KEL537

ROBERT DEWAR

Northlands Ledger (B):

Bringing Customer Focus to a Newspaper

After his first day on the job in January 2008, Potter never again used his reserved parking
place. Three weeks after becoming the Northlands Ledger’s publisher, he visited Paulus Press
headquarters—owners of the Ledger and the Star—and spoke with the executive vice president in
charge of newspapers about the newspaper’s problems. The executive vice president was
supportive of virtually any change Potter wanted to make, with one condition. The numbers could
slip for only two more years (Potter’s first counted as one) and after that they had better turn
around and do so dramatically. Cash flow had to be positive and the top line had to show real
improvement in all revenue categories.

Getting the Right People on Board—and the Wrong People Off

Potter’s next steps involved replacing key personnel, starting with the managing editor.
Another from the Paulus chain was brought in with two clear mandates from Potter: reemphasize
local news and cut turnover in the newsroom. The vice president of circulation was also forced to
take early retirement. Allison lectured Potter long and hard against making both changes but
Potter persisted. Potter then demanded a full-scale evaluation of the third level of management by
his vice presidents and directors. In the course of this he came to the conclusion that the head of
personnel was in significantly over his head. Potter liked the man and offered him the position of
assistant director, and then brought in a new personnel manager from the Star. In exchange he
offered his successor at the Star a manager from the Ledger. His offer was declined. Several other
managers left as a result of the performance evaluation—the public relations director, two
managers in ad sales, and the head of the mailroom.

Meeting Number One

Six weeks to the day he took over, Potter assembled his new team. Allison was not invited.
Potter’s message was simple: First, the paper was in trouble. Potter had asked the controller, the
new editor, and the heads of circulation and advertising sales to put together a report on the
paper’s performance. The controller presented it. Few of the old managers had ever heard this
person speak. The report concluded that the decline in circulation and ad revenue, and the
practice of eking out profit by cost-cutting would lead to significant shrinkage in the paper, the
paper’s staff, and their salaries. Several old managers began to offer “solutions” featuring other
departments. After listening a while, Potter cut them off. He stated the mission of the paper was

©2011 by the Kellogg School of Management at Northwestern University. This case was prepared by Professor Robert Dewar. Cases
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 NORTHLANDS LEDGER (B) KEL537

now going to be “First Choice.” He wanted the Ledger to be readers’ first choice for news and
information, local advertisers’ first choice for placing their ads, and media professionals’ first
choice for employment. Potter would accept nothing less. Up to this point several of the old
managers thought they were hearing a new version of Allison, who had frequently stated a
mandate (disguised as a mission) and then given orders as to how they were going to carry it out.
Instead Potter appointed a number of task forces headed by members of what he now called his
executive committee—his direct reports. The task forces would work on learning more about
what readers wanted to read, how value could be added to advertisers, customer service for
subscribers and vendors selling the paper, and managing turnover. What surprised the people in
the room was the composition of each task force.

The Task Forces

Each task force had one of the district managers (Potter had cleared this with the union
steward and offered overtime pay to show he was serious), one person from the complaint
department, two reporters, one from information services, and two ad sales reps. People from the
controller’s office, personnel, and information services were also assigned to various task forces.
While each task force was told to produce a thoughtful diagnosis of problems in its written report,
oral presentations could mention only solutions. Potter allowed a full discussion of each of these
reports (most came in within a month of the first meeting). He, however, let everyone know that it
was his responsibility to decide what was to be implemented. Managers noticed that most, though
not all, task force recommendations were approved. Some were not and some were sent back to
the task force for more work. Once Potter decided a recommendation was to be implemented, it
was the head of that task force’s responsibility to implement it and report progress at the next
monthly meeting.

Pilots and their Progress

Many task force recommendations resulted in pilot projects that addressed a host of issues
crucial to the struggling paper.

Customer Service and Reader Surveys

A number of these surveys asked about aspects such as the quality of customer service, new
service initiatives and reader reactions to features, the new emphasis on local content, the
website’s design and ease of use, and changes in the paper’s layout. Potter thought the first
surveys were, quite frankly, awful. They were poorly constructed, elicited less than a 5 percent
response, and were not well analyzed (simple means and percentages were all that was reported).
They also did not generate concrete recommendations. Potter kept encouraging these two task
forces to try something else and after a year, response rates started to increase and useful
information was generated. The task force learned it was a justifiable expense to contract with a
professional survey researcher, that a small sample with a high response rate (over 40 percent)
was worth far more than a large sample that generated an equal number of responses but only a
fifth of the response rate, and that the response rate improved when readers were given
summaries of the results and a report of what action the paper intended to take. This task force
also worked on empowering the customer service reps in the complaint department. At first this
effort was a good feelings program, but as new information became available to those in customer

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 KEL537 NORTHLANDS LEDGER (B)

contact positions, motivation increased and service enhancement and recovery efforts were better
targeted to “gold” customers. These improvements were linked to the “information services
revolution” task force below.

New Positions—Reader Advocates

The newsroom added two reader advocate positions. These people took calls and wrote a
report on readers’ reactions to that day’s paper. People drawn from all departments in the paper
staffed these positions on a one-week rotating basis. After three months of a pilot, these new
positions were made permanent. The newsroom also started to focus some reporters on topics
found to be of interest to readers, including local government, national and international disasters,
local lifestyles, local entertainment, and local and national weather.

New Positions—Key Account Managers

Advertising sales piloted a key account manager position in which two people were assigned
four large advertising accounts each. This pilot generated several other pilots, the most significant
of which was the “Value Ad” pilot (see below for a description of this task force). The account
manager pilot caused considerable conflict in the paper. These managers attempted to improve
service by telling their peers to shape up, which prompted predictable reactions. Potter halted the
pilot and sent a number of his top sales reps to a training program in relationship selling (for
advertising customers) and relationship building (for peers). Next Potter conducted meetings with
people from other departments and these new account reps so that managers could hammer out
who had responsibility for which decisions that affected an account. A year later the account
manager initiative was still a work in progress.

The “Value Ad” Pilot

This was an effort to make the Ledger more valuable to advertisers. Visits were made to the
Star for ideas and many of the Star’s practices were adopted. Essentially the Ledger attempted to
shift from selling space and lines to consultative, relationship-building selling. This pilot was
delayed until Potter’s overhaul of the information services department. But, by the end of the first
year, Ledger sales representatives were able to supply advertisers with national market research
data and data from local consumer surveys done by the Ledger.

The Information Services Revolution

This pilot, so named by the task force members and backed by a substantial budget increase
from Potter, started with interviews of other department heads on what support they wanted from
information services. Potter and the task force reviewed and prioritized these. They deemed
acquiring and analyzing data for the use of advertisers the top priority, because of its profit
potential. Second priority was the creation of a reader database that tracked length of
subscription, history of complaints, starts, stops, cancellations, and classified ad placements.
Third priority was the building of capabilities to launch new electronic products and services. The
task force began experimenting in website creation for advertisers and used the Paulus chain’s
resources to start a real estate guide. This guide surpassed guides supplied by national real estate

KELLOGG SCHOOL OF MANAGEMENT 3

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 NORTHLANDS LEDGER (B) KEL537

broker chains because it contained far more local information with each listing, such as average
SAT scores for local high schools. An auto finder was not considered because others already
dominated this area.

Changes in Incentives: Potter’s Bomb Shell

Six months after Potter took over, the Ledger was becoming a new place. Many of the task
forces were still a work in progress, but managers liked the direction. One major advertiser that
had cut its ad budget significantly was persuaded to increase it again, and there were several
similar stories. The decline in circulation seemed to be slowing. Potter arrived late to the six-
month meeting of his management team and entered the room while some people were
congratulating themselves on this progress. Potter thanked them all and then announced that there
would be a change in senior management compensation for the following year. To help people
get used to it, for the next six months managers would receive a report on what their raises would
have been had the new system been in effect. Essentially, half of each manager’s pay would be
based on halting the decline in circulation and advertising revenue. In order to keep people from
exclusively focusing on the top line, a positive cash flow had to be achieved by the end of the
next year. The controller asked Potter if he should be responsible for calculating the other
managers’ incentive pay. Potter said yes, but then reminded the controller that because he was a
newspaper executive, not a controller, the incentive system also applied to him. Potter then went
around the room and made the same announcement to each executive in the room: “You are not
the head of circulation—advertising—human resources—editorial—public relations, etc.—you
are a newspaper executive.”

Shortly after this the controller took a renewed interest in the information services revolution
task force. He spearheaded its work on account profitability and built systems to communicate
this to all people working with the account. He also spearheaded the development of a subscriber
database so that subscription history, complaints, and any other business the person did with the
paper appeared on the same screen. From this database the controller was able to show the cost of
subscriber acquisition, the cost of retention, and the potential long-term profitability. Customer
service representatives in the complaint department were surprised when they were able to call up
this data while resolving complaints. The screens were color-coded red, green, and gold for both
advertisers and subscribers. Essentially the rule was, “Be nice to everyone, but for a gold screen,
do anything you can.”

A Human Resource Strategy

Potter worked closely with the new head of human resources to establish three objectives.
First, work with, not against the union. District managers were to be shown real numbers on
service performance and circulation improvement. Second, each hire had to be substantially better
than the person leaving. Third, Potter was not worried about turnover in the first year—he had
caused some of it himself, but in the second year the turnover had to decrease, especially among
new hires in all departments after their first six months.

The head of human resources first tackled hiring. He involved advertisers in the interviews of
new sales people. He insisted on generating a pool of candidates for each position, on peers being
involved in the hiring interviews, and worked with Potter to make part of each manager’s
incentive compensation contingent on retention and development of good talent.

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 KEL537 NORTHLANDS LEDGER (B)

The new employee orientation program was expanded. New recruits visited all departments
of the paper and then had to make a report on these departments other than the one they were
joining.

A New Culture at the Ledger

Potter was pleased with the changes that had occurred at the Ledger. There was a new set of
norms, a new way of thinking. As people made decisions they had a habit of asking, “How does
this add value for our customers?” Two examples illustrated this new thinking. In the old days,
when a person got no results from a classified ad, the old Ledger procedure was to argue and
perhaps blame the condition of the merchandise or the attitude of the seller. The Ledger just
printed the ad. If there was an error, the ad was rerun. If there was no error, the case was closed.
No refunds were given. This approach irritated customers and diminished the probability of future
business. At the new Ledger, the procedure was to offer to rewrite, rephrase, or reposition the ad
and even suggest a new price based on comparable merchandise in the classifieds, an approach
based on a proposal generated by the customer service representatives themselves. These
representatives were empowered to run the new ad free for seven more days. The incremental
cost to retain the customer was calculated to be less than $2.00. For commercial advertisers,
advertising sales personnel at first were allowed to simply refund money, if there was an error in
the ad. This was standard industry practice. But soon the Ledger offered new and improved
incremental advertising instead of a refund to produce the benefit the advertiser wanted in the
first place. Sales reps proactively called advertisers when they noticed an error to start the
recovery process.

As part of his effort to change the culture at the Ledger, Potter began an internal newsletter,
the Sunny North Ledger. The usual announcements of birthdays, anniversaries, and promotions
were in the back. The first three to four pages were filled with reports of the progress of the task
forces and their pilots, increases or decreases in circulation and ad revenues, and stories of reader
and advertiser customer service heroics.

Potter initiated a monthly pizza party during which he awarded the publisher’s prize for
significant customer focused achievements. These prizes were in the form of “Ledger” money.
This currency could be spent at any of the Ledger’s major advertisers. Each prize was worth
$100. Because the paper was a twenty-four hour operation, Potter himself ran a second party at
4:00 a.m. for the late shift of the press, the mailroom, and the circulation district managers.
Besides publisher’s prizes, this party featured doughnuts and coffee instead of pizza.

On the one-year anniversary of becoming publisher, Potter eliminated Allison’s private

parking place and told Allison that his office suite was needed for a conference room. Although
Allison was offered a nice but smaller office as an alternative, he left that day and was never seen
at the paper again. His accounts were assigned to several of the Ledger’s best sales people. No
accounts were lost, primarily because Potter accompanied these sales people on their first few
visits to the accounts and because these new sales people surprised the accounts with how much
more the paper could do for them.

KELLOGG SCHOOL OF MANAGEMENT 5

This document is authorized for use only in Prof. Venkataraman S.'s Managing Change and Transformation/ at IIM Kozhikode - EPGP Kozhikode Campus from Nov 2019 to May 2020.