Murdoch Addresses the Troops After Chernin Leaves: Time to “Streamline”

Published on February 23, 2009
by Peter Kafka

rupert-murdochWhat will News Corp.’s management structure look after Peter Chernin leaves? In the very short term, it will remain the same, except that the Fox units Chernin ran–the movie studio, network TV business, and Fox Interactive/MySpace group–will report directly to CEO Rupert Murdoch.

But Chernin’s departure will also kick off a near-term management shuffle, which Murdoch refers to in his memo to the troops, reprinted below. Passage that’s going to draw immediate attention from News Corp. (NWS) employees:

Now is also an ideal opportunity to streamline and enhance many of the corporate and administrative functions of the business. There will be cost savings as a result, but the more important aim is to be leaner so that we can better leverage our collective talent and expertise.”

I don’t think this augurs mass layoffs–News Corp. has already been making cuts throughout its operating units, albeit on a fairly small scale. But it definitely sounds like a reorg is in the future.

Also up for intense discussion now that Chernin is moving out: Who is supposed to run News Corp. when Murdoch leaves, and when will that happen? (News Corp. is the owner of Dow Jones, which owns this Web site.)

For years, the clear understanding inside and outside of the company is that one of Murdoch’s kids–at one point his daughter Elisabeth was an heir apparent, then his son Lachlan, and now his son James–would run the company one day. But until they were ready, Chernin could step in and oversee News Corp. if Rupert Murdoch, who turns 78 next month, needed assistance. Now what?

Here’s the complete memo from Rupert Murdoch to News Corp. employees:

Sent: Mon Feb 23 19:19:40 2009
Subject: A message from Rupert Murdoch regarding Peter Chernin stepping down

Dear Colleagues:

Today, we are announcing that Peter Chernin, our President and  COO, will not be renewing his employment contract. Peter will be taking up the opportunity to start a new motion picture and television production venture with Fox.

Attached is the press release.

Many of us who have worked with Peter over his 20 years with the company can attest to his leadership, his diligence, and his wisdom. I can also testify to Peter’s friendship, dedication, and honesty. He has been a close colleague and an ally to me for many years.

While Peter has distinguished himself at News Corp, he has also, increasingly and tirelessly, circled the globe in support of Malaria No More, which has achieved nothing short of remarkable results.  Let us all wish him the best of luck, and the greatest success, as he embarks on this new chapter of his career, both as a professional and as a role model for an executive who gives back.

As you all know the downturn we are operating in is more severe and global than anything we have seen before.  No company is immune to its effects. I want to take this opportunity, today, to write to you about how we will manage such an important leadership transition, and why I am convinced that today our company is not only well-positioned financially and competitively, but is on the cusp of a new phase of growth. Remember, we began priming ourselves for a weakening economy over a year ago. We have managed expenses and capital expenditure prudently, and strengthened our balance sheet. Following the partial sale of NDS, we will have over five billion dollars in cash, and this year we should exceed $3.5 billion in adjusted operating income.

In the past, we have met downturns with vigor, often departing from the herd. We have emerged much stronger.

Achieving our ambitions will require change and renewal. So throughout 2009, I will continue to work closely with all of our companies to make sure that we are organized and resourced in the best way to take advantage of this extraordinary point in time. We will press our advantages and invest in our great franchises.  And, of course, we will keep our eyes on big prizes, some of which may arise only once in a generation.

Across News Corp. we have a broad and deep reservoir of extremely able executives.

Over the years we have accomplished great things. People understand, and have acknowledged, our entrepreneurial spirit as well as our doggedness; our willingness to take risks, our contrarian investment style; and our commitment to long-term development and shareholder value.

Many of you have told me how hungry you are to work more closely across our companies. Many of us have been frustrated by the things that can get in the way of that. From systems that don’t talk to each other to incentives that struggle to capture the opportunity and aspiration of our total group.  These obstacles are obvious to us all. There will be a streamlined management structure between our Los Angeles based business units and the rest of the company.  Peter and I will be communicating more on this over the next few months. For the time being, of course, the talented executive team at the Fox Group will continue to report to Peter.

Now is also an ideal opportunity to streamline and enhance many of the corporate and administrative functions of the business.  There will be cost savings as a result, but the more important aim is to be leaner so that we can better leverage our collective talent and expertise.  For instance, and beginning immediately, H.R. functions throughout all our units will report to Beryl Cook in New York as well as their division heads.  Beryl reports directly to me.

We have worked hard to develop and advance the best among us. The renewal of great companies begins within themselves.   Pursuing an edge through superior talent is a priority.  This will be a key focus for us in 2009.

In the coming months, I will be reaching out to you with new questions, and with new plans.

We are in the midst of a phase of history in which nations will be redefined and their futures fundamentally altered.  Many people will be under extreme pressure and many companies mortally wounded.   Our competitors will be sorely tempted to take the easy beat, to reduce quality in the search for immediate dividends.

Let me be very clear about our company: where others might step back from their commitment to their viewers, their users, readers and customers – we will renew ours.

The direction of the business now and over the next few years will define the character of our company for decades.

We have always thrived on change and challenge.  This was true when we began building a newspaper business in Australia. Just as it was when we created BSkyB and developed a fourth US network, the Fox Network, when conventional wisdom dictated that there was room for only three players. It was true when we launched Star, now the leading network in India, and the Fox News Network and Sky Italia.

The best things we have done, and there are many examples, have defied conventional wisdom, often in the teeth of fierce opposition and near universal disbelief in our capabilities.

Over the past 12 months I have spent time with you in India and China, in Italy and the UK and many other countries. We have brought Dow Jones into the fold, extended our influence in Europe, and been at the center of reporting the arrival of a new American president and the impact of the global financial crisis. We’ve told extraordinary stories, in theaters around the world and on page and screen from Mumbai to Malibu.

Our own international reach is a profound strength. We have intelligent, creative and highly motivated colleagues around the world who are ambitious for themselves, for their countries, for our customers and for our company.  The result is that where others simply seek distribution, we are building durable businesses at scale.  We are also creating large franchises in marketplaces that will grow at a faster pace in the coming years and, increasingly, our businesses are based on direct customer relationships..

We must always be acutely aware of our responsibility to shareholders, and to create real value for them. This is entirely consistent with, and in many cases inseparable from, the enormous social value we have created over the decades.  We provide information and entertainment to billions, enabling them to improve their lives and those of their families.  There is genuine value in the values of our company – these are values that are even more important in a world confronting so much today

We believe in communities. The very idea of community is broad, and encompasses interests that cross national, ethnic and demographic borders. We are all members of many different communities, whether it be of people who are passionate about Hollywood films, or care about living in a healthy environment, or use a local jobs website, or trade commodities in Chicago and London, relish soccer whether in China or Nigeria. These communities are our communities, as they read, evaluate and create everyday

That is why, most of all, I believe in the community that is our company.
Rupert Murdoch

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