General Mills' Gift to Journalism   

Times Mirror not only went outside the company, it went far outside the communications industry to find its new chief executive. Can number cruncher Mark Willes improve the company's disappointing financial performance without hurting editorial quality?

They could have anointed anyone inside the company. They could have lured practically anyone in the business. Instead, Times Mirror found its new president and CEO at General Mills, the packaged food company. Mark H. Willes, a General Mills vice chairman and an economist by training, had been immersed in Wheaties, Fruit Roll Ups and Hamburger Helper for the last 15 years.

Willes had not worked in news, communications, computers or even entertainment. His only connection to journalism was that he read newspapers.

In a fun but ultimately stomach churning article, the New York Times romped all over the appointment. In it, Willes suggested that the decline in newspaper circulation may be the result of insufficient attention to readers' needs. His examples of successfully consulting consumers? The marketing of cereals and cake mixes. World news, the new boss seemed to say, should be marketed like a jumbo box of Cheerios.

With the shock of Willes' appointment, Times Mirror newsrooms bubbled with gallows humor. The inevitable "Top 10" list (see page 43) made its way through the Los Angeles Times: Anything new in the paper? "Nuttin Honey."

So putting a businessman with no journalism background in charge of a publishing empire is crazy, right? Maybe not. Given the recent history of Times Mirror, the choice of a businessman/outsider was almost inevitable.

As the third largest newspaper publisher in the U.S., Times Mirror is a $3 billion corporation that owns the Los Angeles Times, Newsday, Baltimore's Sun, the Hartford Courant and other papers. It also owns magazines ranging from Popular Science and Field & Stream to the National Journal, and publishes legal, health, art and educational books and materials. But its profit margins have lagged behind those of comparable corporations. For example, last year Times Mirror's profit margin for newspapers was 9.4 percent, compared to 16.4 percent for Knight-Ridder and 23.1 percent for Gannett.

Members of the search committee that settled on Willes would say little about their efforts. But it's clear they didn't find what they were looking for in the media business.

"I think they had looked around inside the industry and couldn't find the talent they were looking for that would get the stock price back up," says a former Times Mirror executive.

The hiring of Willes, 54, is yet another reflection of the evolution of the newspaper industry from a collection of family owned and operated entities to an industry dominated by publicly held corporations whose first allegiance is to shareholders.

"That constituency can be overlooked only at the peril of the publications," says Tom Goldstein, dean of the University of California at Berkeley Graduate School of Journalism. But with corporate control, says one retired Times Mirror editor, "the people in charge of making newspapers, the creators and shapers of newspapers, are really in a secondary role," which is not necessarily a good thing as far as the final product is concerned.

Despite the jokes, Willes' appointment was hardly unprecedented. "They never had journalists running that company from the get-go," says Steven Isaacs, an associate dean of Columbia University's Graduate School of Journalism, who knows and admires Willes. Outgoing Times Mirror CEO Robert Erburu is a lawyer, although he held other positions in the company before taking the top one. In the 1960s, Times Mirror selected for its CEO Franklin D. Murphy, a former chancellor of the University of California at Los Angeles.

"I think there's something very unique about journalistic principles, the way journalists approach their work, see the world," says David Cox, CEO of Cowles Communication, who was in snow blowers and lawnmowers before joining the publishing business. "That's something one has to learn if you're not familiar with it."

Mark Willes' education has just begun.

Many Times Mirror journalists had been rooting for Richard T. Schlosberg III, the popular publisher of the Los Angeles Times, to be named the new Times Mirror CEO. He and another inside candidate, Curtis A. Hessler, were both Times Mirror vice presidents. As such, both represented the status quo. By this winter, stockholders basically made the decision that an outsider had to be brought in.

"The performance of Times Mirror shares has been poor for a long time," says Dean Witter Reynolds advertising and publishing analyst James D. Dougherty. "The leadership of the company has been controversial."

Times Mirror's difficulties stem from the volatile mix of Southern California's protracted recession and management miscalculations, such as the heavy losses experienced by New York Newsday, says a Times Mirror writer.

The problem, says Newsweek Senior Editor Allan Sloan, was that "the stock was down, the company hadn't earned its dividends for years." And, adds the former Newsday business columnist, Times Mirror had been selling properties to pay its dividends, a practice he likened to breaking up the deck chairs to feed the engine.

Times Mirror has had a bad habit of buying high and selling low. Two years ago, it sold its four TV stations. A year later, the stations were sold for far more. Its luck hasn't been much better with newspapers. Nine years ago, it spent $400 million to buy Baltimore's Sun and $250 million more for new facilities. As John H. Taylor wrote in Forbes magazine, "It remains doubtful whether the results will ever justify the cost." (A week before Willes took over, Sun Publisher Mary Junck announced that as of mid-September, the Evening Sun, whose circulation had slid to 81,000, would be closed.)

The corporation also bought papers in Denver and Dallas, only to dump both – after years of losing money – at fire sale prices. It invested heavily in New York Newsday, an artistic success but a cash drain. The company also has been criticized for having a bloated bureaucracy.

xecently, the company sold its cable interests to Cox Cable. With the sale, Times Mirror was sitting on over a billion dollars in cash. Investors hoped then CEO Erburu and staff might go slow on spending the booty.

In early February, Erburu, Schlosberg and Hessler flew to New York to make a presentation to investors. "People started believing management may have changed its stripes," says Susan Decker, a vice president at the investment firm Donaldson, Lufkin & Jenrette. "Now they would invest their proceeds wisely. This was going to be the inaugural speech to talk about the new Times Mirror strategy."

However, says Merrill Lynch First Vice President Lauren Rich Fine, "at the exact second people thought you would expect earnings momentum to improve, they told us they were whacking earnings by $40 million after taxes because they had a lot of great spending ideas" for new projects they wanted to implement.

What was to have been "an important watershed meeting," says Decker, turned into something else. The three executives talked about digitizing their computer systems, about "edutainment" CD-ROMs and about spending $100 million for a joint venture with Cox to create an outdoor life cable channel – at a time of numerous cable startups and no assurance that this one would be a winner.

From Wall Street's perspective, Decker says, the meeting was a disaster. Two hours after it ended, the stock began to tumble. Within two days it had dropped from 23 and 3/8ths to 18 and 7/8ths. The chances of Hessler or Schlosberg becoming CEO plummeted as well.

The meeting, Erburu acknowledges, "was not greeted with universal enthusiasm." And soon afterward Mark Willes had become a candidate for Times Mirror CEO.

As it launched its secret search for a new chief executive six months ago, the company had enlisted the help of Thomas Neff, described by the Wall Steet Journal as the top headhunter in the country. Neff also happened to be General Mills' executive recruiter. It was Neff "who brought Mark to our attention," Erburu says.

They met in March, and Erburu was impressed. Willes quickly won over all six members of the search committee, including two representatives of the Chandler family, which founded the L.A. Times and still controls the company. Willes received the unanimous approval of the board. His appointment was announced May 1, and a month later he took over as Times Mirror chairman and CEO.

His status as an outsider was an asset. That he knew his way around Wall Street didn't hurt either.

At Columbia University, where he majored in economics and statistics, Mark Willes was known as "The Monk." Even today, his conversations are sprinkled with references to the importance of discipline.

It's an approach that has paid big dividends for Willes, who has a Ph.D. from the Columbia Graduate School of Business and has taught finance at the University of Pennsylvania's Wharton School.

At 35, he was appointed to run the Federal Reserve Bank in Minneapolis, the youngest person ever to be named to such a position in the country. Willes says his 11-year stint at the Fed left him "with a keen appreciation for the role of the press and the important role it can play in helping people understand issues that are critical to them and sometimes issues that they wouldn't otherwise know about or understand."

Fifteen years ago he left government and joined General Mills because, he says, "I was such an advocate of free markets that I wanted to see if I could make it in a market environment." His first job was as executive vice president and chief financial officer. Five years later, he was elevated to president and was considered by colleagues to be the heir apparent to the chairman's job.

But he never made it to the top. Instead, he became vice chairman in charge of international operations, corporate law and finance, a job he held until he left for Times Mirror in June. Neither Willes nor General Mills would comment on why he was passed over for the top job.

The answer may be simple: General Mills is a marketing company. While focus groups and surveys certainly help, observes one former colleague, a great marketer "still must have a fair amount of intuition." Willes, he says, never did. While Willes hired good marketers, he had never been particularly creative, nor had he added much to marketing meetings, according to numerous sources.

While news accounts of Willes' Times Mirror coronation focused on his marketing background, General Mills employees joked about "Mark the Marketer," because that had never been his strength. Finances were.

"I think that it may be Times Mirror knows exactly what they got," says Tony Kennedy, a business writer with Minneapolis' Star Tribune: a number cruncher who is a "very humane, decent person," but one who also "has a reputation for not liking nonperforming assets."

As this year began, Times Mirror and Mark Willes possessed great strengths, but neither was living up to their potential.

Willes had helped engineer General Mills' restructuring, spinning off Ann Taylor, Eddie Bauer and the restaurant division. It wasn't clear what his role would be in the slimmed-down General Mills. His boss and biggest booster, Bruce Atwater, retired in May. "He was," says Kennedy, "kind of a fifth wheel in the restructured company."

Neff, the headhunter who brought Willes into the picture, has worked for General Mills for years. As one executive who knows Neff says, "You don't come and raid a firm that hires you" unless "it's with that company's blessing."

While some who knew Willes at GM speak critically of his impact – they say he left no footprints – CEOs at other top corporations on whose boards Willes sits are effusive in their praise. They talk about Willes' exceptional character, his integrity, his fine, logical mind.

"So many corporations are slash and burn, restructure and fire," says John Birkelund, chairman of Dillon, Read & Co., and the lead investment banker for General Mills. Willes, he adds, "is not that sort of executive. He came from a very civilized company. He's an outstanding manager with what I would judge to be an effective but incredibly decent way of handling people."

After reading the New York Times story about Willes, Los Angeles Times Executive Editor Shelby Coffey III thought his new boss sounded "like this guy who was pushing Kellogg's further down the shelf." Instead, Coffey says, Willes "comes across much more as the Ph.D, Wharton professor, Federal Reserve Bank guy."

On May 1, Times Mirror announced the appointment of Willes to be its new chief executive. The company stock rose and has remained up for weeks.

Willes believes he was chosen for three reasons. First, he cites "the extensive experience I've had in issues of corporate strategy." Second, as the onetime head of the Federal Reserve Bank in Minneapolis, he says he had gained a healthy respect for the public trust. Third, "because I've been in the consumer business for 15 years, I've not only learned a lot about marketing, but I really have learned to think about business from the consumer or user point of view."

At his maiden teleconference with reporters Willes admitted, with a surprising burst of candor, that he'd only read Newsday once, while he was being considered for the job. (He says he's now reading it more often.)

He has been a regular reader of the New York Times and Wall Street Journal for years. Not surprisingly, he is developing a new favorite. "I happen to think the L.A. Times is terrific to read," he says. But he knows that all is not well in the newspaper business, that readership is dropping.

Acknowledging that his attitude may be "incredibly naive," he says "one of the reasons you see declines in circulation is because newspapers need to do a little better job in making sure they stay relevant." He suggests using surveys and focus groups to determine what readers want.

"If you want to make money," he says, "if you really want to be successful, you have to start with the end user, then work backwards, rather than assuming you can just say we know what we can do, let's see if we can find someone interested in having us do that."

But one former Times Mirror executive argues that readers don't really know what they want. Surveys found that L.A. Times readers didn't want seven foot long stories, he says, but when they were asked what stories they remembered and liked best, they were always the long stories. "Polls are fine," he says, but "don't be directed by them."

But Willes' penchant for canvassing the public isn't necessarily a threat to Times Mirror's traditional commitment to quality journalism.

"Mark has made it very clear he fully understands the importance of journalistic independence and the obligation a company like Times Mirror has to the public," says Erburu, who stays on as chairman until Willes also assumes that role in January. Rather than focusing on the General Mills connection, Erburu adds, taking the full measure of Willes and his background will reassure skeptics about what his new post portends for Times Mirror.

While he intends to "actively participate" in the selection of top people, Willes says he will "set the standards and hold them accountable... But I'm not in any way going to interfere or be involved in the day to day operations of the newspapers."

The pressures on Willes to keep Wall Street happy will be intense. He was appointed not just for his business acumen, integrity and intelligence, but also because as a media outsider, he would be more willing to change the course of Times Mirror, pleasing disheartened investors.

The day Willes was named, newspaper analysts already were composing wish lists that sounded more like hit lists. They talked about thinning the Times Mirror bureaucracy, "second only to the federal government," in the words of a former company executive, and about snipping away at the L.A. Times staff, already shrunken by buyouts. "This is like Ross Perot going to the federal government," declares one relieved Wall Street analyst.

One analyst recommends Times Mirror newsrooms begin thinking about combining forces, sending one reporter, say, to Oklahoma City, instead of one each from several of the papers. That advice would please shareholders but horrify journalists, who would see such a move as a step toward the homogenization of the newspapers.

While analysts urge draconian measures, Willes sometimes sounds more like a cheerleader than a budget slasher. "They're darn good businesses," he enthuses, "tremendous businesses. What a great opportunity!" Asked if the employees at New York Newsday have reason to worry, he replies, "I have no idea. You know more about New York Newsday than I do... I have to find out an awful lot more about what's going on before I can make a sensible judgment about anything."

Willes brought no one with him to Times Mirror. For now, at least, he seems to be relying on in house executives. He says of Times Mirror Editor At Large David Laventhol, who stepped down as president of Times Mirror for health reasons, "He is clearly a remarkable resource. We've already talked a number of times about the newspaper business and we'll continue to do that." He gave Schlosberg, publisher of the L.A. Times, an equally strong endorsement: "He's a tremendous executive, a very talented executive. The future for him is very bright. He's going to be exceptionally helpful."

What Willes' ascension means for journalism at Times Mirror isn't certain. He's not saying what products will survive his strategic plans, but if the closing of the Evening Sun is any indication, New York Newsday may be vulnerable as well. When cuts are made, Willes is expected to try to minimize the human toll. While the decision to shut the Evening Sun was made before he took over, the way in which it was done was very much Willes' style. Buyouts were offered but Times Mirror did not expect to lay off any editorial staffers. (The morning and evening staffs were combined three years ago.)

In the future, predicts one former Times Mirror executive, the papers may become leaner but probably "there will be no change in their editorial direction at all." Still, in competing for resources, Willes will make the papers justify why the dollars should go to them rather than another Times Mirror property or a new venture, the executive predicts.

Willes says it's necessary "to be the low cost producer," something not normally associated with Times Mirror. "That is the only way you can generate margins you need to effectively advertise and promote and do the other things you need to do," including, he says, turn a profit.

So how would Willes respond to journalists' cavalier if not hostile attitude toward big advertisers?

He's given a test. I tell Willes about an expensive incident at Newsday, when an editor ran a headline over a story about Delta Airlines checking up on job applicants' sexual orientation. Taking off on Delta's ad slogan, the head read, "They Love to Pry and It Shows." Delta pulled its ads but Robert Johnson, the publisher at the time, never complained. Only when New York Newsday Editor Don Forst mentioned another headline did the publisher facetiously inquire if this too would cost him $2.2 million.

Asked if this made him cringe, Willes says, "Not a bit. If you start with the view as I do that the newspaper is a public trust, that the number one criterion that must be satisified is the integrity of the newspaper, you cannot do anything to jeopardize that integrity."

The tests lie ahead, as Willes learns to deal with several critically important constituencies: his board of directors, the shareholders, the readers and Times Mirror journalists.

"We've got to make money," says Pulitzer Prize-winning Newsday columnist Jim Dwyer, who says he's not worried about Willes. "We also have some other work, the mission of newspapers." And while nobody's opposed to doing it "in an economical and sensible way," Dwyer adds, "people who try to get away with putting out cheap newspapers just don't put out very good ones." l