This past August Star Tribune editor Tim McGuire e-mailed a two-page "belt-tightening memo" to employees in the paper's newsroom. Anonymous sources promptly faxed a printout of it to City Pages. And we just couldn't help but print the thing (Off Beat, August 25, 1999). Not because it said that the Strib's management was looking to cut costs at the same time as its corporate parent McClatchy Company was reporting record second-quarter earnings of $22 million; rather, it was the provincial tone of McGuire's note that proved too alluring to resist. (When we first passed the memo around our offices, more than one editor wondered aloud if it might be a hoax.) "Effective right now, we will scrutinize hiring carefully. We will cut down on non-news travel. We will be judicious in our use of newshole," the missive began. "We will go very light on catering (no more cookies)...."
More than two months have passed since then, and the belt-tightener has yet to be forgotten; especially by the paper's publisher, John Schueler, who--according to two off-the-record sources at the Strib--was not amused by McGuire's folksy prose. Schueler denies being upset with McGuire, but in an informal meeting with staff on November 2, Schueler did refer to the now legendary cookie memo no less than three times. "I'm not making an edict that cookies are to be eliminated. That's not my claim to fame," he quipped to a roomful of chuckling employees before sounding a more serious note. "I rang the bell in June and nothing happened. I rang the bell in July. Nothing happened. I blew the foghorn in August. Nothing happened. I blew the siren in September. Yet still, we were running a million dollars over budget."
Now, with less than two months to go before the close of McClatchy's fiscal year, Schueler insists it is still possible for the Star Tribune to make up a two percent shortfall in projected revenue by trimming the fat, an all-for-one effort likely to include everything from stalling hires to whittling down the money spent on travel, conferences, and training seminars. "Discretionary spending means expenses you have control over," Schueler said by phone last week from his office in downtown Minneapolis. "I definitely think we have control over a lot of expenses that don't impact our customers."
But skeptics in the newsroom--and there are many--don't believe there's time to meet the company's ambitious projections by year's end, and they worry that before long readers will begin to notice the negative impact of an increasingly frugal management. In short, one veteran reporter observes, for the first time since November 1997, when McClatchy bought the Minneapolis daily from Cowles Media Company for $1.4 billion, the Sacramento-based chain is "flexing its corporate muscle."
Mike Meyers, an economics reporter at the paper who also serves as the secretary-treasurer for the paper's chapter of the Newspaper Guild, says his colleagues are "confused" because McClatchy is clamping down on their flagship paper during a period of robust growth. What's more, it has not yet been made clear to staffers what "discretionary" items in the budget are being flatlined or eliminated altogether; there are already rumblings, for example, that when city hall reporter Kevin Diaz leaves to take a job in Washington, D.C., next week, management won't have moved quickly enough to fill his beat with a full-time hire. "We want to make sure the newsroom has the manpower and the tools to do the job asked of us," Meyers says. "We have a lot of questions about the facts, including how many openings are now dark and how many will be filled by whom and when. The problem we've had so far is that we're communicating by rumor. We asked the company more than two weeks ago for the accounting and they haven't gotten back to us."
Schueler insists there is no hiring freeze afoot. "We have asked management to look at positions that are open and fill those that are necessary," he says. "If there are current positions we can hold on to for a while, we will. Is it permanent? No, it's not necessarily permanent."
Eternity aside, the immediate feeling around the Strib is of "extreme tightness," one editor observes: "Money is in the back of everyone's head. There's a whole different ethic. Before, whenever we wanted to do something, there were never any questions asked. You just went ahead and did it. Now you don't know if you should be putting in for expenses. Enterprise projects are being discouraged. Editors are lamenting the number of trips denied to their respective desks, including locations as exotic as Fargo and Sioux Falls. For those people who are buying McClatchy stock, of course, that's happy news."
Regardless of what happens over the next two months, those stockholders are likely to remain happy--after all, the company's fortunes have never been better, which is one reason staffers believe McClatchy to be overreacting to the Strib's shortcomings, and Schueler premature in his austerity measures. In mid-October the McClatchy Company reported record third-quarter earnings of $20.4 million, up a whopping 45.2 percent from the same period the previous year. And revenues jumped to $269.3 million owing to increases in both advertising sales and circulation throughout the chain. "Our third quarter was very successful, reflecting records across the board--in revenues, operating cash flow, operating income, and earnings," McClatchy president and CEO Gary Pruitt noted in a company press release.
The Star Tribune's growth year-to-date is somewhere around four percent, according to Schueler. Not too shabby, considering that the paper invested nearly $12 million this year in direct marketing, new media, core product roll-outs such as Free Time (a weekly entertainment tabloid), and expanded sports, business, and food sections. In the six-month period ending September 20, the paper also increased daily circulation by 2.5 percent and its Sunday circulation by 0.4 percent (ranking it 14th and 12th respectively among U.S. metropolitan newspapers). Add to that the Strib's rating as the 17th best newspaper in the nation, according to a poll of editors conducted by the Columbia Journalism Review, and it would seem McClatchy's flagship is sailing lucrative waters.
Last fall, though, managers at the Star Tribune predicted a seven percent increase in growth for 1999, well above the rate for the overall Minnesota economy. At the time, Schueler says, he didn't believe it to be an overly optimistic goal, especially in light of plans for a big push on the direct-marketing front. But then a number of the paper's major advertisers pulled up stakes. For example, Montgomery Ward & Co. filed for bankruptcy, Holiday Foods and Computer City were both sold to other companies. What's more, Target cut down on their ad buys, and Mervyn's department store decided to spend more on promotions in California and cut back business with the Strib by 20 percent. As a result the paper had a slowdown in advertising revenue for the first time since 1992.
When Cowles Media (essentially a family-owned business) owned the daily, budget deficits and expense overruns tended to be overlooked, especially if they occurred in prosperous times. Some in the newsroom guess that's why managers such as McGuire were slow to react to Schueler's admonitions last spring. But McClatchy is a publicly traded chain set on meeting projections to the decimal point, both to appease stock analysts and attract investors. If Schueler can't find a way to enhance the paper's performance within the next two months, McClatchy isn't likely to cut the publisher or his staff much slack. In practical terms such a scenario means the rank and file won't receive "success sharing" checks (which averaged about $400 per full-time employee last year), and executives, including Schueler, can look forward to a lump of coal instead of a holiday bonus in their stockings.
"The bottom line is that we are performing significantly below others in the industry and well below the level we committed to achieve, and that's what we're trying to correct by reducing discretionary expenses," the publisher wrote to his staff on November 9. "The single best way to help this effort is to do your job as efficiently and effectively as you possibly can." There was no mention of cookies in Schueler's memo. And, in the short run at least, there seems to be no danger of running low on treats. Two weeks ago a wiseacre at WCCO-TV who'd gotten wind of McGuire's gaffe did Strib staffers a good turn: He sent over two boxes of sugar cookies for them to share during an afternoon strategy session. Word is they ate every crumb.
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