Winners and losers
Saturday 1 October 2011
Tom Glocer says there’s a business to fix and he’s not going anywhere “for a good long time”. Some close watchers of Thomson Reuters are less certain: they think the recent promotion of James Smith moves him closer to occupying the chief executive’s suite in New York.
The succession is in place, some analysts believe. They speak of internal turmoil and say Smith, 52, a former journalist steeped in the ways of the former Thomson Corporation and the Thomson family, its Canadian majority owners, is being groomed as a future CEO.
Wrapped into September’s announcement of the latest restructuring was news of the exit of Robert Daleo, another Thomson veteran, as chief financial officer. It was said he planned to retire next July when he turns 63, a relatively young age by North American corporate standards.
For the present, Glocer, 51, survives as the last senior executive of the old Reuters still serving at the highest echelons of the new company.
Major restructurings are complex, disruptive and uncertain of success
Smith’s sudden and immediate elevation to chief operating officer of the entire business is a significant advancement for the chief executive of the minority professional division, which looked after the legacy Thomson legal, tax, accounting and healthcare (the latter now being sold) products. It puts him in a strong position to succeed Glocer, who is under pressure to boost sales to financial institutions, Reuters reported.
Major restructurings are complex, disruptive and uncertain of success. What drives a $23 billion corporation whose shares are listed in New York and Toronto to undertake two in only two months? The conclusion that the first one was rushed and did not work is difficult to escape.
A glance at the charts tells the story: the shares languish around $27 from a 52-week high of $42 and are down 25 per cent from a year ago. Then look at the business: its struggling markets side has failed to make a breakthrough with its flagship product, a desktop system called Eikon. The timing of Eikon’s launch, in the depth of a severe downturn affecting players in its core market, could scarcely have been worse. The banks and other financial institutions it was designed for were cutting budgets, laying off people, and delaying new technology orders. Eikon needs a fresh start – an unequivocal assurance that it is fit for customers’ purposes and an energetic effort on sales.
The Thomsons, whose shares in the group have lost more than 20 per cent of their value this year, were sufficiently worried about the performance of markets to demand the first re-organisation in July. Hence the abrupt departure of Devin Wenig, a former Reuters executive who was the division’s head, who supervised post-acquisition integration and who was once seen as a potential successor to Glocer. Five other key executives went with him.
Reuters’ own report of that overhaul quoted people familiar with the thinking of the board saying Glocer had been given about a year to accomplish a turnaround. After the second reorganisation, Reuters said Smith’s preferment raises fresh questions about how long Glocer will remain CEO, and whether the markets business has deteriorated further in the last two months.
Glocer, a mergers and acquisitions lawyer who masterminded the sale of Reuters to Thomson in 2008 and then became chief executive of the combined operation, was asked in a recent Reuters interview about succession plans. He replied: “I think Jim is an extraordinary executive and he’s always been in the frame of who the board should consider one day as a successor. That is a board process. It hasn’t started yet. I’m going to stay for a good long time to fix and thrive under this business.”
After the July upheaval Glocer took direct charge of markets. Now, after only two months, some of the burden of hands-on management has shifted to Smith, whose 24 years working for the Thomsons give him deep knowledge of how they like to control their businesses.
Glocer intends to remain involved with customers, strategy and products including Eikon. Smith will take the “operating rhythms” and “directly manage in-year performance”. The merger of the two operating divisions may result in some layoffs, though any cutbacks will affect “chiefs, not Indians in front of customers”.
Sales and migrations to Eikon from existing products were good in September, Glocer reported, and a major software upgrade is due in October. “We are really focused on the remainder of the year on performance and product quality with a view we will enter the year with a significantly improved and stable product,” he said.
Much, possibly including the fate of Glocer, will depend on how successful that has been when Thomson Reuters’ financial results for 2011 are announced in the new year.
Smith views his appointment as an important step towards delivering the promise of Thomson’s acquisition of Reuters – “namely, turning the world’s greatest collection of news and information assets into the world’s greatest news and information company”. He told staff: “I accept the new assignment with a healthy dose of realism about the size of the task. I do not have a magic wand or a pre-baked set of answers.”
Over the coming months work would be guided by a mission to shift focus and resources towards customers. Fewer layers of oversight and more resources directed towards customer insight, product development, sales and support were needed.
“Make no mistake, there is a lot of work to do… stay focused on your customers and the job at hand. I will take care of the plumbing and look forward to joining you soon full-time at the front line.
“The pace of change in the world is unprecedented. When the dust settles, there will be winners and losers. In the downturn of 2008 many of our businesses put clear blue water between themselves and their competitors. Heading into 2012 the seas again look choppy. But no one is better positioned to win. The ultimate outcome will be up to us.” ■