Shaw Newspapers: It's a Family Thing -- And It Pays Off

By: Mark Fitzgerald Six or seven years ago, in a very different newspaper jobs market, it seemed that a family-owned group would have to be aggressive to entice journalists and executives to its smallish papers in the far suburbs of Chicago and rural Iowa. So Shaw Newspapers hired an agency to create recruiting materials.

"We thought, how in the world are we going to compete with the Chicago Tribune or Sun-Times Media Group, since we simply can't pay what they can pay?" recalls President/CEO Tom Shaw.

For the agency, it must have seemed a no-brainer assignment. Shaw Newspapers, after all, isn't just family-owned ? it's the third-oldest continually owned family newspaper group in the nation. Its founder, Benjamin Flower Shaw, along with 11 other Illinois newspaper editors and a fellow named Abraham Lincoln, met to form the Republican Party of Illinois.

So the agency kept coming back with brochures that emphasized the chain's family ownership. But the Shaws kept telling the agency that wasn't what they wanted. "First, because when you say 'family,' it's like you're telling someone, 'If you come here, you can only go so far,'" says Tom Shaw.

But there was something else: Shaw Newspapers has built a corporate culture that aims to treat everyone like family, whether or not they are a Shaw ? and, conversely, treats a Shaw like every other employee. The company's official Code of Conduct reads like something out of All I Really Need to Know I Learned in Kindergarten. Among its commandments: "Be fair," "Tell the truth," "Do your best." It ends, "Be kind." The culture was unique, "and it could be a competitive differentiator," the CEO says.

Shaw executives know as well as anyone that these values can sound corny ? but they insist they've served well during the fierce multi-front newspaper war it fought against Illinois' biggest papers.

Now they're betting that the same values will help them survive the brutal economy that's quieted those newspaper wars ? but is battering Shaw, too. Like other family publishers that were able to avoid drastic cuts for a while, Shaw has trimmed the physical size of its papers, dropped a publishing day at one of its dailies, and laid off employees.

What's certain, though, is that as badly beaten up as Shaw Newspapers has been by the economy, it appears to be in better shape than its much-bigger competitors. As a private company, Shaw doesn't report its financials, but claims it was profitable in 2008, though the results missed budget by 25%.

By contrast, the corporate parents of the Chicago Tribune and Chicago Sun-Times, which over the years repeatedly advanced into Shaw Newspapers' home markets, are now both under bankruptcy protection. It's nearly certain that some of the Sun-Times Media Group community dailies located close to Shaw papers will become semi-weeklies or weeklies.

Tom Shaw says one strategic decision ahead for his company is whether it'll be worth the expense to expand into those anticipated voids. There are likely to be more partnerships among the different chains ? with Shaw perhaps playing the unlikely part of big brother.

"Ironically, little old Shaw is probably the healthiest group in the market," says Suburban Group Publisher John Rung. "We may be the one they look to for support."

More values per buck
Shaw executives say that the company's values are a big reason that a group whose biggest daily has a circulation of just 39,000 can have an innovative corporate structure, shift focus from print to digital, create the widely hailed prep sports site Mchenrycountysports.com (winner of an EPpy Award in May) ? and become one of the first newspapers in North America to adopt "cloud computing" for its editorial system. Roxen, the remote-hosting vendor, is so impressed with the templates developed by the information technology team led by Tom Shaw's son Ben that it's talking about licensing them and including the templates in its service package.

Broker John Cribb has been on both sides of the negotiating table with Shaw executives, working with them as they looked at acquisitions and representing the papers Shaw was considering buying. He says the philosophy at Shaw News- papers may sound hokey, but it's genuine.

"Their philosophy is coming through for them in these [rough] times," says Cribb, managing director of Bozeman, Mont.-based Cribb, Greene & Associates. "They are seriously customer-driven, and right now they are strengthening all their relationships with their customers because they fully intend to come out of this economy with more market share ? especially in the Chicago area.

"And you know what?" he adds, "They're going to do it."

No one should mistake the directive to "be kind" for a lack of competitive fire, Shaw executives add. "We will absolutely not back down" in competitive situations, its CEO says. Shaw Newspapers proved that for more than two decades, as seemingly every daily newspaper in northern Illinois made incursions into the backyards of its Northwest Herald, The Chronicle in St. Charles, the Elgin Courier-News and other papers.

The Tribune, Sun-Times and the Paddock family-owned suburban Daily Herald were the biggest papers to target the market of quaint communities along the Fox River Valley that were fast turning farm fields into sprawling housing developments.

"Kane County may be the most competitive set of ZIP codes in the United States," says Rung. Aided by an economy that forced an end to costly circulation campaigns, Shaw Newspapers outlasted them all. "Competitive expansion is the one fear I don't have," he laughs. But even now, a typical 7-Eleven store in the market displays six dailies and usually two or three local weeklies.

During the peak of its multiple-front war, Shaw leaned on its values of teamwork and cooperation as it reorganized several times. When replacing a single corporate human resources manager with a team of HR managers from several newspapers worked out, CEO Shaw took it even further ? turning his own position over to a team.

The "Office of the President," formalized in 2007, comprises Tom Shaw; CFO/Treasurer Terri Swegle; Vice President Trevis Mayfield; suburban group publisher Rung; and Corporate Secretary Peggy Campbell.

The team presidency fits CEO Shaw's inclination to share credit as well. For this story, for example, he wasn't interviewed alone but around a conference table with other family ? and if the questions came at him too often, he'd invite answers from the others. He chose to meet not at the headquarters in Dixon, Ill., but at the chain's biggest paper, the Northwest Herald in Crystal Lake, a location that neatly symbolizes the market itself: a low-slung utilitarian building in an industrial park across the road from a cornfield that, come the end of the recession, will undoubtedly house another industrial park or big-box retailer.

In another example of its code of conduct taking corporate shape, Shaw Newspapers' headquarters bills itself as "Corporate Services" ? and acts like it. "It's not all hugs and kisses, but corporate here is about as good as it gets," says Rung.

The respect around the workplace is palpable, says Mayfield, who had his doubts when he was being recruited by Shaw. He was quite content with his job at a CNHI daily, and while the "be kind" talk sounded good, the former reporter in him was skeptical.

"When I interviewed here, I kicked the tires pretty hard," Mayfield says. "After the due diligence, I thought, 'They're serious about this.' Five years later, I still think that's the case."

Smaller bets pay off
It makes for a different sort of workplace for family, too, says Ben Shaw, the company's IT director: "As a family member, you're not relegated to a corner, just, you know, something prestigious but 'over there.'"

In 2006, to shake up what it considered a highly "silo-ed" corporate structure, Shaw adopted group-style management virtually across the board ? and made the tough decision to let go a dozen managers from individual papers. "Once you've got the right structure in place, then you can get the right people in place," says Ben Shaw, who adds he's finding his training in developing-education curricula ? he's got a master's degree in it ? has helped enormously in workplace structure.

He's taking the same no-duplication work approach to Shaw's information technology. One big attraction of the cloud-computing solution was that editorial content can be published simultaneously to the Web or the print copy desk.

Shaw Newspapers increasingly is placing small bets to see if they pay off. Another of the CEO's sons, VP/Advertising J. Tom Shaw, came to the family business from television production. He's introduced extensive video offerings that have noticeably increased time spent on the Web sites, with the average video viewer spending five minutes. In fact, time spent on the 21 Shaw sites increased 250% between December 2007 and the end of 2008 ? and was up another 65% through March 2009. In the past, "video might have been seen as a distraction or someone's pet project," the younger Shaw says.

The company's approach to innovation is well-illustrated in its decision to consolidate newspaper classified to a single call center. Before going ahead with it, there were not-unreasonable objections that newspapers simply are not very good at making them work ? but Suburban Group Publisher Rung went ahead anyway. "Our own incompetence can't be an excuse not to try," he says.

Classified, of course, did not suddenly bounce back because call centers were consolidated. Shaw has the same deep problems with real estate, automotive and recruiting classified that virtually every newspaper in America has. But call volumes, Rung says, are at least improving.

Same boat, different paddle
Shaw Newspapers now finds its corporate values tested by the most brutal industry recession in memory, compounded by the abrupt end to the market's long housing boom. The builders who took out all those big display ads are gone ? and that was just the start of the pain. Like publishers in other gone-bust markets, Tom Shaw confesses that he can't yet see a bottom to the economy. And like many groups, Shaw has implemented cuts to match falling revenue ? only to see that revenue fall off again.

Shaw shares something else with chains in far more dire straits ? it took on debt to grow by acquisitions just as the bottom fell out of the newspaper business. In 2007, it realized its longtime ambition of owning the Daily Chronicle in DeKalb, Ill., which Lee Enterprises sold along with its sibling papers and niche publications.

Bring up the subject of debt with CEO Shaw and he says with a laugh, "Well, we won't be taking on any more." Turning serious, he adds that the company's debt is manageable: "Even in this downturn, we haven't found it to be a serious problem. We have no impairment issues at all, no covenant issues."

Though the family rarely invokes its history, here he does: "Every indebtedness we've ever had, we've paid off ahead of schedule. And we're ahead of schedule on this."

Shaw Newspapers is also somewhat more insulated than its peers that have flamed out on acquisitions. It's a diversified company in its own way, with clusters of community papers that have not fallen as hard as the dailies closer into Chicago. John Rung says in the boom times, his fast-growing cluster helped support the slower-moving community papers. "Last year, Trevis made some decisions to sort of ramp up the yield he was getting, and that went to help us," Rung says of Mayfield, who heads the community group.

Still, Tom Shaw has pondered a day of reckoning. The business must make money, he says, but it also must serve its communities, with newspapers, print or digital, worthy of the name. "If conditions keep deteriorating, do we continue to make cuts?" he wonders aloud. "At some point we may say, no, we are going to serve the needs of the community first."

He remains optimistic that things will turn around: "I tell people here all the time that in the next couple of years if we gain back half as much of the revenue that we lost in the past two or three years, we'll make twice as much profit as we've lost."

"We are healthy," son J. Tom Shaw chimes in. "We're going to be around. Our competitors might not be around, but we are going to be around."

This story first appeared in E&P's June issue.