When the dot-com bubble burst early in this decade, several online news sites also felt the pinch.
Layoffs at newspaper and magazine Web operations became common. In some cases, staff members about to feel the ax were asked to sign nondisparagement clauses to prevent laid-off employees from making derogatory comments about the company. Meanwhile, uncertainty still plagues online operations as they chase elusive profitability status. Managers must make decisions about online profit margins. Newspapers of every size have struggled with declining ad revenues and readership.
Most continue to seek ways to make online publications profit centers. But if advertisers don’t support an online publication, is downsizing the only answer?
At what point should seeking outside consulting be considered? Can staff be treated fairly when downsizing is necessary?
This case asks Media Leaders to evaluate a management decision to downsize the online operation and the resulting effects on staff.
THE CASE
The Capital Area Times-Express was late jumping into its online venture but entered the field with aplomb. The Times-Express initially hired five new people for the online edition, which posted stories from the print edition. John Collins, the weekend editor for the Times-Express, volunteered to lead the newspaper’s online edition. With more than 10 years of experience at the Times-Express, Collins added an air of professionalism to the start-up venture.
Even though the community held a large African-American population, Collins was among the few people of color working in the upper echelons of management.
As the Web site developed, staffing increased. The operations of the online version of the Times-Express moved to a separate part of the newsroom. It was afforded a degree of autonomy by upper management. Collins hired five younger journalists with backgrounds in Web reporting and Web design. Two reporters moved from the print edition of the Times-Express, and the others were hired away from jobs in smaller markets. Occasionally, the Web team would develop stories. Most times the online journalists would post articles also appearing in the print edition. Unencumbered by the constraints of space, the electronic edition of the paper often featured in-depth reporting on special topics. The Web journalists supplemented existing print stories with postings with more research and additional interviews.
The Web team also created ExpressMail, a bulletin of news tidbits e-mailed to subscribers daily. The subscription rate for ExpressMail quickly outpaced the newspaper’s subscription rate.
The service proved extremely popular with readers and helped boost traditional subscriptions for the newspaper. ExpressMail even won a local media association award for its coverage of breaking news.
While the online edition gained the respect of readers, advertisers remained wary of spending money on it. Not convinced that page views translated into increased sales, many advertisers used the print edition exclusively.
Most of the advertisers for the online edition were high volume print advertisers that received discounts for ad space online. Revenues never exceeded costs at the online venture.
In its first year, the Web edition lost more than $1 million. Losses in subsequent years forced management to reconsider its efforts on the Web.
New management brought new scrutiny of the Web site.
Joseph Alcado, the new publisher of the paper, had a different vision for the Web site. Alcado wanted the Web site to cater to the needs of existing customers instead of providing free news for nonsubscribers. Staff would be released as the new Web site returned to the earlier version — with headlines and news briefs based on stories appearing in the newspaper. The Web site would add features to facilitate the ordering of subscriptions, sales of newspaper merchandise and sales of reprints. The managing editor of the newspaper would resume management of the Web site.
Alcado called two meetings to discuss the situation.
• During one meeting, those employees being released were apprised of the situation.
“We are sorry to have to let you go,” said Gary Rossi, the in-house lawyer for the newspaper. “The paper is prepared to soften the blow of this downsizing. If you sign a confidentiality agreement, the paper will pay you an additional sum that will help offset your lost wages. If you refuse to sign this agreement, the paper will only pay you for any unused vacation time in accordance with state and federal laws.” Alcado wanted confidentiality for two reasons. First, the separation package for Web employees was more lucrative than the usual severance payment awarded to longtime employees. Second, Alcado wanted to protect the image of the newspaper. He did not want the firings to become a news story itself. Alcado hoped that the confidentiality agreement would prevent terminated staffers from bad-mouthing the paper. Every released staffer signed the confidentiality agreement.
• In the other meeting, management announced the layoffs and discussed the outlook for the future. Alcado noted that regular staffers would be required to take on some extra responsibilities to help maintain the Web site.
Occasionally, reporters also would have to submit online versions of stories. The newspaper’s use of word processing technology made the transition almost perfunctory. In the event of a problem, the reporter would have to work with the remaining Web site staff to resolve the issue.
On a daily basis, no more than 10 reporters would be burdened with the extra duty of posting their stories.
THE RESPONSES
How the leaders handled the case
1. While the online version of the Times- Express was not profitable, other Webbased publications have been successful. Should management hire outside consultants to examine the situation before scrapping the Web site in its current form? Did Alcado pull the plug too early?
Bruce Tomaso, religion page editor, Dallas Morning News:
I don’t suppose there’s any problem in seeking the opinion of outside consultants. The good ones often bring a fresh perspective and an ability to frame questions that those of us on the inside don’t think to ask. I’m not one of those journalists who think that modern business methods — the use of consultants, of focus groups, of marketing and research — have no place in a newsroom. I guess I used to be one of those. That was before I had a house payment, a 401(k) and a kid who’s going to off to college some day.
In this case, though, as a practical matter, I question the wisdom of hiring someone to come in and evaluate a venture that’s already piling up losses. Top management at the Times-Express, I presume, has a finite amount of money to spend on consultants — as on everything else. Is this the best expenditure of those dollars? Or is it throwing good money after bad? It’s not possible to say from the facts presented whether Alcado pulled the plug too early. Was there any indication that the losses were going to reverse themselves? Or were they getting worse each year? How do the actual losses compare with projected losses? Losing $1 million a year could actually be good news, if you thought the Web venture was going to lose $5 million. What percentage of this paper’s total cash flow does $1 million represent? A behemoth corporation (or the Pentagon) could lose that much every year on filched office supplies and never miss it. For a medium-sized newspaper, it could easily represent the difference between loss and profitability.
Bob Priddy, news director,Missourinet:
Flip a coin. If this thing is a major money loser, why throw good money after bad? One would hope there has been some internal discussion and assessment, not just an impulsive decision to drop the hatchet. The alternative might be to drop back to the basic service to the point that it is no longer gushing financial blood, and then seek some professional advice to discuss how to shape the site so it is stronger. Alcado could add features to facilitate the ordering of subscriptions, etc., to the existing Web site. But there’s no guarantee such things would turn it into a profitable venture. So make the decision. Keep the Web site but take it back to simpler days.
Marcy McGinnis, senior vice president, CBS News:
Before deciding to downsize, Alcado would have benefited from outside expertise. The first thing he would have learned is that other revenue opportunities exist besides straight advertising from existing Times-Express clients. Alcado could have explored creating a subscription site with “newsstand” daily pricing as well as monthly or annual subscription rates. Additionally, he could have done more to attract a wider base of advertisers — particularly those who did not advertise with the paper. Instead, by seeking out only big-volume print clients, who viewed the site as “value added” rather than as a stand-alone business, Alcado effectively limited his revenue potential.
Also, using simple site registration tools, Alcado could have profiled his online-user base. It is likely that the user base online is a younger and more advertising- desirable audience than his current newspaper reader.
Kelly Dyer, general manager,NewsOk.com: I think Alcado pulled the plug too early. An outside consultant would be an option, but a small task force from several departments could probably do a worthwhile analysis. The task force should include members from the Web team — display, classified, circulation and promotion. Time spent on the phone talking to colleagues could produce a plethora of ideas. There is a strong likelihood that John Collins did not get the internal support required to run a successful Web operation. It takes cooperation from many departments to change a news and sales culture.
2. Should Collins be held responsible for the Web site’s economic failure? Should Alcado fire Collins or retain him in some capacity? Can Collins return to his position as weekend editor, even if it means displacing another editor? Should you reduce Collins’ salary? How does your decision affect morale at the newspaper?
Tomaso: Collins heads the online edition. I’m afraid that makes him responsible, whether he is or not. True, he can’t make advertisers spend money on the Web, and it does appear that he put out a quality product. But an inescapable part of being an effective manager is learning to operate within the fiscal constraints that business conditions impose. It doesn’t seem that Collins took many steps to hold down costs in the face of annual losses — hiring new staff, launching a new product (ExpressMail) and investing in the generation of original content.Who did he think was going to pay for all of that? Whether he should be fired or retained should depend solely on whether he can help the company in some other capacity. He doesn’t get his old job back — not if his replacement is doing it well. Collins surely realized this when he jumped to the new venture. Such moves don’t come with a money-back guarantee. And his present salary isn’t automatically portable. As far as staff morale is concerned, I’ve never known it to rise or fall on the basis of whether a particular editor got sacked, no matter his or her talents, or race.
Our happiness just isn’t all that important to the troops. The newsroom souls who think fondly of Collins — and I postulate that they’re comparatively few — will forget about him in a month, six for sure.
Priddy: Have you ever noticed that when the sales department fails to do its job, the news department gets it in the neck?
Heck, no, Collins should not be held “dismissed” responsible for the Web site’s economic failure. He shouldn’t take the entire fall. He had “some” autonomy, but he did not dig this hole all by himself. This is a corporate failure, not his alone, although the company might find it easier to designate a fall guy than to shoulder blame. Keep him.Make him weekend editor again? No. He provides continuity in the remaking of the site, and perhaps in its eventual rebirth after financial stability is achieved. Cut his salary? Why? He’s been the glue that held the unit together. He can be the glue that puts the new unit together. He can provide some stability during these shaky times, even if he is put under the newspaper’s managing editor — who probably already has a full plate and who will need a good right hand man to refocus the Web site.
Respecting Collins’ efforts will send a message to other staffers.
Want to fire somebody? Get rid of a salesman or two or three who haven’t done their jobs.
McGinnis: Collins’ level of responsibility for the site’s financial challenges depends on a number of matters.
Was Collins hired as both a “publisher” and an “editor in chief ”? Did the previous publisher make it clear that Collins would be accountable for business revenue? Was he given a timetable to achieve profitability at the site? Collins could be a useful and unique asset to the paper because he now has online and traditional print experience. So Alcado should review how to best tap into this knowledge. Collins should not displace the existing weekend editor if it means replacing a strong person who is working well in that position. That sends a bad message to the staff. In terms of compensation, if Collins is returning to a pure editorial position, his pay should be commensurate with other editors.
Dyer: To a point, Collins is responsible. But that also depends on the level of support he received internally. A news Web operation will not succeed without editorial and advertising support.
Fire Collins?
Absolutely not.
How can you penalize a long-standing employee who took a risk for the company? You always need innovative people who can explore new frontiers. If the spot is open and he chooses to return, that is fine. I would not replace the new editor. I would find a new role for Collins or continue to use him in some capacity on the Web site. It will still need supervision and innovation. I think reducing Collins’ salary sets a poor precedent for those willing to explore new avenues at the request of the newspaper. I think layoffs of any size cause turmoil.
A decision to abandon growth on the Web is also a step back in time. It may make the staff feel less competitive. They will know that they have one less boundary for competitors in their market.
3. How do you decide whom to fire? Five reporters must be terminated. The budget cannot continue to accommodate everyone. Should the online journalists be fired or should you fire newer hires in order to retain those longtime staffers that moved to the online project? Is there a duty to pay existing staffers more as they pick up the load from the online edition? If they are doing more work, should they be compensated for their efforts?
Tomaso: How about an eminently sensible answer (and one that’s way too practical for most newspapers, especially union shops, to heed): You fire the five reporters who are most expendable. You keep the ones whose work makes you look good every morning. It’s dopey to get rid of talented journalists working on the online side while retaining less talented people to do comparable jobs on the print side. There’s no “duty” to pay staffers more for feeding the Web. (Though, if you’re worried about morale, a few bucks more in the pay envelope will go a hell of a lot farther than keeping good old John Collins around.) Feeding the Web is part of a reporter’s job these days.
There’s almost no one in journalism who isn’t being asked to do more than he or she was asked to do 20 years ago. That’s a function of shrinking newsroom staffs across the board and across the country.
Priddy:If this is a union shop, this question might have a more clear-cut answer.
But I gather it’s an open shop. I favor retaining the best people and letting go the people with lesser talent and/or least experience. The practice might involve some adjustments in the newsroom as well as in the Web site. Pay staffers for picking up the load from the online edition? Given the more bare-bones product the online edition is to become, I’d say “no.”
It appears this will be little more than a cut-and-paste operation, which takes a few minutes, not hours, of re-editing and rewriting.
McGinnis: The most skilled reporters should remain at the paper. Reporters with Times-Express tenure should not be fired simply for having moved to the online venture. Likewise, new hires with significant promise should not be penalized because they started in the online newsroom. Additional compensation should be determined by how much work the staffers are taking on to service the site’s readers. Alcado should recognize the difference between simply posting print stories to the site and doing additional research for the online version of a story.
Dyer: Each position and person must be evaluated on his or her merit and talent.
Staffers are hired by a company to do a job. Jobs evolve. If they work overtime, pay overtime. Otherwise, how you need them to fill their 40 hours is up to management. If the job changes and they don’t like it, they can move on.
4. Who should get credit for writing online stories? If a Web editor makes phone calls and adds to a story, should he add his name to the byline? Must reporters collaborate, or can one take over and take credit? How do you acknowledge the input of a variety of journalists?
Tomaso: I can’t think of many things in a newsroom less worth worrying about than who gets credit for a story. Bylines are important only in those sweatshops where they’re counted as a means to determine pay. Since I don’t work in one of those, I don’t care. Neither do readers.
Priddy: The writer of the online story gets primary credit. If a Web editor fattens it up, the notation should go at the end of the story (“John — or Janet — Jones also contributed to this story.).
If a reporter’s ego is injured because a collaborator improves a story, the reporter can take his or her ego out the door, thus relieving some strain on the firing of people. Acknowledging the contributions (God, I hate the word “input”) isn’t all that hard.
McGinnis: If the story is republished from the newspaper verbatim, the print reporter should get full credit. If there is additional reporting by a Web staffer, the staffer should be credited for “additional reporting.” It should be clear to the online reader which developments are new to the story from the print edition. The story should be labeled “updated” if new elements are added. In order for Alcado to make the site a viable and somewhat stand-alone business, he should take every opportunity to point out to online readers and advertisers when the site’s version is offering more or updated information.
Lastly, one reason Collins should stay involved in the site is because he is one of the few managers with both traditional and online experience. He could work with the reporters to develop a structure and policy for story collaboration.
Dyer: Online journalism is no different than print. The lead writer takes the byline. Contributing writers can be added at the end of the story as such. If the story is co-authored, shared the byline.
5. As an editor, how do you cover the downsizing? Does the fact that it happened to the paper affect coverage of the story? Is Alcado wrong for trying to limit the amount of bad publicity the paper receives?
Tomaso: Of course, I would hope the paper would cover it like any other business story in the community. Of course, that never happens.We use our barrels of ink and the power they confer to cut special deals for ourselves all the time. The New York Times, to take but one example, runs stories about the appointment of new Times executives that it wouldn’t run about identical promotions at other papers. And everyone else does pretty much the same. That said, major changes in the look or content of a widely distributed consumer product like the online edition of the Times-Express seem worth noting in a news story. The changes also represent a strategic shift at the Times- Express, one has the clear potential to affect earnings. That’s certainly newsworthy to investors and potential investors, among others. On the other hand, a fiveworker “downsizing” is barely a blip. It wouldn’t make a brief if it happened at the semiconductor plant down the street. So I guess this strikes me overall as a story, but not a huge one.
Alcado may not be wrong to try to limit bad publicity, but he’s an idiot if he thinks it’ll work. These are journalists, after all. He has as much chance of keeping this quiet as I do of dating Heidi Klum.
Priddy: This is a problem of the newspaper’s own making. By overplaying the expansion of the Web site, it now must properly acknowledge that the effort hasn’t lived up to expectations. A brief story, perhaps by the newspaper ombudsman, will take care of things. After all, the Web site isn’t going away. It’s not a great tragedy. Is Alcado wrong to try to limit the amount of bad publicity? You bet. It’s a mistake to give a favorable severance package under this circumstance. Life happens. Projects fail. What makes these people more special than others who get laid off?
Nothing that I can see.
And the whole idea that a newspaper should be involved in censoring the news is repugnant. I can’t trust a newspaper that is dishonest about itself to be honest about others. This is not something that is going to turn the newspaper into The Capital Area Times-Titanic. Don’t act as if it is. Or better, stop acting as if it is.
McGinnis: This likely will be more of an important story to the online community than to the traditional print community. The paper should cover the story as it would any other business change. The reporter should not be someone involved in the online day-to-day business, and he or she should apply the same objectivity to this story as he or she does to any other coverage. Alcado’s concern about “bad publicity” is valid, but he looks as if he’s trying to hide something with the bribe of additional severance — using this tactic sets a dangerous precedent for the paper. If Alcado had legitimate cost reasons for downsizing the paper, he should not be fearful of badmouthing. He has more to hide by deciding to overpay in severance to ensure confidentiality than downsizing for legitimate financial reasons.
Dyer: Does the paper have any history of downsizing? This does not seem like a “newsworthy” layoff if it involves only a very small number of people. I’m not minimizing the impact to those individuals. Depending on the size of the city, if the paper covers layoffs of this size, then it should cover its own. Alcado is not wrong, but it can also be futile. I believe it is better to treat yourself as you would treat others. If you run the story yourself, then you can tell your version of the story.
Judith Sylvester is an associate professor, Renita Coleman an assistant professor and Craig Freeman an assistant professor at the Manship School of Mass Communication, Louisiana State University.
