Belo's Embarrassing Misstatement
A colleague described his new employer, LRN, to me over lunch last week. LRN is one of a growing number of companies devoted to helping companies strengthen their ethical standards and compliance. In light of Sarbanes-Oxley and the post-Enron climate, businesses such as LRN are booming.
It is clear that setting standards, training people, and increasing attention on and visibility of ethics is making a difference in companies. However, I asked my colleague if there might be more to ethical breaches than just these factors. Could it be that performance pressures might lead even ethically aware people to bend or even break the rules?
We believe that the dramatic rise of ethical violations like that at Enron and others was in large part due to desperate people trying to meet their performance goals. Because the business isn’t giving customers what they want, the customers aren’t buying. As a result, desperate employees are resorting to desperate measures. This seems to be what happened at Belo Broadcasting.
According to articles published last week in Dallas Morning News, Belo Corporation, (publisher of the Dallas Morning News) has admitted to the inflation of circulation numbers that misled advertisers. Belo attributes this to “aggressive pursuit of goals set by former managers and inadequate monitoring of distribution and return practices.” Belo goes on to report that circulation for the six-month period ending today is down about 5.1 percent and 11.9 percent on Sundays compared with figures reported a year ago. A companion article reports that Belo is cutting 250 jobs due to a lag in the DFW market.
Instead of just thinking about this situation as a couple of bad apples who broke the rules, we would invite Belo to take a hard look at their business. It’s clear that their customers are going to other sources for their news. There are so many substitute providers for obtaining more timely daily news than just a newspaper. For a newspaper to compete, it has to offer something else, something different and better.
What can Belo do? Belo should turn this event into a disruption that would have them seriously rethink their business. How could they reimagine their business model to reinvigorate the business and jumpstart growth and restore profitability?
Unless Belo makes significant changes to its Success Formula, we predict that the company will continue to struggle. Perhaps they won’t have any other ethical breaches, but their problems will show up in other ways, like being forced to lay off employees due to slowing sales …