Dow Jones Enters Uncertain Era With New Leadership : Media: The parent of the Wall Street Journal must deal with acquisition debt at a time of economic downturn. Its austerity effort may hurt an unusual corporate culture.

The executive memorandum, dated last Oct. 3, described foibles of a sort that usually delight Wall Street Journal reporters:

Big-shot managers at a New York company, deep in the throes of a cost-cutting campaign, were being pestered by Canada geese every time their helicopter flew into a New Jersey branch office.

So the company decided to buy three border collies and train them to herd the geese. But the collies might run off, the memo noted. So the company would also invest in a sophisticated electronic “fence”--protecting jobs for dogs, while laying off people.

As it happens, the company is Dow Jones & Co., which owns the Wall Street Journal. And any delight that Journal reporters have taken in underground copies of the goose-chasing memo is offset by a growing sense that their corporate parent, after all, is much like any other.

(As for the geese, the company eventually reprinted the memo in its employee newsletter. “We like to think we can laugh at ourselves,” says a spokesman.)

In its fifth year of austerity, Dow Jones, the nation’s premier purveyor of business information, enters 1991 with both new leadership and an unaccustomed identity crisis as it struggles with hard times aggravated by a difficult shift toward electronic data delivery.

Peter R. Kann, a 48-year-old reporter-turned-publisher, on Jan. 1 succeeded Warren H. Phillips, 64, as Dow Jones’ chief executive. Kenneth L. Burenga, 46 years old and previously general manager, became executive vice president and succeeded Kann as chief operating officer.

Kann won a Pulitzer Prize in 1972 as a Journal foreign correspondent, but he worked only briefly covering American business and is regarded as something of an outsider by many in the newsroom.

In a departure from the days when news executives reigned supreme, he will be the first Dow Jones CEO since World War II not to have served first as managing editor of the Journal.

Similarly, Burenga is the first non-news person to have become second in command during the period. And the two will inherit a company that faces tensions similar to those of corporations that appear in stories on Page 1 of Dow Jones’ flagship business paper.

Stung by a recession in New York since October, 1987, and the expense of a major expansion into electronics, Dow Jones managers say they are cracking down on performance reviews, offering early retirement to highly paid employees and firing reporters to slash costs.

The company expects to report slightly more than $100 million in net income for last year, on revenue of $1.7 billion. That would be its worst performance since 1982, partly because profits slipped badly in the Telerate electronic data service just as Dow Jones took on heavy debt to complete its multistage buyout of the unit for $1.6 billion.

Telerate, a highflier in the 1980s, got hurt in part because S&L; executives, bond traders and other customers for its price quotes and other data were among the hardest hit by the financial recession that also slashed advertising revenue at the Journal. Even as the recession hit, competition intensified among such financial information vendors as Telerate, Reuters and Citicorp’s Quotron subsidiary.

Lately, Journal workers--no slouches at business analysis--have been questioning their own management and recently mounted a drive to affiliate their company union with the powerful Communications Workers of America. The affiliation effort failed last month in a 701-402 vote.

The Journal’s New York newsroom proved to be a strong pocket of affiliation sentiment, even as production workers and others in outlying facilities voted down the measure.

In a sense, Dow Jones, founded 118 years ago around a service that hand-delivered financial bulletins, is simply growing up. New tensions became inevitable as it evolved over the past decade into a media conglomerate that gets more than 40% of its revenue from electronic information services both here and abroad. It also owns such publications as Barron’s and the Ottaway Newspapers chain.

“Yes, (Dow Jones) is somewhat larger than it was before, and, yes, it is somewhat more diverse in what it does. And in some (ways) it is perceived by people on the outside as more like other companies. But I think it is not,” says Kann, a Princeton professor’s son who spent his entire career with Dow Jones after joining the Journal just out of Harvard University in 1964. Kann believes that the Journal ultimately will become the primary global business newspaper, even while expanding the reach of its electronic news and trading services worldwide.

As it works to find a new balance, however, Dow Jones also risks losing the benefits of an unusual, loyalty-based corporate culture in which employees, from top to bottom, often seemed to revel in their mission: to get the news, first and best.

In what some at Dow Jones regarded as an ominous prelude to the new regime, Kann and Phillips on Oct. 11 jointly presented their troops with a detailed budget-cutting program that is referred to internally as “The Twelve Points of Darkness.” Shortly afterward, they announced plans to close part of a printing operation in Illinois and a news bureau in Philadelphia, eliminating about three dozen jobs--and sending morale into a nose-dive.

“This is depression central,” said a top Journal editor who declined to be identified. “They’re really playing hardball with us.”

Six times in the 1980s, Fortune magazine’s annual list of the most admired businesses in America ranked Dow Jones No. 1 among U.S. publishers. And despite its current economic problems, the Wall Street Journal continues to be one of the nation’s most respected newspapers. It has taken major steps in recent years to broaden its readership with a variety of new features, columns and specialized areas of coverage including culture and sports.

But executives and workers alike now believe that the company’s growth in the past decade outstripped management structures that had largely evolved from the newsroom. With about 9,500 employees, nearly double its 1980 level, for instance, Dow Jones is now installing companywide performance reviews and a system for informing employees of job openings.

Those reforms, Kann says, were demanded by the Journal’s company union, the Independent Assn. of Publishers’ Employees. The union--whose officers say they now fear that harsh performance reviews will be used to force out older employees who turn down early retirement--had argued that haphazard job ratings made the distribution of rewards unfair.

The union also argued that choice positions increasingly went to an old-boy network of editors’ friends under the “druthers” system, whereby Journal troops traditionally grabbed superiors in an informal setting and expressed their druthers as to where they’d rather be.

To some, Kann’s evolution as a hard-nosed manager seems at odds with his past reputation for freewheeling creativity. It is widely assumed at Dow Jones that Burenga, an accountant by training, is supposed to keep a check on Kann’s expansive tendencies. Yet Phillips insists that Kann, though buoyant by nature, has never shrunk from tough decisions.

“I think he’s probably a lot better at that than I am,” says the former chief executive. Phillips made Kann his assistant in 1979, when the younger executive returned from Asia, where he helped set up the Journal’s Hong Kong-based edition.

Yet some news employees now argue that the company has fostered a new type of corporate behavior that would have been quite unusual a decade ago. Recently, tongues wagged over the story of a reporter who was transferred from Washington to Philadelphia only weeks before the Philadelphia news bureau was closed and most of its employees fired in what the company described as a cost-cutting move.

By several accounts, the reporter, seven-year Journal veteran Jolie Solomon, had asked top editors about the rumors of a pending shutdown. They downplayed the risk, urged her to make the move, then immediately closed the bureau. Solomon was offered a new job in New York but decided instead to work for the Boston Globe.

News executives also complain that none of Dow Jones’s four senior vice presidents have ever worked in the Journal newsroom. (In the next management tier, Karen Elliott House, a former Journal writer and editor who is married to Kann, is a corporate vice president for international business.)

But Norman Pearlstine, the Journal’s managing editor and a longtime friend of Kann, dismisses concerns about the Journal newsroom’s clout within Dow Jones. “When Kann . . . was told he was going to become president and then chief executive officer, I congratulated him on getting the second-best job in the company. Because I think I’ve got the best one,” Pearlstine says.

Kann says many employees had come to view the old culture as a “caste system” in which non-news managers from Dow Jones’ advertising, production and the burgeoning electronics services departments felt undervalued.

Less than a decade ago, he points out, “the only way a business person could talk to the editor about anything, including how come we missed a (printing plant deadline) last night, was through management committee representatives, who would then go into the chairman. . . . Then the chairman would have to go back down and talk to each and say, ‘How come we have this problem?’ That wasn’t a very efficient way to run anything.”

Internally, Kann’s own appointment was widely seen as a stinging political defeat for Dow Jones’ electronics services chief, William L. Dunn, who resigned abruptly a year ago when it became clear that Kann, yet another newspaper executive, was to become Phillips’ successor. Dunn is “a very talented guy. He was not ruled out by politics . . . although I’m sure he’s convinced otherwise,” Phillips says.

Dunn, who is still a consultant to Dow Jones, declined to comment. One Dunn associate says the executive, proud of having fueled growth with such innovations as the satellite transmission network that let the Journal publish nationally in the 1980s, felt he was entitled to the chief executive’s post. When Kann was chosen instead, Dunn declined to become president, even though he might have helped balance the company’s print and electronic interests in that role, the associate said.

Information services contributed 61% of Dow Jones’ $494 million in pretax operating income in 1989 and appear to have accounted for roughly half of 1990’s profit. Carl Valenti, who succeeded Dunn as Dow Jones’ electronics chief, dismisses the notion that the computer divisions have been under-represented. “There’s very little politics at Dow Jones,” Valenti says. “We just don’t stand for it.”

Valenti says it has been difficult to reconcile the “entrepreneurial” spirit of Telerate, where budgets were anathema and customer service lagged market growth, with the more sober culture at Dow Jones. But he also believes that the critics, including some normally astute business thinkers at the Journal, fail to recognize the full value of Telerate’s 90,000-terminal, worldwide information network.

“What Telerate brought to Dow Jones is an electronic distribution pipeline to over 60 countries,” says Valenti, who points out that Dow Jones previously delivered electronic news abroad only through a patchwork of alliances with foreign companies such as Japan’s Kyoto News Service.

Until the union affiliation vote failed in mid-December, some Dow Jones employees had hoped to unify their internal culture in ways that company managers didn’t wish.

Union activists at the Journal had sought affiliation with the CWA--which represents employees with General Telephone and the Baby Bell companies--because of the union’s presumed ability to lead an organizing drive among Telerate’s 2,500 employees, many of whom would have more in common with phone company workers than with writers and editors.

Telerate sells financial information such as price quotes on U.S. government bonds and other financial instruments over a computer network to subscribers around the world. Its workers are concerned more with the technical challenge of delivering detail-intensive information at lightning speed than with the news analysis and investigative spadework performed by Journal reporters.

“We frankly don’t think we can organize Telerate by ourselves. But to have 800 employees sitting across the river unorganized (at a major Telerate facility), this has got to be an issue,” says Douglas Sease, a Journal reporter and head of IAPE’s bargaining committee. Sease believes that IAPE, which is staffed by volunteers, was undercut in the affiliation drive by the threat of a big hike in monthly dues and by the relative strength of its current contract, which promises a 5% pay hike next year.

Last fall, the union became alarmed when Dow Jones disclosed plans to transfer 18 union employees from Dow Jones Capital Markets Wire to Telerate’s non-union electronic network center in Jersey City, N.J., just across the river from Dow Jones’ Manhattan headquarters.

The move, in tandem with the latest round of budget cuts, has fed growing concern among many Journal workers, some of whom believe that the paper--which has remained profitable despite the downturn--is being milked to service more than $650 million in debt that Dow Jones has carried as a result of the Telerate acquisition. “They’re just slimming us down so we can be even more of a cash cow come January,” says one longtime Journal reporter.

Pearlstine replies: “You can’t have year after year of expenses growing at a higher percentage increase than revenues. And in the Journal’s case, that’s been true maybe five of the last six years.” He acknowledges that productivity among editors and reporters has increased markedly over the past five years, as the staff shrunk by about 15% even as the paper’s news columns grew.

Internal debate continues to center on the fact that Telerate, despite the Journal’s budget cuts, requires ongoing investment to develop such products as “analytics,” which manipulate its bond quotes and other data into more useful formats, and its new foreign currency trading system, which has yet to capture a significant chunk of a business now dominated by Reuters.

Yet pain may be the inevitable price of growth, particularly given Dow Jones’s determination to conquer the world. Says Kann: “I think it’s a pretty realistic strategy, partly because we’re pretty well embarked on it, and partly because that’s where the markets in every sense are headed.”