THE Science OF Cutbacks

Folio: The Magazine for Magazine Management, July, 2001 by Sarah Gonser, Jillian S. Ambroz

WITH THE ECONOMY REFUSING TO PERK UP, PUBLISHERS ARE TRIMMING EVERYTHING FROM STAFF TO SPECIAL EVENTS. BUT EXCISING FAT WITHOUT CUTTING INTO MUSCLE CAN BE TRICKY. HERE'S HOW TO IMPROVE THE BOTTOM LINE WITHOUT HURTING THE LONG-TERM HEALTH OF YOUR MAGAZINE.

The year 2001 has not been kind to the publishing industry. A steep ad-page drop-off, increased postal rates and a brutal circulation environment have conspired to bring back an ugly reality that magazine publishers have been able to avoid for nearly a decade--significant cutbacks.

In some ways, this downturn has been tougher for publishers and their employees than the recession of the early nineties. Not only are magazines coming off the best year ever for advertising, making the fall that much more precipitous, but more publishers are public now, subservient to the short-term demands of Wall Street. The combination has meant widespread layoffs, magazine closings and divestitures, and an overall battening down of the hatches. With no relief in sight and 2002 budget season upon us, there may be even more scaling back in the future.

Cutbacks may be an unfortunate cost of doing business, but done haphazardly they can cause irreparable harm to a company's future. FOLIO: talked with 20 publishing executives, consultants and mid-level employees who have gone through the cutback drill to discover the smartest theories to making painful decisions.

THEORY NUMBER 1

Decentralize, Decentralize, Decentralize

When publishers looked to slash costs in the dark days of the early nineties, they usually operated in classic command-and-control mode, issuing stark, across-the-board edicts about who and what would get the axe. Today, publishers from Time Inc. to Hammock Publishing are pushing that decision down to individual business-unit heads, who are given a target but then handed the freedom to determine how best to achieve those savings.

Whether businesses in the past just weren't set up in a way that allowed this sort of delegation of responsibility, or CEOs lacked the confidence in their management teams, unilateral adjustments now seem a thing of the past. Today, making smart cutbacks involves weighing a product's competitive environment, marketplace pressures, market size and more--all elements that division heads, not the CEO, COO or CFO, are more familiar with.

"There's a time to fuel the business and there are times when you can cut back," says Ehlert Publishing president Stephen Hedlund. "Certain of our markets are thriving, and to make them part of an across-the-board 10 percent employee cut, or 10 percent editorial cut, just wouldn't be Smart business."

THEORY NUMBER 2

Cut Perks Before People ...

Do away with extravagances like the office masseuse before chopping employees from the payroll. The Industry Standard, which has gone through three official rounds of layoffs, didn't follow this piece of advice at first, and ended up infuriating the fired and ratcheting up the guilt levels of the survivors. During the first wave of firings, one staffer, her muscles being treated to a desk-side Swedish massage, looked up to see her co-workers stuffing personal belongings into cardboard boxes and shooting her baleful looks before being escorted out of the building. It made a difficult time that much harder. "We tried to tell them that we'd be okay without the perks, once we saw how they were choosing to make the cuts," she says.

In an ironic twist, the staffer has since been laid off, but massage time is over. And even though she was fired, the former employee says the company's management team is "learning how to handle things better." The key, she says, has been clear explanations of the reasoning behind its decisions. As a result, current and past employees are less angry and more willing to accept other cutbacks.

THEORY NUMBER 3

... But Don't Eliminate All Morale-Boosting Perks

There's a fine line between saving money by cutting perks and the importance of showing employees gratitude for plugging away with increased workloads. So, while The Industry Standard has now eliminated both the office massage and the snack perks, which annually cost somewhere in the low six figures, according to COO Ann-Marie McGowan, it has retained employee health club refunds, day care and parking, even though these cost more than the perks it chose to cut. "We kept the ones that matter to our employees," says McGowan.

At Ehlert Publishing, "While we're keeping things tight, we still try to demonstrate that our employees are of good value to us," says president Hedlund. "So, for example, we're not cutting back on company picnics, summer hours, baseball tickets and small performance rewards--the lower out-of-pocket perks that we feel are important to maintain as we continue to ask more of our employees." Hedlund estimates that retaining these perks cost his company between $10,000 and $15,000 a year.

CMP's editorial excellence awards and its holiday parties traditionally involved grand dinners at posh locations such as the Vanderbilt dance hall in Melville, New York, and cost the company up around $200,000 a pop, including the cost of flying employees in from satellite offices. Today, the company has traded them in for toned-down, in-house events, and spends 80 percent less. "The employees still get the awards and the compensations," says Leah Landro, CMP's senior vice president for human resources and communications. "But they understand that it's more about recognition than the event. They know that before we hit people, we're going to try to maintain costs everywhere else."