CASE STUDY - ANATOMY OF A TURNAROUND IN PUBLISHING

BACKGROUND

A years ago, a business acquaintance referred me to a European multinational media organization which was looking for someone to takeover leadership of one of their major Canadian media operations. The parent organization operated over 300 publications, 60 websites in 21 countries. North America was their largest market and Canada represented approximately 95% of their North American business. The particular Canadian operation that I was asked to lead was causing them significant challenges. The most notable of which was the fact that it had become their largest money loser globally.

This business unit operated approximately 14 regional and national magazines and newspapers, 3 websites, employed approximately 50 people, was headquartered in Toronto and had 7 regional offices. It was a market leader with a circulation of over 700,000 publications monthly. The publications were printed in 4 different locations across the country and distributed through 7,500 locations nationwide.

In the 5 years prior to my arrival, the senior leadership role of this Canadian company had changed several times. The management team (i.e. department heads) had been negatively impacted by this ever changing leadership. The individual managers, for the most part, while capable within their respective areas of responsibility, suffered from a lack of leadership and as a result had developed a noticeable “silo” approach to handling problems and making decisions. In other words, there did not appear to be any noticeable team approach to dealing with issues and challenges. Each department implemented their individual solution when it came to dealing with situations that were of a more general nature. This had resulted in situations where the actions of one department negatively impacted the ability of another to function properly. There was a fair degree of acrimony among some department heads and, on my first day, I was informed that a few key department heads had submitted written or verbal resignations.

Financially the business was in bad shape:

• there was a significant operating loss and had been for a number of years.
• bad debt was in the double digit range.
• some accounts receivable were over 180 days past due and, of these, several owed well over $150,000.
• many of these larger bad debt accounts were still booking business with the company despite their outstanding debt situation.
• the company’s cost structure had gotten out of control in some areas. For example, websites were locked into a cost structure of $75,000 a month, produced no discernible revenue benefits and were experiencing declining traffic.

The company’s European head office was losing patience with the operation and I was advised that I was the last “kick-at-the-can” for this business. Upon my arrival, I was given several briefings by head office senior management on their views of what needed to be done which included a list of which members of the management team should be replaced and where costs should be slashed.

SITUATION

My assessment of the challenges I faced was:

• My superiors wanted to see developments quickly. (NOTE: The global COO, to whom North America reported, met with me 2 weeks after I joined the company and within an hour of our meeting advised me that “my vacation period” was over and I was to send him, within 48 hours, a list of my 10 quick fixes for the business.)
• I did not want to immediately act on the suggestions made by my superiors. I needed to be able to make my own decisions regarding my management team.
• There were a few members of my management team who had indicated their intention to leave. I needed to convince these individuals to stay.
• I had a reluctant and battle scarred management team. Many of whom were convinced that my primary responsibility was to wind down the operation at the behest of my superiors. The management team’s buy-in and commitment was integral to any transformation strategy for the business. The challenge was to find a mechanism for achieving this immediately despite their misgivings.
• I needed to produce identifiable and meaningful short-term progress in order to reassure my superiors that my decision to not implement their suggestions immediately was a proper course of action.
  
  
  

STRATEGY

It was important to get the management team involved in the problem solving and decision making process at the outset. They needed to feel empowered and involved if I wanted them to stay around, take ownership and be part of the turnaround process.

In hindsight, I guess I was implementing a cross functional team style approach. The benefits associated with this approach, included:

• Faster problem solving and decision making
• Increased level of by-in or commitment to the resultant action plan by those who crafted the solution.
•  Increased ability to get multiple situations dealt with simultaneously. A cross functional approach should require less senior management involvement in each problem solving and decision making circumstance. In my case, I worked with individual managers to help identify the key issues or problems and then turned the matter over to teams who would return to me when they had arrived at what they felt were implementable solutions. This allowed me to have a number of problems being worked on simultaneously without personally being involved in every detail and running the risk of being the source of delay.
• Opportunities to assess the quality of the management talent by observing them in real work situations. It can be a very effective way to measure how individuals function in a team, their leadership or potential leadership qualities, problem solving and decision making skills, organizational capabilities and overall work ethic.
• Improved customer relationships resulting in increased sales and brand strengthening. I have on occasion put inside and outside sales together with finance to manage aspects of the sales process and experienced surprising benefits.

This idea first came to me when I was running a company that was facing a particularly aggressive competitive environment. We were losing sales because the sales reps, especially the outside sales reps, when trying to cut deals with clients were required to contact their supervisors for approval before they were permitted to wander off the official pricing schedule.

The solution was to have the sales management team and finance department work together to come up with a pricing management process that would provide the field reps with the latitude to make pricing decisions while sitting with the clients while at the same time safe guard the businesses margin requirements. Finance and sales management structured a pricing practice that, while riskier in terms of maintaining margins, ensured that our reps left very little money on the table for competitors.

In addition to the direct benefits in terms of increased sales, clients were impressed that our reps were empowered to make these decisions and to make them quickly. This reflected well on the reps individually as well as the company.

IMPLEMENTATION

Beginning the day I arrived, I spent most of my time meeting with my managers one-on-one to discuss their departments and to get their perspective on what they felt was required to get things back on track. These meetings were always held in their offices, never in mine. I needed to get them to accept my presence and this was the best way to reinforce that I was part of their team and my role was to remove obstacles as well as help and support them. I had no hesitation in telling them that they were the experts when it came to their departments. Through these initial sessions and ensuing discussions, I believe it became evident to the management team that I had high level of confidence in their ability to get this organization back on its feet.

Initially, from a few Department Heads, I was greeted with a litany of “won’t, don’t and can’t” responses to my suggestions on how we could attack a problem. This was not entirely unexpected, I had experienced this type of resistance in previous roles. Most of what I was suggesting were actions that these managers had requested under previous administrations but their requests had been met with resistance and traditional risk averse rationalizations. What I was now hearing was the re-iteration of what they perceived as the parent company’s resistance to these ideas.

NOTE:  I always find it amazing that when companies or business units find themselves in dire circumstances the senior management (i.e. the guys in Head Office) often adheres to “safe” practices that probably got them into their difficult situation in the first place.  A major portion of my career has involved being recruited into organizations to lead management teams that are underutilized and, often, have become demotivated due to being subjected to risk averse senior level decision making and problem solving practices. The major challenge I usually face is transforming these teams into motivated, energized groups that embrace innovation,  make the tough decisions and zealously pursue being best-in-class.

I seldom have encountered managers or department heads who do not want to take a risk. What I have encountered are managers who have been discouraged from taking risks because of a lack of senior management support. Someone once expressed it best when they said “senior management want us to take risks but not to risk anything”.

Changing or transforming an indigenous team can be difficult and not without its challenges. Often it is preferred to replace all or part of the existing team with known talent that you may have worked with previously. It has been my experience that the management team that was in place when an organization went off the rails can be the best team to get it back on track. It seldom is the front line management or department heads who have caused the problems, they are just the ones asked to accept the blame. Given the opportunity and the proper environment they often quickly rise to the challenge.

RESULTS
 

With a few exceptions, I was able to keep the original team intact and in the first 12 months the team was able to accomplish the following:

• The company, after years of losses, was  returned to profitability.

• Bad debt plummeted from double digit to low single digit.

o   Finance was given control over bad debt accounts.

o   Sales was required to get finance’s authorization before they could accept business from bad debt accounts. This authorization was absolute. I refused to personally get involved dealing with exceptions without finance’s approval.

• Production costs dropped $1,000,000.

o   Production was centralized to Toronto from several regional locations.

o   Print contracts were re-negotiated. Printing operations were streamlined.

o   Production was given increased authority to refuse last minute ads if accepting late ads meant missing print production schedules or incurring overtime.

o   Production was significantly automated thus reducing time lines and manpower.

o   Production and sales worked with clients to automate the client’s process for submitting ads. This eased and helped streamline our production processes.

• New products were introduced.

• Web costs were reduced almost $50,000 per month and the websites were restructured to be revenue contributors.

o   Publication advertisers were given the option to pay a little more and have their print ad appear online.

o   The sites were modified to allow for this to occur as a simple pass through from production. In other words, once an ad was setup for the print product it could be digitally placed on the site with no or minimal manipulation thereby producing additional revenue with negligible additional cost.

o   In addition to wanting to develop more contemporary and relevant web sites, a priority in redesigning the sites was to eliminate the need for costly out-sourced service contracts.

• Magazines and newspapers were redesigned to make them more relevant to market needs, to reduce paper costs and to optimize the use of ad space. Studies were conducted regarding readers preference for size and aspects of layout. The objective was to reduce paper costs by reducing publication size but not lose ad revenue by reducing ad sizes excessively.

NOTE: We also carried out a number of studies regarding the quality of paper used for the print products. But despite the results, we were somewhat restricted in using lesser quality, less expensive paper.

Over the years, I have been responsible for the publication of close to 100 titles including consumer, industry and trade publications. I have never seen a study that showed that the reader or the advertiser for that matter would actually stop buying or advertising in the publication due to the quality of its paper. The real opponents of lesser quality stock were ad agencies. They were usually the ones who refused to put a client’s ads in a publication that did not publish on high quality expensive stock despite what the studies showed.

Because we needed to deal with agencies we were often required to use expensive paper.

•  Editorial costs were reduced 25% while maintaining quantity and quality of content.

o   A big contributor to this process was reducing editorial staff and relying more on freelancers. I believe we reduced our full time editorial staff almost 50% and ended up sourcing our content from a group of approximately 75 freelancers.

o   The system for compensating freelancers was changed from a “per word” fee schedule to a fee schedule based on the specific piece of content being provided. Managing Editors would negotiate with freelance writers to pay according to the experience of the writer, importance or relevance of the piece and the managing editor’s judgment regarding how many words the article should require.

 Distribution was re-engineered.  

By: Richard Peters
http://ca.linkedin.com/in/richardpeters2/