Jeff Pelline's Sierra Foothills Report

The Sierra Christian school in Nevada City will close at the end of this month after a 12 year run, my sources tell me.

A one-month effort to raise $100,000 — the call for a “miracle” — has come up short. At least one teacher will lose her job; the others will be hired as contractors by parents to finish off the year.

My wife and I saw the handwriting on the wall when this was disclosed last month, and we put our son in another school. (A midyear transition is difficult for any child, and Nevada City Elementary was full for his grade.)

It didn’t have to end this way for a school with excellent teachers and dedicated parents. As it turns out, the school has accumulated debt during the past 2 1/2 years because of the poor economy, declining enrollment and the growing inability of parents to stay current with their tuition payments.

So why wait until last month to go public with a problem like this?

I place the blame on the board of directors. Boards are responsible for managing situations like this.

This is not the only example. I’m reminded of the Foothill Theatre Company in Nevada City. I admire Board President Lowell Robertson for visiting me at The Union to discuss the theater’s financial problems in August. 

But it also was too late in the game. The problems had gone on for years.

I raised this issue with Lowell, the principal of the school and others. Other local nonprofits, such as the Lutz Center, also have gone under.

What’s the problem? We have a plethora of nonprofits here, but too many inexperienced board members when it comes to managing financial problems that are bound to crop up. Many board members see the post more as a social activity. Some boards are too insular — an ongoing problem around here.

Boards also have to be much more transparent about their finances. What does the balance sheet look like? How much money is going to administrative costs? Donors deserve the right to know that.

It’s going to be tough sledding for nonprofits here this year and next. Consolidation and tough times is inevitable. The boards need to step up the challenge. In some cases this means recruiting new board members.

The New York Times is reporting “Editors and publishers in a relvolving door.”  

(http://www.nytimes.com/2009/01/19/business/media/19paper.html)

(A longer, better version appeared in print on 1/19, page B7.)

“The primary explanation is the unremitting pressure on these guys to produce journalism at a lower and lower cost,”  Conrad C. Fink, a professor of newspaper management at the University of Georgia, told The Times.

The print version of the article points out that the problem also stems from a “gentlemanly” culture where the managers don’t know how to “claw” for every dollar.

To go deeper, the problems of newspaper are a lack of being innovative on the advertising side.

Instead, the focus is on cutting costs. Now newspapers find themselves fighting a two-front war: the same “elephant in the corner” on the revenue side and a mounting one of producing journalism at a lower cost (challenging indeed).

If you could roll back the clock, papers should have jumped on the revenue problems much sooner. Don’t jump onto the Web until you can find a way to “monetize” the content. Papers had a chance, too: this is exactly what led to the failure of most Internet companies in the late ’90s — a problem they should have learned from.

It stemmed from an entrenched management culture that was too used to getting its own way for decades — almost like a utility with approved rates of returns.

The focus should have been on bringing in experienced ad and marketing people from other industries — ones that knew how to “pick up pennies off the floor,” a phrase we often used when I worked at CNET (one of the successful dot.coms).

Now papers are behind the proverbial eight-ball. They fell into the  trap of cost cutting to meet short-term revenue goals. That’s easy, though some are at a point of burning up the furniture to keep the oven going — a favorite Danny Kaye tale (attributed to a Tolstoy short story) called the “Big Oven.” (http://en.wikipedia.org/wiki/The_Big_Oven)

They need to regroup and focus on revenue, with three missions:

1. Again, find advertising and marketing executives from industries where you need to work harder and faster to make money. Turning to former dot.com executives is no answer: As I said, they never learned to monetize. I’d go to some hi-tech industries: middle and small-cap ones where the executives learn to “think out of the box” — or die.

2. Blow up the newspaper advertising culture. The culture still has the utility mindset. It needs leaders who can change that. In fact, you need to borrow from the skill sets of experienced newspaper beat reporters — tenacious, much more Web centric, results- and deadline-oriented and deeply focused. I see more of that in newsrooms nowadays than on advertising staffs.

3. Launch new products. Sometimes you need to spend money to make money. Newspapers are so tight with their money nowadays, they forget good opportunities exist right under their noses. They need to create new revenue streams. The opportunity to launch business weeklies exists throughout the country, including here. You can start small and grow the product. In short, you need a set of entrepreneurs within your company.

All told, the future of the newspaper industry depends on growing revenue ASAP, not cutting costs. For the most part, I see just the opposite occurring. Otherwise, you end up with the “Big Oven” scenario.

I swung by the office Saturday after a refreshing swim and found our publisher in the office with his son. He had said he wanted to meet with me. “Hey, what’s up?” I asked after he walked into my office. “We’re eliminating your position,” he responded. Oh.

Jeff A. (you know, the other Jeff) said it was purely a financial decision. He said it had nothing to do with performance; in fact, he said I had improved the paper since he hired me (despite the economic challenges we faced), and he thanked me for that. (My performance reviews said the same thing).

Jeff said he now is going to be the Editor (managing the news coverage) and the Publisher (managing the business) of The Union for economic reasons. Being a stickler for “conflicts of interest” (you know, the “watchdog” stuff we’ve written about at the paper), I expressed some skepticism that he could wear both hats. But Jeff vowed it could be done.

Jeff had been filling in as the interim advertising director for months (a more natural fit for a Publisher in my mind), but he has hired someone to fill that post who he thinks can make it a success.

It’s a very tough market and a tough job, even for a Publisher. (Jeff came up the ranks on the news side, not the business side). Jeff said he couldn’t afford both positions (Editor and the incoming Ad Director) at this time. It was painful to hear that, but I accepted it. We had a very professional conversation. We chatted, shook hands and left on good terms.

This was sad personally, because I had looked to Jeff as a business partner and friend. I trusted him implicitly too, since he encouraged our news coverage (positive and negative) and regularly suggested stories. Coverage that might be seen as negative (at least to the subjects), including investigative reporting, sometimes can ruffle feathers in a small town. But Jeff had been supportive (and often suggested topics).

Still, newspapers are undergoing rapid structural change, we’re in a deep recession and Jeff faces some tough challenges as a businessman. I hope The Union continues both its “watchdog” and “celebration” role as far as journalism goes. As a resident and homeowner with a school-aged child (AKA major stakeholder), we need both.

We have a lot to celebrate here but also some important issues that can’t be swept under the rug. (You know, the ones we’ve written about in the paper and some of my columns — meth/crime, conflicts of interest in a small town, holding elected officials accountable, transparency in public decision-making, good fiscal management, etc.)

As you know, we also celebrate the community — the “economic bright spot” bug featuring positive news was one of my ideas. I also have worked with county executive officer Rick Haffey to regularly run Other Voices from Rood Center leaders and law enforcement — explaining their outlook on things. The latest one (running this 1/18, in fact) was from the public defender.

I really didn’t want to write this because it is personal. I also like Jeff A. and “feel his pain.” But around here, rumor/misinformation fills the void of accurate information and becomes “truth” (AKA small town gossip). It can get downright nasty. I hope that changes sometime.

I’ll also be blogging here from time to time: focusing on the pragmatic local issues that our community’s true “stakeholders” worry about. We need more bloggers who want to engage in a fact-based dialogue, not political rhetoric.

My family and I wish you well and thank you for your encouraging and thoughtful words during the past 28 months — at work or around town. You’ll see us around town, including with our “red” lab puppy.