Part three: Culture shock

With the takeover complete, Sam Zell and his team of outsiders brought a new approach, but their ideas never took off and their style alienated employees

January 14, 2013|By Steve Mills and Michael Oneal, Chicago Tribune reporters

Tribune Tower was in crisis, and the illustrations of penguins installed in the building's ornate lobby were meant as a constant reminder.

With Tribune Co. revenues sliding and managers struggling to adjust to an Internet revolution, executives in early 2007 turned to a Harvard Business School professor to motivate employees. The penguins in the building's display cases stood on melting icebergs — the professor's metaphor for an industry experiencing rapid and potentially fatal change.

Company executives, led by CEO Dennis FitzSimons, hoped the penguins would communicate urgency and spark reinvention at the media conglomerate. Instead, the display prompted snickering and puzzlement by many employees. Despite FitzSimons' efforts, the company's staid culture did not change. Readers and advertisers continued to move away from its products.

Turning around the fortunes of a national company with nearly 20,000 employees is at once a delicate and unsubtle enterprise. The success stories can become fables of their own — how Steve Jobs tenaciously transformed Apple from a struggling niche computer-maker into a consumer products powerhouse, or how Alan Mulally saved Ford.

So it was that when Sam Zell took control of Chicago-based Tribune Co. at the end of 2007, there was hope within the company that the feisty Chicago real estate billionaire and his team might be able to do what FitzSimons' team could not: inject life into a national roster of newspapers -- including The Baltimore Sun -- and TV stations. Even some career Tribune Co. executives — a mostly buttoned-down group — expressed relief at Zell's arrival.

"We were open to additional innovation opportunities, whether they came from inside the company or from Sam — and Sam did have a track record," said Scott Smith, a company veteran and former president of Tribune Publishing.

What happened next could be seen as a case study of how to squander an opportunity at reinvention. Less than a year after Zell took control, Tribune Co. filed for bankruptcy protection. Less than two years after that, Zell's hand-picked CEO, radio executive Randy Michaels, resigned amid allegations he had created a hostile and sexist work environment — his goal of turning the company into a digital powerhouse unrealized and his team's efforts to energize Tribune Co. culture widely considered a failure.

Rather than inspiring employees to embrace a new culture, a task experts say is crucial to remaking a company, Zell and Michaels took an approach that alienated many employees and managers. Attempting to stir the company from its lethargy and instill a more creative spirit, they came off as disdainful and insulting. Instead of fostering innovation among current employees, Michaels brought in a coterie of his colleagues from the radio industry who could not deliver the innovative breakthroughs the company needed.

In short, Zell and Michaels never bothered to understand the workplace they were trying to remake, which should be job one in corporate culture change.

"It's not how smart you are. It's how much you know about the business. That's why most people fail at turnarounds," said James Schrager, a professor of strategic management at the Booth School of Business at the University of Chicago. "Sam Zell, for all of his brilliance, probably didn't get the business."

Pressed by deteriorating financial conditions and an onerous debt load, the Zell team bought out or laid off at least 5,000 employees across the company. Many employees were angry that managers continued to receive millions of dollars in incentive bonuses.

When Tribune Co. filed for bankruptcy in December 2008, Zell's promise that employees would share in the profits evaporated as their nascent stakes in a new employee stock ownership plan were wiped out. That further sapped enthusiasm.

Zell declined to comment for this story. He left the company as chairman Dec. 31, 2012, when it exited Chapter 11 bankruptcy under new ownership.

In an interview, Michaels maintained that faced with the company's eroding finances, he had to push employees to act faster to adapt to an increasingly digital media world. That effort, he acknowledged, may have fallen short.

"I cared a lot about that company, and while I recognize that there's plenty that people might disagree with, I worked hard to keep those brands relevant in a changing world," he said. "We thought that by knocking down some of the walls, by bringing in a looser culture and getting rid of all the bureaucracy, that we had a chance to outperform. I thought it was my role to challenge everything."

As it happened, Zell installed in Tribune Tower's lobby his own illustration meant to spark a new culture: a squat statue of a man with six legs running in circles called the "Bureaucratic Shuffle." Like the penguins of the previous regime, it prompted snickering and ridicule. Today, Zell and Michaels are gone. So, too, is the six-legged statue.

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