March 2007

Arts & Letters

Read all about it

By Gideon Haigh

Fred Hilmer’s ‘The Fairfax Experience’

Twenty years ago next month, a rube was introduced to a crook, and the world of Australian newspapers was never the same. The naif was Warwick Fairfax, overeager heir to the 146-year-old newspaper dynasty John Fairfax & Sons; the knave was Laurie Connell, a businessman racy even by the elastic ethical standards of WA Inc. Warwick perceived himself as saving the company from the dead hand of its incumbent management, including his conservative kinsmen James and John; within three years of his taking the group over, Connell's maladroit financial engineering had driven it into receivership.

Sold by its creditors in December 1991, Fairfax subsequently reappeared as a public company. Its misadventures, however, have continued. Fairfax may be the publisher of Australia's premier metro broadsheets, the Age and the Sydney Morning Herald, and its only business daily, the Australian Financial Review, but investors tend to value it according to the comings and goings on its register, while looking askance at its executive turnover and dwindling core businesses. It's as though the company now bearing the Fairfax name is a strange simulacrum of the pre-bankruptcy version, in newspapers but no longer of them, a corporation rather than an institution.

How else to explain the reign, as chief executive, of the management consultant Fred Hilmer, one of whose first public pronouncements was that he didn't really read newspapers all that much, and who recapitulates his tenure in The Fairfax Experience (co-written by Barbara Drury; John Wiley & Sons, 188pp; $32.95) in terms of how it compared to the theory of organisations in which he had previously transacted, first at McKinsey & Company and then at the Australian Graduate School of Management. What the Management Texts Didn't Teach Me is the book's subtitle, conveying a sense of surprise that there was anything much at all.

The book has already been pored over by media types anxious for insight into Fairfax's inner workings - or, to be more precise, confirmation of their existing prejudices. The Australian ran a lengthy extract, as though it contained revelations of the organisation's seditious liberal tendencies, flourishing Hilmer's comment that "editorially the company's default position was to turn Left and be agenda driven." Ha! They knew it all along. The response in the Fairfax stable has been tepid reviews and tart responses from erstwhile executives, as though it is a bitch-slapping memoir. Of course, they never liked him.

This, however, is barely the half of it, for The Fairfax Experience is only marginally about the media. Its subject is management: in particular, the way management reduces everything in its path to inputs, outputs, processes and PowerPoint presentations, oblivious to its own vanity and delusions. No Taylorist ever described the work of a foundry with the same incomprehension as Hilmer in delineating the exercise of news gathering:

For example, the daily editorial cycle begins with a story idea and ends with publication. In a perfect world the story would be written with little need for alteration; but in reality, some stories at Fairfax were touched up to thirty times on the journey to publication. When that is the case you need to know the minimum production cost of a story and the cost at the other extreme - that is, after thirty hands have touched it - and then ask what accounted for the difference in cost. If you don't break the costs down into components you are just guessing. Some of my most difficult meetings within the company were with the newspaper publishers - not because they were difficult people but because they had little or no experience of management processes within a large public company.

Just as Napoleon thought of every French soldier as carrying a field marshal's baton in his knapsack, Hilmer fantasises of a business singing from the same spreadsheet, and his own default position was an all-pervading condescension: "A lack of financial literacy was part of the problem; many of the costs in a newspaper's profit and loss statement are allocated on a basis few publishers understand," he writes. "Consequently, people at Fairfax did not feel ownership or responsibility for their part of the business." The idea of ownership or responsibility that is not financially based never seems to have occurred to him. With his new religion of accounting accountability, he is as impervious to doubt and intolerant of dispute as a missionary intent on civilising the heathen.

When tensions between ‘church' and ‘state' are concerned - that is, the traditional rivalry between editorial and enterprise - Hilmer is particularly derisive:

While a strong journalistic culture is valuable, there were elements of the tradition that were holding back the business. One example was the prevailing sense among editorial staff that the business side of the newspaper industry was the enemy of editorial independence. This made it impossible to work across mastheads to save costs because each publication functioned as a self-contained silo in competition with the others.

Again, Hilmer does not entertain the possibility that the value of a masthead derives in part from protecting its editorial autonomy: a "strong journalistic culture" is commended with the same tone as one might recommend good quality stationery. And again with the condescension: "One of the things I grew to love about journalists was their cleverness in pursuit of what they saw as editorial interests." Of course, they prove no match for Hilmer in the cleverness stakes: "I could use terms like ROE (return on equity) and TSR (total shareholder return) and be confident that the board would understand, but if I went to the editorial floor or to one of our printing plants and slipped the same jargon into conversation it would poison communications." Fancy that!

Ultimately, The Fairfax Experience should really be called ‘The Hilmer Experience', for it is concerned with the author far more than the subject: Hilmer could have run a company making canned soup or truck tyres and written much the same book. After a while, the question of what he did loses force, being replaced by the conundrum of what he was doing there in the first place.

In The Fairfax Experience, Fred Hilmer seems in the grip of a most curious conviction, that he is the first executive who has ever told journalists that newspapers are a business. In fact, for generations they have been told nothing but - and not without good reason. The fons et origo of the newspaper is the political pamphlet: the original newspapers were the instruments of sectional interests, fiercely partisan, actively proselytising. The rising capital cost of presses, newsprint and labour then forced them into the hands of commercial proprietors; industrialisation, urbanisation and the demand for news stimulated by World War I steadily made them into lucrative enterprises. Proprietors didn't just create a protective cordon around editorial because it was in the interests of democracy; they did so because it enhanced the authority of their masthead, and themselves, which made newspapers more effective as instruments of public suasion, and as mints of advertising money.

As the American professor of journalism Philip Meyer observes in his perceptive analysis of the industry, The Vanishing Newspaper (2004), we should be free of illusions about this: "The reason newspapers were as good as they were in the golden age was not because of the wall between church and state," he writes. "It was because the decision-making needed to resolve the profit-service conflict was made by a public-spirited individual who had control of both sides of the wall and who was rich and confident enough to do what he or she pleased."

It suits Hilmer's purposes to present Fairfax as having been operationally ineffectual when he joined, so that he can exaggerate its need for his slick commercial elixir. When he arrives, for example, he gets as close as he ever does to banging the table. Research! Bring me research!

The circulation figures told the company nothing about its readers. Readership surveys covered whether readers were male or female, young or old, wealthy or not, but they didn't tell Fairfax why people did or did not buy its papers or why they switched to other publications.

To fix the problem extensive research was carried out. On the whole editors responded well to improvements in market intelligence and necessary changes were made, both to the papers themselves and to how they were sold and marketed. Perhaps traditions at Fairfax were so entrenched and so difficult to change because they had never been rigorously questioned or held up to scrutiny.

Yet research is newspapers' God That Failed. They have been probing and prodding and polling their readers for generations, even as they have watched their circulation dwindle due to secular forces over which they are mostly powerless: somewhere, there are probably mountains of market research undertaken by buggy-whip manufacturers in the early days of the horseless carriage, too. Readers seldom have strong or particularly enlightening views about their newspapers; bother polling them, and you mainly end up jumping at shadows.

"Surveys are quite helpful in telling editors about the lifestyles of their readers and where to find them," points out the former Chicago Tribune editor Jim Squires in his classic critique of American newspapers, Read All About It (1993). "But ... readers always start out by saying the paper is too fat and end up by saying they want more of everything; and non-readers always say that the newspapers they are not reading are dull, are boring and contain nothing relevant to their lives." And so, it appears, was the experience at Fairfax: for all those "necessary changes", Hilmer confides that there were, in his time, no circulation increases "that could be linked to an editorial initiative".

Undiscouraged, Hilmer then takes his new business mantra to the workplace, where the journalists, as is their wont, resist. This vignette of some "in-depth process engineering" that Hilmer initiated at the Australian Financial Review goes a long way to explaining his approach:

Fairfax found that stories were being filed by journalists at the end of the day, that most were being touched up to thirty times by the writer, editors and subeditors and that a lot of this work was being done between 5 pm and 7 pm ... Instead of just hiring more sub-editors and leaving the Australian Financial Review to operate as it always had, the paper redefined its processes to do more work earlier in the day and to touch stories less. These actions underpinned excellent cost performance for a number of years.

Journalists filing at the end of the day: who knew? Couldn't they have written the stories first, then done the reporting? And what is this "touching" going on? Does he mean subediting? If so, what was the impact on the quality of the paper, as distinct from its "excellent cost performance"? No wonder Hilmer found that "the people I had the biggest problems with were the seasoned Fairfax hands, rather than the people I appointed." When the boss is this obtuse, the bonehead who flourishes is the one with a square peg promising imminent breakthrough. Don't worry about that round hole, chief! It'll definitely develop straight edges if I just keep hammering!

The other dimension of the Hilmer approach was to scorn any pitch for a new initiative or additional resources that did not involve an easy pay-off:

People were passionate about expanding Fairfax's coverage of the arts in the Spectrum section on Saturdays, for example, but the initiative never produced the higher advertising revenue they hoped and believed it would. The revamped Spectrum created a better Saturday package but it did not alter the fundamental economics of the paper ... Higher circulation was only ever driven by things such as sales and discounting, putting papers in petrol stations and promotional activity.

I eventually became cynical and told people they had to give me an advertising case for any new initiative no matter how passionate they were about it or they would not get the money. If people said it would raise the profile of the paper, I would ask them to show me one reader who would buy the paper that otherwise would not. I also insisted that advertising sign off on any changes because editorial was often keen to leave advertising out of the loop. In the end you have to make a judgement not just about people's passion but also about their ability to deliver.

Follow this thinking through, if you will: each newspaper section to make an advertising case. Never mind your Spectrums or your A2s or your Insights: why would you bother with news? After all, it's hardly the kind of feelgood backdrop we want for a Rolex promotion, is it?

A powerful impression forms, in fact, of a chief executive who simply wanted others to retrofit from preconceived notions - that papers are screwed, that the only strategies worth pursuing are diversification and/or disinvestment etc. - and with an unappeasable hankering to be confirmed in them. Towards the end of his tenure, for example, Hilmer committed a 40-member team to "modelling what would happen to the company's newspapers if classified advertising revenues declined further". Their front-page scoop of a conclusion? "All agreed that the business would not be sustainable in its current form and that the company would have to continue shedding staff." That's why he's on the big bucks: if revenue falls, you might have to cut costs. Business, eh? No wonder we journalists find it complicated. What's that thing about buying high and selling low again? Ah, my bad: I was thinking of Warwick Fairfax.

Warwick Fairfax and Fred Hilmer have at least one common attribute: both have MBAs, Fairfax from Harvard and Hilmer from Wharton. And while newspapers have traditionally been associated with barnstorming proprietors, the pervasion of newsrooms by management dogma has been no less marked for its stealthiness. It's now almost 15 years since Doug Underwood, latterly of the Seattle Times, devoted a famous book to the trend: When MBAs Run the Newsroom (1993). Since then, the hidden hand of consultants and seers has lurked behind many moves, especially in the American media: it was a report to Times Mirror from Boston Consulting that spelt the end of New York Newsday; it was the guru's guru, Peter Drucker, who was called in when the Los Angeles Times wanted to make itself over, whereupon the creation of new sections in the paper became known as "getting a Drucker process going". In The Fairfax Experience, Hilmer casually mentions that he started work shortly after McKinsey's had swept through Fairfax, stripping out costs; there is no mention of the ransom that his former employer extracted for suggesting that hacks use both sides of their notepads. For those evaluating the Hilmer ascendancy, though, perhaps the most instructive comparison is with the management misadventures of the world's biggest paper, the New York Times.

In 1969, the then publisher of the Times, Arthur Ochs ‘Punch' Sulzberger, committed the organisation to "a multiyear program of management study and executive development" with the Harvard Business School's Chris Argyris, the author of a celebrated text on industrial psychology, Organization and Innovation (1965). Argyris was given carte blanche to go where he pleased, and to talk to and record whomever and whatever he wished. He found what he considered an inconceivably dysfunctional company, one senior Times man telling him: "You know you've become a full member of this organisation when you genuinely believe that few changes are possible and that it is necessary to hold such a belief to remain sane."

Argyris's account of his program, Behind the Front Page: Organizational Self-Renewal in a Metropolitan Paper (1974), is one of the funniest books ever written by an entirely humourless man, with its interviews evaluated according to "thirty-six variables that enhance or detract from individual interpersonal competence, that facilitate or inhibit effective group dynamic or intergroup relationships, and that result in organizational norms that increase or impede effectives". The most revealing sections prove to be Argyris's interviews with Punch Sulzberger. Sulzberger's patrician papa had been known for his maxim "I believe in an open mind, but not so open that your brain falls out." Talking to Argyris, Punch sounded like someone in danger of just such an eventuality.

Argyris: Once in a while, it's important to open up the hood of your car and see if the motor is working effectively.

Sulzberger: My father used to say if you had a car going fifty miles an hour, never open up the hood.

Argyris: This is a choice we now have to make. Do we want to look at our behaviour?

Sulzberger: I think we have to. We can't go back to the old days ... My difficulty is that I try to involve everyone and I get no decision made ... I wanted to open up the big issues of the paper. Where are we going? Are we drifting, resting on our laurels? I wanted ... a rational discussion that would lead somewhere ... I've never been able to succeed in doing it.

When the book came out, even Sulzberger agreed it had been "a little bit too psychological for us at the particular time" and "a terrible invasion of privacy". But there must have been something in the genes, because his son Arthur Ochs Sulzberger Jr, AKA ‘Pinch', also took a guru on succeeding to the role of publisher, 15 years ago. His was W Edwards Deming, the statistician identified with the Total Quality Management (TQM) movement, who Pinch watched evangelise at a four-day seminar for the US Department of Defense in 1990. Deming was then at the peak of his influence, made famous for his role in postwar Japanese rebuilding by an NBC documentary, If Japan Can, Why Can't We? In their excellent New York Times history, The Trust (1999), Susan Tifft and Alex Jones explain how Sulzberger became a fervent Deming disciple:

Deming's ideas would quantify the production process mathematically so that managers would rely on data rather than anecdotes when making decisions. The approach was better suited to assembly lines than to newspapers, but for Arthur Jr it held the promise of inherently democratic decision-making based on fact, not an executive's whim.

Edwin Diamond describes, in his Behind The Times (1993), how shifts of employees were brought to the New Yorker Club in June 1991 to hear how TQM would be applied "to every department and every employee" of the Times. The newsroom floor pullulated with cross-functional teams; interminable meetings were spent on such tasks as re-engineering Adolph Ochs's legendary commitment to "All the news that's fit to print", which produced something "as uninspiring as a corporate press release that "quickly disappeared into filing cabinets". Reporters absorbed the changes "with the same weary scepticism that reporters usually adopt when invited to news conferences by promoters of ‘miraculous' self-help nostrums".

Sulzberger insisted on pushing, to the extent of specifying a new, more collegial seating plan for news conferences, and between October 1992 and January 1993 staged no fewer than five retreats for senior staff facilitated by the "professional change agent" Doug Wesley. These, however, became increasingly vicious and destructive. Ken Auletta relates, in Backstory (2004), how they became excuses to beat one another up, especially the hapless executive editor, Max Frankel:

Wesley stood at his easel and pressed the editors to free-associate. He asked them to describe in a few words the news department, say, or "the rules of the road" in the newsroom.

"When in doubt, dissemble," was a rule that one editor cited.

"Paradox: the best newspaper in the world can't keep its bathrooms clean," was another editor's contribution.

Each remark was written on the board, for a total of about thirty items.

Frankel exploded. "Let's not play these stupid games," he said. "This is intellectually dishonest. This doesn't represent what we think of ourselves." Few disagreed.

Of Sulzberger's infatuation, Tifft and Jones conclude: "Much of his frenetic effort to transform the Times was really an attempt to define himself. Privately, some editors and managers complained that he was self-indulgently figuring out who he was in their time."

There are many possible answers to the question of why heavy-handed managers court such resentment and resistance in newspapers. Journalists are awkward, wilful, egotistical; they are leery of abstract notions and formulaic solutions, in which management theory abounds; they resent overt instruction and overmighty supervisors, by which Fairfax has increasingly been gripped. This does not make them incorrigibles urgently in need of reprogramming, as Fred Hilmer insists ("Culture was by far the toughest nut to crack at Fairfax"). If anything, their management model may be more advanced than they are given credit for: a good newsroom operates along the lines of what the American diplomat and organisational thinker Harlan Cleveland has called "the nobody-in-charge society".

Whatever the case, their dispositions, duties and drives certainly make journalists a supreme mismatch with the standard command-and-control management pyramid evolved by twentieth-century industrial capitalism, inspired by the military, the clergy and Weber's model of bureaucracy. And for all his academic credentials and consultant jargon, Fred Hilmer was just another narrow know-all with a slick shtick: no Thomist could quote Aquinas with the same conviction and credulity as Hilmer invoking Jack Welch of GE, or citing the management maven of the moment, Jim Collins.

To the question of why he was appointed, then, the inference must be that Hilmer was a choice for the sake of the comfort of Fairfax directors, not the needs of the organisation, and certainly not the quasi-institutional status of the media. In his time, the board was populated by four investment bankers, and business people with backgrounds in property, retailing, television, advertising, mining, accounting and e-commerce. It is hard to avoid the conclusion that, conscious of the profundity of their ignorance about newspapers, they chose someone who shared it, who could reduce their organisation to something explicable in managerial and mechanistic terms, and who would steadily populate his executive with like minds. And while Hilmer has gone, his type flourishes, which is something journalists had better get used to, and should be prepared to challenge. There is, as Ken Auletta remarks, no point complaining:

We would do better to recognize that this is the nature of the business culture and figure out how to translate our journalistic concerns into language corporate executives can understand. Since they write the checks, somehow journalists must persuade our corporate chiefs to broaden their too-narrow definition of success.

In his survey of press barons, Paper Tigers (1994), Nicholas Coleridge ends a retelling of Warwick Fairfax's star-crossed buy-out with a poignant cameo of the self-disinherited heir threading his way through the catacombs of his former company's head office for the last time:

By now, a Sydney Morning Herald journalist had had the idea of conducting a valedictory interview with the erstwhile proprietor, and following him to the lift.

"Have you anything to say before you go?" he called out to Fairfax.

"Only that I'm sorry," he replied flatly as the metal lift doors closed behind him.

Fred Hilmer isn't sorry. As far as he was concerned, he was just doing his job.

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