Wednesday, April 22, 2009

Navigating painfully through peril

An anonymous commenter sent me a message here late Tuesday wishing I was dead.

Not long afterward came a follow-up, likewise anonymous, saying it had been sent while “drunk and furious,” asking me not to publish it.

Honest to God, I understand: I’ve been there. Though I haven’t been drunk in a long time, I’ve spent a good bit of the recent past furious as well.

Tuesday, like too many days in recent history, was a horrible day at McClatchy. Talented, hard-working people who do their jobs as well as anybody in the country have been laid off. Those remaining at work often approach the future with despair, unsure about survival, much less the capacity to fulfill their missions. On the front lines (and, yes, the executive offices) people work heroically to chart a new course safely through peril.

In writing about all this I’ve too often failed to say plainly that I also feel just how awful it is. I suppose I was trying to avoid the old parent’s line, “This hurts me as much as it does you.” I know it doesn’t.

My only intention has been to introduce facts into the discussion and to tell you what this all looks like from my perspective. For a lot of this period I worked at the highest levels of the corporate structure, where responsibility lies. I’m sorry for the times I came off off as an apologist and, worse by far, to have seemed indifferent to the pain.

I don’t apologize for expressing the facts as I know them. It simply isn’t helpful to build mythologies based on anger and blame that don’t reflect reality. That won’t erase the pain or fix the changing business models. For example, those who argue that McClatchy took over a thriving N&O and greedily ran it into the ground are misinformed, and perpetuating that myth hurts the cause of reconstruction.

As I have for more than 40 years, I believe at my core that intellectual honesty, critical thinking and plain speaking are the best way to face and fix problems. I intend to keep adding whatever perspective I have to that process in the hope of helping navigate through a dark, painful time for our beloved profession. I also plan to acknowledge more often what I feel every day: this process has damaged a lot of talented people and valued institutions; like most of you, that makes me profoundly sad.


  1. Anonymous9:07 AM

    Well, at least you're paying lipservice to acknowledging the pain now.

    But the reality is that McClatchy could have prepared for a bad future by doing what high-performing companies do: Get rid of the haters, the obstructionists and the dead weight.

    But the "family friendly" no-layoffs policy and lax management did just that. That was encouraged from the top.

    But please don't say you "feel" anything. At least when Knight Ridder sold the Detroit Free Press, Tony Ridder showed up to deliver the news. When you sold the Minneapolis Star Tribune, Pruitt was off listening to the Rolling Stones on his quadraphonic Blaupunkt or whatever.

    So you weren't feeling anything much then.

  2. As someone who voluntarily left my last paper for a start-up, I don't know the pain of losing a job, but I have seen plenty of friends hurt.

    The problem is I see a lot of journalists going from understandable pain and anger to what seems like cheerleading for the death of the companies that used to employ them. That doesn't help.

  3. Anonymous10:06 AM

    I'm confused. Is McClatchy a bad company for not feeling people's pain or is McClatchy to blame for being too nice ("family friendly" no-layoffs policy)?

  4. Howard, you have indeed been expressing the facts as you know them (whether you are believed or supported is a much different issue) but the problem is, you are -- or, rather, were -- pretty much the only one in McClatchy doing this.

    The downside of this, of course, is that because you were the only outside "face" of McClatchy, you became a convenient target as well. Frank wasn't mentioned in that N&O bit. Chris wasn't. Nor Lynn. Only Howard. That's unfortunate.

    The thing is we really do need "intellectual honesty, critical thinking and plain speaking" and, really, we expect it. Not just from you, Howard, but from every executive and manager in McClatchy.

    Instead we have to rely on tidbits gleaned from rumors on the web or other sources (like Moody's) or trying to read the tea leaves left behind from the somewhat random "direction" set by the plodding steps of by McClatchy management.

    If we're extremely lucky we can jockey for the privilege of throwing a leading question or two at a Corporate VP during a newsroom whistle-stop, treating them like the very politicians we cover.

    And this makes me profoundly sad.

  5. Howard Weaver writes: “...those who argue that McClatchy took over a thriving N&O and greedily ran it into the ground are misinformed, and perpetuating that myth hurts the cause of reconstruction.”

    He says he’s offering facts to puncture the myths. Um, what facts?

    I was a senior editor in Raleigh when McClatchy bought the News & Observer in '95. The N&O then had revenue of about $125m a year, & pre-tax profit of about $20m. We had a newsroom of 250, in a town growing as fast as any in the country. McClatchy paid $373 million for the N&O — a nearly 20-year payback period.

    Today, McClatchy is saturated in debt to the point of near paralysis — because it went on a purchasing spree that included buying Knight Ridder (three times McClatchy’s size) for too much money at precisely the wrong moment.

    The N&O now has a newsroom half its previous size. The N&O itself remains profitable as a stand-alone unit. The cuts — of incredible talent, of sections and features, in a fast-growing town filled with readers — are being made to pay down the Sisyphean debt Gary Pruitt&Co. assumed, through what was clearly arrogance and imprudence.

    The N&O has at this point gained nothing from its absorption by McClatchy — or from McClatchy's purchase of Knight Ridder. Indeed, the N&O, its staff, readers and community clearly suffer from McClatchy having bought Knight Ridder. Smaller paper, smaller staff, less ability to cover the community. The anger in Raleigh comes from this: there is a direct line from McClatchy's purchase of the N&O to the withering of an energetic newspaper.

    So I’d love some facts about what the financial state of the paper was at the time of purchase — the $400m price looks a bit silly with these facts; if the paper was in bad shape, the overpayment was greater, as was the misjudgment. And I’d love some facts about how McClatchy ownership has benefited the people who work at the N&O and the people who read it.

    Charles Fishman
    former N&O Deputy ME

  6. Thank you, Charles, for this thoughtful and straightforward note. I appreciate that you are working to engage constructively – and, not least, that you sign your name.

    Your analysis suffers throughout from one fatal error: comparing 1995 or any other previous year to the current economic cataclysm. (Talking about what McClatchy paid for the N&O 14 years ago is irrelevant. For the record, its performance improved dramatically after the purchase). My point in citing Fortune 500 declines, bankruptcies of name brand companies like Lehman or Merrill, etc. is to demonstrate that failure to foresee unprecedented events is hardly the result of “arrogance and imprudence.”

    Basically nobody foresaw that the economy would fall off a cliff as it has. If, like most of us, your 401(k) today is worth a fraction of its earlier value, does that make you stupid or imprudent, arrogant or malicious? Do your kids curse you for squandering their inheritance?

    I hope not; that would be bad analysis. Yours is, too.

    News companies with no comparable debt have done equally dramatic things to their newsrooms: Atlanta, Dallas, St. Louis, Portland and scores of others, large and small. When you build an expense and revenue model based on 150 years of experience, you don’t anticipate that it will change so dramatically virtually overnight. McClatchy’s debt contingency plans prudently included a wide range of possible futures; neither the company nor Warren Buffett nor anyone else I know of planned for what actually happened.

    Is the KR debt burden to McClatchy? Of course it is. Knowing what I know now, I’d have moved my 401(k) out of stocks sooner, too. What I have to do instead is manage my spending so I don’t lose the house. Failure to do that would be imprudent, indeed.

  7. Howard W. —

    I offer the information from 1995 because you have said several times — without providing any data — that the News & Observer was in poor or failing financial shape, and was basically rescued by McClatchy. That, I think, is simply not true. Feel free to correct me. (Improving the performance of the paper after purchasing it doesn’t mean it wasn’t in good shape to begin with. I’d hope there would be some efficiencies and insights from a big chain.)

    My central analysis is this: While McClatchy couldn’t foresee the downturn, but the company also didn’t need to buy Knight Ridder. That was a leap, an act of expansion, even an act of corporate or personal ego, that had nothing to do with either good management of the newspapers it then owned, or of the financial health of McClatchy.

    At the very least the purchse was a risk. At worst, it was a very poorly calculated risk. The fundamentals of the newspaper business were deteriorating quickly in 2006; the whole reason Knight Ridder was for sale argued precisely against buying it.

    Gary Pruitt and the McClatchy board didn’t need to buy Knight Ridder, they wanted to. Many other prudent business people said, No thanks.

    One other bit of analysis is also indisputable: If McClatchy had not bought Knight Ridder, every single paper it owned before the merger would be in better financial and journalistic shape now than they are. The interest on $2 billion in debt is sucking the profit and the life out of MNI’s papers — much faster than otherwise.

    Whatever amount the pre-merger papers have to send to Sacramento to pay the interest on that debt — that’s money for which those papers get literally nothing, and money that wouldn’t have been needed in Sacramento without the merger. (Very conservatively, that interest tariff comes to $2 million a week.)

    That’s my central point: The purchase of Knight Ridder was a calculated risk, but it wasn’t very carefully or thoughtfully calculated; it was an impulse purchase. The purchase hasn’t just been foolish, it’s been devastating — not just to the Knight Ridder papers like the Miami Herald that MNI acquired, but to the hardy papers MNI owned before the merger. And while the economy would have slapped those papers very hard anyway, the burden of the unnecessary debt is hollowing them out.

    The strategy MNI has followed does not, in fact, represent thoughtful, responsible stewardship of those papers, either as community institutions or as profit-making enterprises.

    /C. Fishman

  8. I'm writing on my former boss' Web site in any capacity a reader would care to ascribe: former Washington bureau chief for McClatchy, former ME of a newspaper much like the N&O (DM Register), now researching new media at USC J-school.

    I've long thought that, pound for pound, the Raleigh News & Observer has been the nation's finest newspaper. Its understanding of community, its talent, its fierce aspiration, its wonderful history have been Exhibit A for what journalism can be. So the downsizing that's happening at the N&O is dismaying. And demoralizing.

    I can't help agreeing, too, that the $2 billion debt burden McClatchy carries from the Knight Ridder purchase is making the situation more difficult.

    But is McClatchy, and/or McClatchy's purchase of Knight Ridder, the main problem? Had the N&O remained in the Daniels family, or if the New York Times or Tribune or somebody else had bought it, would we be seeing a significantly different scenario unfold? No. Most or all of what has happened would still be happening. A massive tsunami has hit the N&O, just as it's hit mid-to-large newspapers everywhere. Its name isn't McClatchy.

  9. Allow me to offer anecdotal evidence about the N&O's health in the years leading up to its sale.

    In the early 1990s, the Daniels family offered N&O employees interest-free loans to buy a home computer. You simply filled out a form and provided an invoice for the computer you wanted. Each payment would be deducted from your paycheck.

    It was a nice benefit in a time when a typical PC cost $2,000 or more, and it played into the paper's belief at the time that news would be moving to a digital arena. (What a concept!)

    When McClatchy bought the paper, the loan program went away. That's fine.

    But here's the point: If the N&O was in dire straits when it was bought, why was the paper's ownership offering interest-free loans to employees? That's a luxury, not a necessity, and hardly a sign of an organization in distress.

  10. Andy: Perhaps N&O was in dire straits *because* it did strange things like that? (I'm sure that program wasn't huge, but I mean operations overall).

    It's certainly no demonstration of economic acuity.

  11. Howard W., you keep insinuating, hinting and implying that the N&O was not in good financial shape when McClatchy purchased it for $373 million. You suggest it again in your reply to Andy Bechtel. You've said as much several times.

    My understanding, having discussed actual numbers back when I was at the paper, is that the paper was very healthy. Frank Daniels Jr. has weighed in this week saying the same thing, without specifics. Another poster, on, also says the finanicials were very strong.

    Do you know something about the N&O's financial performance circa 1995 that you aren't saying, or can't say? Or are you just speculating? Because except for your suggestions, the only data says the paper was strong, even vibrant. And there is no evidence of financial distress until the economic downturn and the Knight Ridder purchase.

    /C. Fishman

    Charles Fishman

  12. Charles: I have not insinuated, hinted or implied anything about the N&O's financial stability prior to purchase. I said it directly, based on numerous contemporaneous and subsequent conversations in which it was widely understood to be the case. I continue to believe it to be true.

    I realize I am emmbarking on a hopeless task in substantiating my claim beyond that, however.

    I'm constrained in at least three ways from *proving* anything. 1) I was a corporate officer of McC from 2001-2008 and as such bound by corporate and SEC requirements not to divulge certain financial information; 2) Beyond that restriction,I am no longer at the company and don't have access to other specific data; 3) Whatever financial records of prior performance before purchase are likely gone or uclocatable in a basement somewhere by now.

    There are other ways to demonstrate your rosy scenario of the past is wrong. You certainly are incorrect to assert "there is no evidence of financial distress until the economic downturn and the Knight Ridder purchase." I know the N&O cash flow declined by tens of millions of dollars well before that time; it was amongst the biggest percentage declines in the company. This certainly WAS NOT the fault of the newsroom or even the paper itself, but more an artifact of the market which, while growing, saw significant advertising declines in key categories based on competition and other factors. Surely this could be discovered by impartial reporting gathered from the N&O's own staff or alums.

    I can't imagine you had access to actual P&L numbers while you were an editor there; I don't know of any assistant editors who ever were. Based on direct personal experience, I also do not credit the accuracy of whatever Gearino asserts, and would caution against doing so; I have no faith at all he has any actual evidence. Frank would surely know, but I don't know what he said, or in what context.

    This is all I can say about it and so I'll stop saying it now, with this final cautionary note: clinging to the illusion of prior greatness followed by singular failure truly is both wrong and counterproductive.

  13. Anonymous4:18 PM

    "... Frank would surely know, but I don't know what he said, or in what context."
    What Frank said:

  14. Anonymous10:07 PM

    Howard, a few things.

    I always liked you when you came around to the newsroom. You seemed liked a smart, standup guy, so against my better judgement I'm going to give you the benefit of the doubt that you have confused the N&O with one of the many other newspapers in the chain.

    But whether it's a memory problem or not, this constant back and forth about the N&O being "in trouble" or highly profitable is tiresome and for your own good you should drop it. Best case you boys pumped it from something like 17 percent to 23 percent profit margin by visionary moves like charging employees for parking. Fishman's numbers are accurate. Everyone in the building at the time the paper was sold has been horse-laughing at your assertions from the first time you made them in that note to Dennis Rogers that, frankly, answered none of his respectfully and elegantly posed questions and dismissed him as a cranky old has-been.

    Dennis is a lot of things, but not those. One of the things he became after that exchange: a man with more character than you will ever be able to salvage.

    Since you didn't answer any of his questions, not one, how about answering just a few for me: Can you give me an estimate within --, oh, I'll make it easy on you -- 50 percent, of the profits that jet generated for us? It cost more than 10 times as much as a small, basic jet and surely was purchased to generate, at some accounting remove, large profits.
    Or maybe not, since I guess the company would have kept it if it were generating profits, right?

    Secondly, as a former Wobbly, did that aircraft, or better yet, the people who have lost their jobs at McClatchy, even faintly trouble your soul?

    What happened to you, man?

    I read this blog and I see a guy who lays himself out as a visionary leader. But I see no evidence of vision in the way the company was run in your time.
    The management was competent in good times, yes. I think it was Billy Shakespeare who said that when waters are calm all ships alike showed mastership in floating.

    But here is something they will teach you in, oh, the first five minutes of business school: the most important goal when running an organization is not profits, it is the long-term survival of the organization. If your organization survives, profits can of course follow.

    The basic methods of ensuring that survival are diversification and R&D.
    Diversifying geographically -- which is what you guys did -- is so mild a move as to barely be claimable as diversification. The level of spending on R&D -- which should have been going into a new business model, specifically -- was clearly inadequate.

    Rogers put all that better than I, noting that when you guys had a revenue stream healthy enough to make risky experiments on new business models you shipped too much of it, on evidence, to the stockholders to keep them cheerful and supportive of Gary, yourself and the rest of the management team.
    Quite a party there for awhile, wasn't it?

    The economy is a convenient excuse. Several of the MNI newspapers are still profitable, if you removed the debt payments for purchasing KR. You'd think there wouldn't be layoffs at many of the papers without that debt.

    At one point, I thought the KR mistake, despite its shocking scope, was an aberration, and therefore forgiveable, though in the event it has turned out to mean that Gary has ceded the management of the company to a mathematical formula, that debt ratio. But the company has doubled down on that error by forcing management at all the newspapers to follow the guild-based setup wherein the most recent hires are the first fired. At a time when the company is shrinking so much, the quality of each remaining employee becomes exponentially more important, yet MNI won't let the managers can't keep their best. This is just blind "management."
    I mean, is anyone at corporate doing a single thing to keep up the quality of the newspapers? There seems to be more time spent selecting the next Rolling Stones song to quote in a speech than on preserving the foundation of the company.

    Currently, your boy Gary -- and you have become his de facto mouthpiece -- is apparently interested in the health of the company only as a byproduct of his interest in preserving his own job. He's demonstrated that he's not the man for this post in hard times, and at this point needs to stand aside before he forces another group of several hundred families into misery in a vain effort to keep the company out of bankruptcy so he can keep that job. Which is where we appear to be headed, based on today's quarterlies.

    As to you, I'm going to be more polite than some of the resident idiots and failed KKK applicants over on McClatchy Watch. I still feel that you're a good man, and a terrific writer and thinker, just not on the topic of the future of newspapers. You should turn your skills to something else, like writing on social issues, where maybe you can do some good and, in a sense maybe, undo some of the terrible things that have happened to good people because of your support for bad decisions.
    Let it go, man.

    And know this, if you dismiss this as bitterness and unhelpful and dodge the questions, its a mistake, because that's all folks expect from you these days.

  15. Anonymous12:12 PM

    What we need right now is some hope. Employees who are enduring the turmoil need a reason to stick around, like maybe the execs could promise to restore some of the pay cuts if we reach certain profit targets ... just an idea ...

  16. Anonymous8:03 AM

    Howard, I truly love your comment on Ms. Morgan's article (link posted above). Berating her for not speaking with you. This is what has become typical of your responses when people give FACTS and hold your feet to the fire. You babble on about how bad a position the N&O was financially in 1995, yet you weren't even at corporate then. And as an employee of the N&O for over two decades I would surely like to know just how our paper got "better" after the acquisition. And one final note to YOU: "clinging to the illusion of prior greatness" I think maybe YOU should repeat that about 1000 times and take your own advice....because YOU are the one who is clinging to your own "prior greatness", which in itself is quite laughable.