Zell The Manager

This year's management theory

The back and forth between another newly dismissed Los Angeles Times editor who refused to carry out another round of budget cuts and the publisher who ordered the cuts has a familiar ring.

The details of the argument aren’t the issue. There are no easy solutions, but our sympathies must lie with outgoing editor James E. O’Shea, quoted here in The Wall Street Journal, who joins Dean Baquet and John Carroll as editors who pushed back against the Tribune Co.’s unimaginative culture of retreat and retrenchment, then departed

“We need to change course and try something different because we’ve been cutting and cutting little by little over the last five years, and it hasn’t done a damn bit of good,” Mr. O’Shea said. “This paper at one time had 1,190 full-time employees. Now it is in the 800s. It has cut 6,000 pages of newsprint on the paper over the last several years.”

Publisher David Hiller here dons the mantle of adulthood.

It seemed to Mr. Hiller that Mr. O’Shea was “unable to make the hard choices” by asking that the newsroom budget increase to about $123 million from $120 million. “They were proposing an increase in a year when, like all newspapers, revenue was down dramatically,” the publisher said in an interview yesterday. “The idea that a newsroom budget would be increased was regrettably totally unrealistic.”

We can only note, as we have in the past, that the paper’s new owner, Sam Zell, has yet to show that he has any new and creative answers to the problem of how to increase a newspaper’s revenue. What he has is a deal that gives him a lot of upside with a relatively small investment.

Not particularly reassuring, I find, is the fact that Zell has apparently adopted a decentralized, hands-off approach to running the media company.

As he takes control of the company, Mr. Zell is decentralizing it and giving more autonomy to each of the units to operate as they see fit, a move that gave Mr. Hiller more latitude in Los Angeles. Mr. Hiller says he didn’t consult Mr. Zell about Mr. O’Shea’s departure but that he told him about the decision.

“I’ve said loud and clear that I am returning control of our businesses to the people who run them. That means David Hiller has my full support. He carries direct responsibility for the staffing and financial success of the L.A. Times,” Mr. Zell wrote in an email to employees Monday morning.

This is precisely the opposite of the style he employed in running (poorly, it should be noted) real estate flagship, Equity Office Properties Trust, a publicly traded, office-building owner. Under Zell, EOP tried various revenue-enhancement and other strategies, to no discernible effect. As I said back in March:

EOP’s command-and-control model—running from Chicago an empire that at one point stretched from Anchorage to Miami—left the company a step behind. Never was the company so out of touch as when it announced a $7 billion deal to buy a forest of buildings in Silicon Valley—the largest public real estate deal to that point—in February 2001, just as the tech collapse was gaining momentum. The so-called “Spieker deal” became a punch line in northern California real estate circles.

And then things just got worse and worse. EOP, the so-called blue chip of REITs, endured severe turnover in senior management, reaching clown-car proportions with the awkward 2002 exit of CEO Tim Callahan and two senior officials, forcing Zell himself to step in for a time. An exhaustive nationwide search for a new CEO ended in-house with the appointment of Zell’s protégé.

While Zell’s about-face is good in the sense that his centralized style didn’t work at his former flagship—in an industry he knew something about—that doesn’t mean this year’s style will work either.

Zell finally sold EOP just before the credit bubble burst, to the delight and relief of his investors.

But Tribune doesn’t need deal-making or financial engineering; it needs creative management.

Cost-cutting by former TribCo managers like Hiller, to the point of provoking yet another leadership crisis at a marquee news property, isn’t that.

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Dean Starkman Dean Starkman runs The Audit, CJR's business section, and is the author of The Watchdog That Didn't Bark: The Financial Crisis and the Disappearance of Investigative Journalism (Columbia University Press, January 2014). Follow Dean on Twitter: @deanstarkman.