A fortnight ago Brian McCarthy presented his long-awaited strategy for Fairfax Media. Yesterday, he announced his resignation. Could the two events be connected?
That’s not the way McCarthy or Fairfax presented his departure after two years as chief executive, with both of them saying he wasn’t able to make the three-to-five-year commitment the board wanted from him to implement his strategic plan.
But last month’s strategy update, where McCarthy presented a management restructure (without the management) rather than a strategy went down so badly with analysts and fund managers that it would be difficult to believe it didn’t play some role in his departure.
The most common description of the briefing was “underwhelming”, while a number of those present have said the presentations were the least impressive they’d ever experienced. Presumably the board received some of that feedback from the market.
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The board does remain committed to the management restructuring, which brings back together the group’s key metropolitan mastheads and their online versions within a national editorial and sales structure and creates multi-platform sales teams for its other media businesses. That’s sensible, if the company can execute the restructuring and manage what will be quite complex and sensitive tensions once the new structure is in place.
But, with declining circulation and revenues in those core properties, and no articulated strategy for properly monetising them online — “we are all pioneers” was McCarthy’s response to questions about online yields — Fairfax, despite spending the best part of a year with consultants trying to develop a strategy, still has no coherent plan for arresting the implosions in its traditional properties.
In fairness, none of Fairfax’s peers around the globe have solved the conundrum of how to survive and prosper in the digital age, but the declines in the fortunes of The Age, Sydney Morning Herald and Australia Financial Review are steepening at a rate that demands a significant and fairly radical response. The group doesn’t have the time to wait until someone proves a model elsewhere.
McCarthy, who was chief executive of John B. Fairfax’s Rural Press for 13 years before the 2007 merger with Fairfax, was deputy chief executive to David Kirk before displacing him in 2008. He proved himself very good at managing costs — which helped Fairfax get through the financial crisis — but has been less effective in building or even preserving revenues.
To be fair to McCarthy, many of the challenges facing Fairfax had their origins in decisions taken, and not taken, more than a decade ago and his management restructure at least produces a more coherent organisational chart than the one he inherited.
The key boxes in that chart, however — the planned new metro chief executive, metro national editor, metro commercial director and metro classifies head — have yet to be filled and the long-term policy of managing down the cost bases of the metros in a simplistic response to their challenges (a policy that has ensured their continuing decline) is still being pursued.
Fairfax, as it acknowledged, is fortunate that earlier this year it appointed the former chief executive of Tourism Victoria — and before that a long-time Fairfax editor and publisher –Greg Hywood, to its board. Hywood will be acting chief while the board conducts a global search for McCarthy’s replacement. He would inevitably be regarded within the company as a potential permanent successor.
He has what Fairfax has lacked at its most senior levels of management and in its boardroom: deep experience in all facets of the business but most particularly in journalism, having been publisher and editor-in-chief of all three of Fairfax’s key mastheads. News Corp’s senior commercial management is studded with former journalists with an innate understanding of the media industry.
While presumably he will be constrained to some degree during the interregnum while Fairfax hunts for a permanent successor to McCarthy, his appointment as acting CEO is an acknowledgment by the board of his perceived qualities — and a statement by it of the lack of obvious internal alternatives within Fairfax’s executive ranks, even for a caretaker role.
*This article was originally published on Business Spectator