Thursday, April 17, 2008

Change Can Be A Good Thing

Exactly six months ago, on October 17, 2007, I posted the following:

Most of the big publishing houses are now digitizing their stock and taking what I would describe as baby steps toward changing their business models. I can think of only one CEO who is really thinking outside of the box: Michael Hyatt of Thomas Nelson Publishing, the world's largest Christian publisher. Read my post on how he "cannibalized" his publishing house here.

This week, Hyatt's name has been on the lips of everyone in the publishing world.

On Tuesday, Thomas Nelson issued a press release here, stating:

Thomas Nelson announced today that it will not be participating in Book Expo America (BEA) 2008 and the International Christian Retail Show (ICRS) 2008. “We have been discussing this move for some time,” said President & CEO, Michael S. Hyatt. “But the current economic downturn is forcing us to re-evaluate the expenditure of every marketing dollar. We are committed to doing our best to support our products and distributors with marketing expenditures that result in greater sales. And we have determined that, for Thomas Nelson, these trade shows provide very little return on a very significant investment.”

Instead of attending trade shows, Thomas Nelson hosted its first "Open House" event at Nashville's Music City Sheraton. The publisher invited its top 100 Christian retail accounts to attend a two-day conference.

The press release continued:

Thomas Nelson intends to make Open House an annual event for its key Christian retail accounts. “The top 100 Christian retail accounts generate more than 80% of our revenue in this channel,” noted Hyatt. “Therefore, we must be intentional and strategic in how we connect with Christian retail accounts. Open House provides us with a better way to invest in our future and theirs.”

Once again, Hyatt has taken a critical look at the way the industry runs and recognized that way did not further his company's goals.

In answering questions about why Thomas Nelson was taking this step, Hyatt made the following statements:

These trade shows do not provide a return that justifies the investment—at least not for us. We believe there are better ways to connect with our key customers in a way that is more meaningful to them and to us. Our recent Open House event is a testimony to this.

We are the only publisher in America who has hosted its own conference for the sole purpose of making the best Christian retailers better. We paid all of their expenses. We tried to give without expecting anything in return. We had no show room. We didn’t ask for orders. We simply tried to inspire and educate, believing that if we invested in these retailers it would be good for them, good for the channel, and good for us.

We attend numerous international shows. We will evaluate these on a case-by-case basis. We will continue to attend them, so long as they enable us to connect meaningfully with our customers in the most economical way possible. Currently, we plan to continue participating in both the London Book Fair and Frankfurt.

Our decision pertains only to trade shows. CBE [Christian Book Expo] is a consumer show. It offers a unique opportunity to Christian publishers because it is designed to raise the visibility of Christian authors and products among consumers. This is of huge value to us and something we are seeking to do with all of our marketing initiatives.

In speaking to Publishers Weekly about the ICRS show, Hyatt said: "It’s just not the best way to meet with customers—there’s too much noise and competition, and fewer retailers all the time.”

Hyatt also spoke of the BEA to Publishers Weekly: “My guess is that 95% of the people walking around are other publishers, authors and agents. As one of my colleagues said, we’re all getting dressed up for each other. So I don’t think it really helps us build our profile in the general market."

What we've begun to see are publishers experimenting with new models and looking critically at the shibboleths of the publishing industry.

Good for them.

Thirteen years ago, I became head of operations for a non-profit organization providing public mental health services. There were more than two hundred staff in my reporting line. I assumed the job at at time of consolidation in the industry and was told before my hire that I'd have to face laying off a sizeable part of the staff as well as closing services I believed were important to our vulnerable clients.

I had worked my way up to that job over five years and knew the company pretty well. I was confident there were things that could be done to address our deficit without a bloodbath.

When I first reviewed the financials, I was appalled by the amount of overtime being expended. When I asked why we were running up so much overtime, I was told it was because we had so many vacancies. Managers said, because they were unable to fill the vacancies, their people had to work overtime.

I drilled down to the individual numbers by staff and came up with a hypothesis for what was going on. After calling my managers together, I announced that henceforth no overtime would be permitted unless cleared by me personally. Managers warned me, since we ran 24/7, I'd be answering calls day and night. I handed out my pager number and said, "Have at it." For two or three days, I took calls almost every hour through the day and night as the system tested me.

Managers quickly learned that a call to me at 3:00 AM to announce a staff had called in sick for 7:00 AM was followed the next day by a visit from me to review staffing patterns. Within days, it became apparent that managers were deliberately not filling their vacancies in order to earn overtime for their staff, thereby increasing their incomes.

Bottom line: It was a form of self-help to address the problem of low salaries at our organization. As with most things, what had begun with good intentions had morphed into wholesale greed on the part of a few insiders. When managers were no longer permitted to abuse the system (and our fragile financial status), vacancies magically began to be filled . . . fast. The hundreds of thousands of dollars we were spending on overtime were now available to balance our budget. With the immediate financial pressure relieved, we could address the underlying issues that led to the problem in the first place.

We sat down together and reviewed both salaries and coverage (number of staff on a shift). We made equity adjustments and took a serious look at our ratio of staff to clients. When we were finished, we were back in the black without a major layoff or a reduction in services to the people we served who depended upon us.

Challenging the status quo and forcing everyone to look critically at how (and why) they do things is exactly what the publishing industry needs to do . . . fast.

Way to go, Michael Hyatt!!

No comments: