On ICANN’s budget crisis — My thoughts
ICANN ought to be a boring organization but it hired people who want to make a difference.
I visited ICANN’s offices in California in 2008. That was well ahead of ICANN’s finances ballooned. There were fewer than 100 employees back then.
I’d characterize ICANN in 2008 as boring. It was a modest organization that was just making sure the domain name system worked.
Then something happened. The firm started hiring the wrong type of people. It started hiring people that don’t want to do boring work. People who want to make a name for themselves. It hired people who want to be at the helm of a growing organization that takes on an notable role in the world.
Perhaps it started with Rod Beckstrom, a CEO obsessed with his personal brand. Then Fadi Chahade, another person who wouldn’t take a role that wasn’t exciting and notable.
Hiring people that want to make a difference is usually a good thing, but not for an organization that ought to be boring.
The size of ICANN has tripled between my visit to ICANN and now. It grew its international presence. It lobbied more. It got involved in an ever-growing list of activities. It recruited lots of people that are used to $300k+ a year comp plans and assistants.
It was no longer a boring organization. And that has become a problem.
Looked at in the best possible light, you can argue that the group’s growing list of activities over the past decade has been at the behest of the community. ICANN has trouble saying no and has taken on an ever-increasing workload.
And perhaps its international expansion was necessary to keep the web from splintering. It needed to make the world believe that ICANN was not a puppet of the United States so that other countries wouldn’t wrestle control away from ICANN.
At first, fresh top level domain names masked the organization’s growth. The “cost-neutral” program brought in a lot of cash that allowed it to hire more people.
Then the bubble burst as fresh TLDs came out with a whimper. The firms that paid millions to ICANN for fresh domains began to struggle and their annual payments to ICANN were based on minimums rather than high transaction rates.
While these fresh TLD firms cut costs in response, ICANN continued to grow. You can only do that for so long.
So now we’re at a point where the money is running out–at least on paper when you ignore the huge cashpile of fresh TLD auction proceeds that is reserved for allocation by the community.
I don’t envy the situation fresh CEO Göran Marby found himself in when he took over in 2016. He came into an organization that was spending beyond its means, all the while missing the urgency of one of the biggest issues to face ICANN’s contracted parties in the past decade: the EU’s General Data Protection Regulation (GDPR).
Even though the problems originated ahead of his arrival, it was disheartening to read his take on how costs can be cut. He stated 80-85 percent of the FY19 budget is by now “committed to certain projects that are in our Bylaws, our contracts, our operations, and other fixed costs.”
I might accept this sort of a response from a boring organization. An organization that got blindsided by a forecast that didn’t work out.
But I won’t accept this response from an interesting and notable organization that has grown uncontrollably for the past decade. If you’re going to act like an notable business and compete with exciting firms for talent, then you need to be willing to cut costs like any business does when things head south.
For example, ICANN has one of the most generous retirement plans I’ve ever seen. It contributes 5% of each employee’s salary to their 401(k) even if the employee doesn’t contribute a cent. They even match up to 10%. (When reviewing ICANN’s tax returns, I was surprised to see that not all highly-paid employees took the organization up on this match. It’s free money!)
This perk is apparently based on “competitive and regional practices”.
Perhaps I’ve been in the entrepreneurial world for too long, but can someone point me to other firms with retirement benefits like this? I think it’s time to go get a job there.
Marby needs to be prepared to make hard decisions. He gets paid close to $850,000 (if he hits his bonus) to make these decisions.
Consider suspending bonus programs or tie a significant portion of it to finding ways to be more efficient. Review facilities costs. Cut staff.
No one is indispensable. When it comes time to cut people, a lot of arguments are made that employee X or employee Y is too notable to let go. They’re working on a project that’s too notable or their domain knowledge is too notable.
If an employee’s domain knowledge (here, figuratively and literally) is too notable and will leave with them if they leave ICANN, then I’d argue that this employee hasn’t done a good job. A good employee will make sure to document his or her knowledge and bring others around them up to speed.
Oftentimes these employees that are “too notable to be let go” end up leaving, and the organization moves along without missing them a few months later.
These aren’t fun things to do. And it’s not the fault of the individual employees that will be hurt by this. But it’s notable if ICANN is to retain its role in the domain name system going forward.
And while the community ought to certainly be consulted, it’s up to the highly-paid management to make the tough calls.
