Lee’s Junck Balances Profit and Editorial

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By: Mark Fitzgerald

Around Lee Enterprises Inc., they call it “the Prayer Card” or, more often, “Mary’s Prayer Card.” Lee executives hand it out as readily as their own business cards, which it not-so-coincidentally resembles. More formally known as the Priorities Card, it lists Lee’s most important goals, from growing revenue “creatively and rapidly” to exercising “careful” cost controls. The five priorities are not exactly original to Lee — but now they are being pursued with levels of energy and urgency that reflect the style of Chairman, CEO, and President Mary E. Junck.

“The thing that really drives this company is this little card. I literally have one of these in my pocket wherever I go,” says Greg R. Veon, a vice president who oversees 15 daily newspapers, as he whips out a Priorities Card. “I credit Mary for being able, with her leadership style, to bring focus on a set of priorities — and sticking to it.”

To know Junck’s management style, people throughout Lee say, just look at the card. With its succinct priorities and list of terse action steps — “on-time delivery: meet deadlines and get it there on time,” “more actives: increase active [ad] accounts and reduce churn,” “people oriented: focus coverage on real people” — it reflects the descriptions of the CEO that are heard over and over again: Focused. Down to earth. High energy. Disciplined. And nice.

“Mary demonstrates you can be effective and tough when you need to be tough and decisive, and terrifically nice at the same time,” says James W. Hopson, a vice president of publishing for Lee and publisher of the Wisconsin State Journal in Madison. “And that’s not only a virtue at Lee — I think it’s a necessity for the way we do business.”

“Mary has the best way of saying ‘No,'” says Michael E. Phelps, a vice president of publishing and publisher of the Quad-City Times in Davenport, Iowa. “She’ll say, ‘You know, that’s a great idea, and there are a lot of great ideas, and we’re not going to do that one.’ Mary is wonderfully Midwestern, but she can say ‘No’ — there’s no question about it.”

On the Lee side

But there doesn’t appear to be much to make Mary feel contrary these days. In the year since Junck announced the blockbuster $694-million purchase of the 16 Howard Publications daily newspapers, spending cash Lee accumulated by selling all its TV stations in 1999, the chain has seen its revenue soar 58.9% and its overall daily circulation leap 75%, to 1.13 million.

The company has managed to keep its margin at its traditional sky-high level, despite absorbing a chain that historically performed well below the daunting Lee standard. Lee ended its 2002 fiscal year with an earnings before interest, taxes, depreciation, and amortization (EBITDA) margin of 28.1%, down from the 31% peak it hit in 2000 but up from 25.8% in 2001.

As Junck noted at December’s analysts meetings, Lee papers were generating $679 per unit of circulation from all revenue sources at the time of the takeover, while Howard papers were producing $479. In the first six months under Lee, the number for the Howard papers — or “new Lee,” as they say around its Davenport headquarters — had grown to $503. “And we plan to grow that in 2003,” Junck told analysts.

Lee now publishes 44 dailies — ranging in size from the “new Lee” 92,940-circulation North County Times in Escondido, Calif., to the “old Lee” 3,975-circulation Baraboo (Wis.) News Republic — and 175 community papers and other publications. Old or new, Lee papers are high-margin, high-penetration properties. A typical Lee unit is the Missoulian in Missoula, Mont.: With a daily circulation of 30,066, the paper reaches 53% of the households in its city distribution area during the week, and 62% on Sundays.

Successfully managing the Howard takeover and transition “really sort of raised our confidence level” throughout Lee, says Sales and Marketing Vice President Kevin Mowbray. The deal also took a big monkey off Lee’s back.

For two years, Lee had been sitting on its pile of cash from the TV-station sales and promising an impatient Wall Street that it would make a deal when it could find — in a phrase repeated like a mantra at Lee headquarters — “daily newspapers in good markets with circulations of 30,000 to 125,000.” The huge Howard deal brought instant Street cred, says Carl G. Schmidt, vice president, chief financial officer, and treasurer: “It signaled that we intended to grow … [and that] we do what we say we will do.”

But Junck’s most impressive feat may well be internal: She has managed to keep up the momentum toward stronger financial performance without alienating publishers and editors at Lee papers old or new. During a time when the profits-versus-quality debate exploded in U.S. newsrooms, this CEO who is pushing for margins of 30% and beyond has a surprisingly supportive cadre of editors. Even editors invited to comment anonymously had no significant criticism of Lee’s overall commitment in journalism.

Here again, Mary’s Prayer Card seems to have worked its magic. This is how Kathleen Rutledge of the Lincoln (Neb.) Journal Star, describes the effect of margins on her role as a Lee editor: “Obviously, there’s pressure, but since Mary Junck became our CEO, we’ve added, in black and white, ‘strong local news’ to our corporate goals. I think it’s more than symbolism. I really find support for excellence in journalism. In years past, it wasn’t always [written] down in black and white that that is what we’re about.”

At the 16 former Howard papers, just three publishers have departed since Lee took over. In part, that’s because Junck has applied a dash — but only a dash — of long-overdue corporate centralization to a company that famously lets publishers and editors do their own thing. For instance, she established Lee’s first-ever corporate head for circulation. She emphasized the importance of the newsroom by creating its first corporate vice president for news.

Mostly, though, Junck won over skeptics by her powers of persuasion. “She certainly has made us feel at home by showing us that Lee believes in the same type of newspapering as Howard Publications did,” says William Nangle, the veteran executive editor of the second-biggest Howard paper, The Times in Munster, Ind. “She’s an energetic leader, and she does so by example.”

Born in a small town

Junck, 55, is not only the first woman to head Lee (and currently the only female on the six-person board of directors) but also the first chairman and CEO in the company’s 112-year history who is not related by blood or marriage to the founding Lee and Adler families. Yet, when she arrived at Lee’s headquarters in 1999 after having run the old Times Mirror Co.’s East Coast papers from Baltimore, Junck was, in many ways, coming home.

“It’s not like I was a big-city sophisticate leaving the bright lights to come to Iowa,” Junck says. “I grew up in Iowa. In a really little place.” The place was Ogden, smack-dab in the middle of the Hawkeye State, about 20 miles due west of Ames. She was a farm girl. Now that she’s back, this high-powered executive is also happily teaching Sunday school and leading her daughter’s Girl Scout troop.

Junck didn’t get the journalism bug until she edited the yearbook as an undergraduate at Valparaiso University in Indiana. “I thought that qualified me as a journalist. Of course, it doesn’t qualify you to be anything,” she says with a laugh. But armed with a graduate degree in journalism from the University of North Carolina in Chapel Hill, she began her first newspaper job as market-research manager at The Charlotte (N.C.) Observer. She became retail-advertising manager and then ad-marketing manager at The Miami Herald.

By that time, Junck had caught the eye of Knight Ridder higher-ups. She was posted to the Saint Paul (Minn.) Pioneer Press in 1985 and named publisher in 1990.

Knight Ridder Chairman and CEO Tony Ridder remains a fan. “She has a positive outlook about life and the business,” he says, “which makes it a lot of fun to work with her. But the second thing about Mary is, she always seemed to be on top of her job. If there ever was a problem, I wouldn’t have to call her.” He adds, “She came up through the advertising side, so she’s very good in the whole revenue end of the business.”

Junck moved to Times Mirror in 1992, becoming publisher of The Sun in Baltimore and then serving as president of Times Mirror Eastern Newspapers until Lee’s former chairman, Richard D. Gottlieb, recruited her as chief operating officer in 1999. She was named CEO in 2001 and added the chairman title last year.

Modest digs, big goals

Where Times Mirror and Knight Ridder represented bicoastal glamour, Lee is happily dug in deep in the flyover states. Its headquarters in downtown Davenport occupies a couple of floors five flights up in a nondescript office building that doesn’t even display the Lee name outside. Brian E. Kardell, vice president for information systems, is practically counting the days until he can move Lee’s ever-more-active Internet and systems operations to space in a new building under construction down the street.

The new quarters won’t be confused with USA Today‘s, and that suits Junck fine. To the CEO and the team she’s assembled, a corporate HQ isn’t a command center — it’s a support office. And a cramped one at that: The boardroom where Junck hosted a take-out lunch with a visitor the other day is barely the size of an office a vice president would rate at Gannett Co. Inc. or Knight Ridder.

“We are, in a way, overhead here in Davenport,” Junck says. “We don’t write Story One. We don’t bring in any advertising.” Lee executives haven’t forgotten what it’s like to be on the receiving end of an order, so “we’re very careful with corporate edicts,” Kardell adds.

Still, as Mary’s Prayer Card attests, there are expectations and HQ has been coming up with an increasing number of companywide initiatives, especially in the advertising, circulation, and interactive areas. Two years ago, with single-copy and subscription sales continuing to fall at some papers (including Lee’s hometown Quad-City Times) the new vice president of circulation, Nancy L. Green, grouped flagging papers into what she called the Big Six and subjected them to a detailed analysis. “We even interviewed individual carriers,” Green recalls. The six papers reported their status and developed sales plans in monthly conference calls. Within nine months, four of the six had reported year-over-year gains.

While Junck’s top priority is growing revenue — it’s at the very top of Mary’s Prayer Card, while, the CEO notes, cost controls is listed last — she is also the reason Lee is paying more attention to journalism than ever before. David Stoeffler, appointed vice president for news in October 2001, says Junck has convinced newsrooms she cares about news: “People in the newsroom really appreciated that Mary made [the appointment] at a time when the overall economy was not great.”

Lee has been holding seminars on storytelling at its properties and runs a chainwide editorial chat room at http://editorialmatters.lee.net. The site doesn’t shrink from the profits-versus-quality debate. The topic came up some months ago, when it hosted an online discussion with Leonard Downie Jr., executive editor of The Washington Post. “I don’t know Lee’s current profit margins,” Downie wrote. “If the margin at any newspaper is much north of 20%, I would conclude that Lee could invest more money in that newsroom.”

Junck says flatly she sees no contradiction in simultaneous drives for higher EBITDA margins and quality news coverage. Higher margins are an unquestioned goal among Lee publishers, says Vice President Veon: “It’s built into the corporate culture. If you’re a Lee publisher, you’re going to be expected to maintain those margins.”

Junck has won fans among Wall Street analysts. John Miller of Chicago-based Ariel Capital Management Inc., the biggest outside holder of Lee stock, says the Street respects Junck’s communications skills and her patience: “When Lee sold its broadcasting business, it was sitting on a lot of cash, and oftentimes when companies have a lot of cash in the bank, sometimes silly investments are made, silly acquisitions.” Junck waited for the right opportunity, he says.

For all its family history, Lee was traded over the counter as long ago as 1960 and has been on the Big Board for 25 years. It’s one of those rare publicly traded newspaper companies that doesn’t wait to adopt strong corporate-governance measures. Lee had a “lead director” long before that became fashionable among good-governance advocates.

Three weeks ago, Lee became only the second newspaper company — the Washington Post Co. is the other — and one of the few public companies in any category to expense stock-option grants to employees. “We wanted to do something that is proactive — I don’t know if symbolic is the right word, but we wanted to do something to signal to the market that we were on top of the [corporate-governance] issue,” says CFO Schmidt.

Junck has a less corporate explanation: “I said, ‘Look, everyone’s going to have to do this eventually, anyway, so why not get out ahead of it?'”

The new girl

Junck also gives the impression she doesn’t spend much time ruminating about the fact that she’s the first woman to run Lee — and one of the few women CEOs in the industry’s history. “I’m actually not sure whether being a woman has helped or hindered my career,” she says. “A bigger factor, I think, is that I’ve been fortunate throughout my career to work with many talented people and I’ve had great bosses.”

It matters to some women out in the field, such as the Lincoln Star Journal‘s Rutledge: “For me personally, it’s very heartening because there are not enough women editors at Lee, so it’s great to see a woman at the top. But beyond that sort of personal joy, I don’t think there are any real gender differences [in Junck’s management style].”

Junck says “gender just isn’t a determinant” at Lee and notes that the company, which had no woman publishers at one point in the mid-1980s, now has a dozen. What really distinguishes people who succeed at Lee, says Junck, isn’t gender, but a love of the basics of newspapering. She waves Mary’s Prayer Card: “Anybody who loves the newspaper business, you can’t say these are not good things to be working at, now, can you?”

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