Monday, June 13, 2011

Reengineering the enterprise to death: consolidating production is a good way to downsize revenue potential

A great way to drive yourself out of business is to downsize, as anyone who has seen the devastation of downsizing on the newspaper or B2B magazine business will tell you. For publishing executives who pursue such policies, the idea is that the cost savings created in one place will be made up with investments in another. Of course, everyone that is utter BS, even the executives themselves if they could stand to be honest for a minute. The real reason for downsizing is "I didn't know what else to do".

But while journalists decry the layoffs in the newsroom few talk about what happens when production under goes the knife. In the early nineties I left McGraw-Hill mainly because of the "reengineering" that took place under a new division president. The idea was to consolidate production at the division's dozen or so regional publications. I knew then, and know today, that the loss of locally based production ended any hopes of creating new locally run products.

In 1993, looking at the production resources we enjoyed in San Francisco, I launched a new magazine. No new staff was hired simply because we had the resources in place to create a new product. At the same time we launched custom publishing ventures such as producing and selling membership directories for regional trade associations. Although we no doubt had to bring on a few part timers to assist, generally we could do the work in house. The result was new revenue, new profitable products and real growth.


Reengineering the Corporation, a book that was required reading
in many publishing companies in the early '90's, and used
too often as an excuse to mindlessly cut staff sizes.

But management, dealing with the effects of the economic slowdown that followed the first Gulf War, wanted to "reengineer" the division. That was a hip new way of saying folks would be losing their jobs. Ultimately those positions were the source of some cost savings, but the custom publishing business was destroyed, and the monthly magazine soon went away, as well. One of the last things I did as publisher with McGraw-Hill was to paginate a huge membership directory myself on an Apple Performa 630, if you remember those. I did the work and handed it off to the production hub, located in Baton Rouge, Louisiana.

Two years ago Gannett announced that it would create page production hubs in Asbury Park, Des Moines, Nashville, Phoenix and Louisville. Each of these hubs would produce pages for other newspapers in their regions, and would result, of course, in positions being eliminated on the local level. The plan has yet to be fully implemented, but staffers know their will be layoffs to come.

One of my biggest complaints with the US newspaper business is its lack of new product development – newspapers are so geared to producing the daily product that it rarely is able to create innovative new products that will stop the flow of ad revenue from leaving the industry.

But downsizing production pretty much kills off the idea of growth. Sadly, many publishing executives have abandoned the very idea of growth. It is as if they have never had experience with the concept. For too many, growth is having one product produce five percent more revenue year over year, when real growth may require a bit more work than that – like launching a new product, for instance.

But, of course, "reengineering" is not limited to editorial and production as sales staffers will tell you. But then it is pretty easy to see the devastating effects shrinking sales staffs have had in the B2B magazine business as the slew of 28 page magazine issues can attest.