Suburban Chicago Daily Herald freezes pays

Memo from Suburban Chicago Daily Herald publisher Doug Ray

To: All Staff
From: Doug Ray
Date: December 4, 2007
Re: Operational update

As we enter the final weeks of the year, I want to bring you up to date on Paddock's financial performance this year and the outlook for 2008. Our newspaper and every newspaper company in the country are in the midst of structural changes. Newspaper display and classified advertising dollars have fallen to levels not seen since the severe recession of early 2000. Looking ahead to next year, we expect a continuation of the revenue situation in these core areas of advertising.

The budget which we will present to the Paddock Board of Directors next week will reflect this trend in display and classified. The good news in next year's revenue outlook is in the Internet and niche products divisions. Strong revenue growth this year will be followed by more next year, although not enough to offset the print-side losses.

On line is a major part of our future. Paddock's partnership with newspapers in the Yahoo! consortium will drive new revenue opportunities, along with an aggressive sales plan which will bring significant numbers of local merchants to our Web site.

As well, new products are being developed through the "Jobs To Be Done" Newspaper Next innovation model. Eileen Brown and department managers and staff are interviewing customers and potential customers to determine informational needs and to create solutions for them. There have been early successes, with several profitable revenue products created as a result of this problem-solving process.

The longer-term outlook remains challenging. The question is when will the inflection point take place in which Internet and other revenues offset the decline in traditional newspaper advertising categories. Until that happens, the cost basis of the company must balance with the revenue declines. As you know, earlier this year the workforce was reduced through restructuring and reengineering. As well, salary increases were frozen and the salaries of all employees were reduced by five percent. These measures have stabilized the company.

However, as we prepare the 2008 budget, it has become apparent that continuing cost reductions are needed to offset expected advertising revenue declines. As a result, the five percent pay reduction affecting all employees will be made permanent. We had hoped for a different outcome, but we believe this is the most prudent course of action. Rather than allowing this issue to linger, we are announcing the pay reduction now so that the company and you can plan for next year.

This was a difficult decision, but one that hopefully will eliminate the need for another round of layoffs and other significant cost cutting which I believe would have a more negative impact on operations and staff.

To help counterbalance the five percent pay reduction, pay increases, frozen since August, will be reinstated and made retroactive. As you know, all full-time employees will receive an extra week of paid vacation in 2008, beginning July 1, and part-time employees on a pro rata basis.

As I have held meetings recently in the office center and in outlying offices to answer employee questions, some of you have indicated concern about the future. Again, I want to tell you that I am optimistic, primarily because of Paddock's talented work force committed to change and innovation and resolved to emerge from this transition stronger than ever.

Thank you for your extra effort, understanding and your commitment to the company.

SOURCE: Poynter Online