GRUNER & JAHR PLANS CUTBACKS AND 'SACRIFICES'

CEO Memo Warns Staffers of Planned 'Streamlining'

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NEW YORK (AdAge.com) -- In the magazine world's first cutback of the new year, Gruner & Jahr USA Publishing President-CEO Dan Brewster warned staffers to brace for a corporate "streamlining" and the "need to sacrifice" to get through the recession.

The company will put its resources behind


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properties with the most growth potential, according to an internal memo distributed today. That could put pressure on struggling titles in G&J's portfolio such as Homestyle.

Senior VP leaves
Left unmentioned in Mr. Brewster's missive was the departure of at least one senior G&J executive: Ken Wallace, senior vice president of corporate sales. Mr. Wallace said he would leave the company, which also publishes Family Circle, Parents and Rosie, by the end of January and characterized the split as "amicable."

The corporate sales unit will now report to Cindy Spengler, named G&J's chief marketing officer last fall.

Another senior executive, Bennett Theimann, vice president and general manager of the Business Innovators Group, the unit that oversees Fast Company and Inc., is expected to take on a new assignment within G&J parent company Bertelsmann AG.

"My title hasn't changed," said Mr. Theimann, although he declined to comment on whether his responsibilities would.

The memo outlines a framework to deal with the tough ad market -- and, some would say, the lingering effects of overpaying for Inc. and Fast Company, which together cost G&J more than $500 million.

'Accepting the need for sacrifice'
"Absent any further deterioration of the advertising environment,

Photo: Doug Goodman
G&J CEO Dan Brewster warned staffers of the need for 'sacrifices.'
we will be able to offset most revenue shortfalls through streamlining corporate functions and managing our operations more efficiently," reads one key section of the memo, according to a G&J staffer who received it. "In order to retain shareholder -- and ultimately employee -- confidence in our ability to manage our business successfully, we cannot embrace growth without also accepting the need for sacrifice."

Staffing cuts
The memo also strongly hints at the possibility of staffing cuts. Divisional heads are directed to "review any job descriptions that overlap or result in inefficient reporting lines." The company will also "substantially eliminate the use of temporary employees."

January raises expected by staffers will be delayed --although the last round of raises went through in June -- on the grounds that doing so "will reduce the need for more aggressive headcount reductions." (Merit-pay bonuses could come at mid-year.)

Statement of principles
Through a spokeswoman, Mr. Brewster stated: "We have set forth a statement of principles and goals that will govern our actions over the coming months."

If recent history is a guide, it's doubtful G&J's moves will be the last from the industry this month. Last year both Hachette Filipacchi Media U.S.'s George and Dow Jones & Co./Hearst Magazines' Offspring, an offshoot of the Smart Money joint venture, shut down in the first week of January.

Magazine-industry coverage shone a bright spotlight on Mr. Brewster in his first 18 months as CEO. The 46-year-old was charged with doubling the size of the company within five years.

But 2001 was not kind to his company. Parents, a crucial cash cow, saw its ad pages fall 14.1% through November, a larger fall than that of its trailing competitor, Time Inc.'s Parenting. Business titles Inc. and Fast Company watched ad pages fall 44.5% and 56.7%, respectively, through November. Homestyle saw pages drop 26.9% for the same period, to just 436.1, according to Publishers Information Bureau.

Ad pages down 14.2%
Through October, the company's total ad pages were down 14.2%, significantly greater than any of the top 10 magazine companies measured by ad pages save for tech publisher Ziff Davis Media, according to Competitive Media Reporting.

"The message was very positive," insisted one company executive, pointing to portions of the memo that refer to G&J's desire to continue to attract top industry talent and expand. Still, the executive conceded, "If you read between the lines, there will be ongoing changes. There is no status quo."

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