your best when you are your true self,” the company said. “This means employees are encouraged and supported in putting their energies toward the causes that they personally care about through our volunteer and donation programs.”

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