CHAPTER I

INTRODUCTION
1.1 Reasons choose the case
Mass media is important for society because along with the
development of the times. one of media that provide a reliable source in
New York is the New York Times. New York Times experienced some
growth is the emergence of New York Times Digital which had developed
and was operating two website: NYTimes.com and Boston.com, New
England's largest regional portal and the Internet home for the Boston
Globe. New York Times Company is a big company. Both website were
operated by New York Times Digital (NYTD).
NYTimes.com and Boston.com included Internet access to the
complete contents of The New York Times and Boston Globe newspapers,
regularly updated breaking news, and a variety of enhanced interactive
features. NYTD was also responsible for managing the Companys Digital
Archive Distribution business, which provided content for research news
retrieval services, such as Dow Jones and Lexis Nexis.
Beside that, New York Times also diversified media company
including newspapers, magazines, television and radio stations, electronic
information services, and electronic publishing.
1.2 The Problems
The problems of this case are:
1. Describe NYTDs evolution to date. What is the strategy of NYTD? Are
the organization and control consistent with the strategy?
2. What impact has NYTD had on the rest of the Company?
3. How does the way NYTD is managed compare to the way a venture
capital firm manages a startup? What insight, if any, do you draw from
this comparison?
4. What impact do internal perceptions of NYTDs performance have on
its operations?
5. Would you change NYTDs existing organizational structure?
1

6. If so, how would the change you propose affect:

a.NYTDs culture and leadership style?
b.NYTDs likely budget?
c.The way NYTDs performance is judged?
d.The way new ideas for the websites are generated?
1.3 The Aim/Objectivity
The objectives of this case are:
1. To describe NYTDs evolution to date. To know the strategy of NTYD
and the consistency between the organization and control with the
strategy?
2. To find the impact has NYTD had on the rest of the Company.
3. To know the way NYTD manage compared to the way a venture capital
firm manages a startup.
4. To know impact do internal perceptions of NYTD performance have on
its operations.
5. To know the change NYTDs existing organizational structure.
6. To give the changes of proposed affect:
a.NYTDs culture and leadership style.
b.NYTDs likely budget.
c.The way NYTDs performance is judged.
d.The way new ideas for the websites are generated.

CHAPTER II
LITERATURE
For the literature we will focus at the organizations control (bureaucratic
control), budget, organizational strucure, and venture capital.
2.1

Organizational control (Bureaucratic controls)

Organizational control are in essence the moral code of the organization

and define what people should do when no one is watching or a procedure
is not specifically defined (James P. Martin, 2008). But for the literature
will more focus on bureaucratic control.
Bureaucratic controls is a rules, policies, hierarchy of authority, written
documentation, reward systems, and other formal mechanisms to
influence employee behavior and assess performance. Bureaucratic
control can be used when behavior can be controlled with market or price
mechanisms (www.businessdictionary.com).
2.2

Behavioral

aspect

in

budgeting

Participation

in

the

budgetary process )
A budget process is either top down and bottom up.
2.2.1 Top down approach
With top down budgeting, senior management sets the budget for
the lower levels
(Govindarajan, Anthony, 2007).
2.2.2 Bottom up approach
Bottom up approach is method where budgets prepared by the
managers of all departments are combined to compute the resource
needs of the entire firm (www.businessdictionary.com).
The advantage of using this type of budgeting is that you are free to
procure all that you need as long as you ask for the right amount of
money.
2.3 Venture Capital
3

Venture capital is a part of financial capital, financial capital can

refer to money used by entrepreneurs and businesses to buy what they
need to make their products or provide their services or to that sector of
the economy based on its operation. Venture Capital is money provided
by investors to startup firms and small businesses with perceived longterm growth potential. As a form of
capitalists
direction in

typically have

entrepreneurship,

venture

voting rights as a determinant of firm policy

accordance with the

number

of

shares owned

(www.investopedia.com).
Venture Capital is a form of "risk capital". In other words, capital
that is invested in a project (in this case - a business) where there is a
substantial element of risk relating to the future creation of profits and
cash flows (www.tutor2u.net). Risk capital is invested as shares (equity)
rather than as a loan and the investor requires a higher "rate of return" to
compensate him for his risk. Venture capital has two approaches:
2.3.1 Financial capital
Financial capital can refer to money used by entrepreneurs and
businesses to buy what they need to make their products or provide their
services or to that sector of the economy based on its operation.
2.3.2 Startup company
Is a company with a limited operating history. These companies, generally
newly created, are in a phase of development and research for markets.
2.4

Organizational structure

The two organizational structures most commonly found are the

Functional and Matrix Organizations (Springer, 2001)
a. Functional Organizational Structure
The traditional (functional) management structure has survived for
more than two centuries. However, recent business developments, such
as the rapid rate of change in technology and increased stockholder
demands, have created strains on existing organizational forms.
Advantages
Disadvantages
Easier budgeting and cost control Does not provide
are possible

oriented

emphasis

the

project-

necessary

to
4

Flexibility in the use of manpower

accomplish the project tasks

Decisions
normally
favor

A broad manpower base to work

strongest functional groups

No customer focal point

the

with
b. Matrix Organizational Structure
The matrix organizational form is an attempt to combine the
advantages

of

the

pure

functional

structure

and

the

product

organizational structure. This form is ideally suited for companies, such as

construction, that are project-driven. The project manager has total
responsibility and accountability for project success.
Advantages
The functional

organizations

Disadvantages
exist Multidimensional

primarily as support for the project

Conflicts

are

minimal,

and

information

flow
those Multidimensional work flow

requiring hierarchical referrals are more

easily resolved
There is a better balance among time, Dual reporting
cost, and performance
Other types of organizational structure (Afzal moman;2010):
1.

Centralization. In a centralized organization, the decisions are made

by top executives or on the basis of pre-set policies. These decisions or
policies are then enforced through several tiers of the organization after
gradually broadening the span of controls until it reaches the bottom
tier.

2.

Decentralization, also called departmentalization is the policy of

delegating decision-making authority down to the lower levels in an
organization, relatively away from and lower in a central authority. A
decentralized organization shows fewer tiers in the organizational
structure, wider span of control, and a bottom-to-top flow of decisionmaking and flow of ideas.
In a more decentralized organization, the top executives delegate

much

of

their

decision-making

authority

to

lower

tiers

of

the

organizational structure. As a correlation, the organization is likely to run

5

on less rigid policies and wider spans of control among each officer of the
organization. The wider spans of control also reduces the number of tiers
within the organization, giving its structure a flat appearance. One
advantage of this structure, if the correct controls are in place, will be the
bottom-to-top flow of information, allowing decisions by officials of the
organization to be well informed about lower tier operations. For example,
if an experienced technician at the lowest tier of an organization knows
how to increase the efficiency of the production, the bottom-to-top flow of
information can allow this knowledge to pass up to the executive officers.

CHAPTER III
CASE ANALYSIS
3.1 Background Case New York Times
The New York Times Company has a division, New York Times Digital
(NTYD) which operates NYTimes.com (the website for The New York Times
newspaper) and Boston.com (New England's largest regional portal and
the Internet home for the Boston Globe).
Scott Meyer, general manager of NYTimes.com, and Lisa DeSisto,
general manager of Boston.com, were satisfied with the current state of
their careers. They are worried about the plan to change NTYDs
organizational structure.
The New York Times Company
In 2001, the Company owned a variety of media properties,
including The New York Times newspaper, the Boston Globe, the
Worcester Telegram & Gazette, and 14 other regional newspapers,
located primarily in the southern United States. The Company also owned
several broadcast media properties, which accounted for 5 percent of
revenues, and NYTD, which accounted for 2 percent of total revenues.
The year was shaping up as a tough one for both the Company and
the economy, which had posted an anemic 0.3 percent annual growth
rate in the second quarter. The previous year, during the dotcom boom,
6

the Company had increased its investment in NYTD dramatically. But by

early 2001, corporate profits had started to decline, and the Nasdaq had
fallen to half its peak, which had been reached in March 2000. As a result,
tolerance for the losses NYTD had been accumulating were diminishing
rapidly.
New York Times Digital
By September of 2001, NYTD had developed and was operating two
websites: NYTimes.com and Boston.com. Where NYTimes.com aimed to
attract

an

international

audience,

Boston.com

focused

strictly

on

attracting and retaining a dominant share of the Boston metropolitan

area.
Developing the NYTD Organization
The way that the NYTD operation was managed had evolved over a
six year period, since The New York Times first ventured onto the Internet
in 1995. NYTD was shaped by choices related to organizational structure,
leadership, culture, staffing, budgeting, and performance evaluation.
While the creation of NYTD as an independent unit altered the
official

reporting

structure,

it

marked

only

the

beginning

of

transformation of the informal power structure. The relationship with the

newspaper changed slowly and subtly.
For about a year, NYTD operated as a confederation of websites in
a very decentralized structure.
1.

Culture and Values

The New York Times newspaper was steeped in tradition and
operationally very conservative. At the time of the separation in mid1999, however, there was a concerted effort to create a distinct
Internet culture within NYTD. NYTD sought to create an experimental
culture.
2. Hiring and Compensation
The

employment

market

for

technology-related

positions

was

extremely competitive in the late 1990s. The pension program, valued

within the newspaper organization, was eliminated from NYTDs
compensation package. Prior to the two rounds of layoffs in early 2001,
7

NYTD had grown to approximately 400 employees, of whom fewer than

one-quarter had experience at the newspaper.
3. The Budgeting Process
The boom in the Nasdaq market and the separation of NYTD from the
newspaper organization altered budgetary constraints dramatically.
NYTD developed a bottom-up approach to budgeting. In late 2000 and
early 2001, however, financial resources once again became the
primary constraint. Subsequently, the Company made a series of
incremental cuts to NYTDs budget. Two painful rounds of layoffs
followed in January and in April. As a result, many existing features
that were not drawing significant user attention were discontinued.
4. Performance Evaluation
Financial targets were negotiated by NYTD and the Companys senior
staff during the corporate budgeting process. These targets tended to
focus on the most important metric for the corporation, which could
change from one year to the next depending on the Companys
strategy and the condition of the economy. Maintaining a healthy
relationship became more challenging as the core business suffered
through the advertising downturn that began early in 2001.
3.2

Case Analyis

After discuss about NYTDs our group will answer some question which
related with NYTD. There are six question will be discussed:
1. Describe NYTDs evolution to date. What is strategy of NYTD?
Are the organization and control consistent with the strategy?
NYTD evolution to date:
New York Times Digital (NYTD), a division of the New York Times
Company was operate New England's largest regional portal and the
Internet home for the Boston Globe (NY times.com and Boston.com). In
2001 the company also owned several broadcast media properties, and
the new york times brend was believed to be the companys most
valuable asset, built through years of topnotch reporting and analysis,
plus marketing and promotion. The paper had won 79 Pulitzer Prizes,
8

more than any other newspaper. By September of 2001, NYTD had

developed

and

was

operating

two

websites:

NYTimes.com

and

Boston.com. The websites included Internet access to the complete

contents of The New York Times and Boston Globe newspapers, regularly
updated breaking news, and a variety of enhanced interactive features.
NYTD was also responsible for managing the Companys Digital Archive
Distribution business, which provided content for research news retrieval
services, such as Dow Jones and Lexis Nexis. There is a Sophisticated
Information Technology systems automated significant portions of the
process of converting nwspaper content to website contente. The news
team did much more than simply reformatting articles for the Internet.
They also sought to find new and creative ways to make full use of
Internet multimedia, including slideshows, audio and video content, and
special interactive sections, such as one for the Salt Lake City 2002
Winter Olympics. Access free to NYTimes.com make the users were
required to register for the site, providing NYTD with demographic
information. And with Registration information enabled NYTimes.com to
serve advertisements to targeted audiences, and if we can complete the
target

all

revenue

for

NYTimes.com

was

generated

by

selling

advertisements on the website. NYTD also can produce New products

were introduced regularly to the website, created by crossfunctional
teams of salespeople, market researchers, software developers, editorial
staff, and general managers.
Strategy of NYTD:
NYTD always develop the organization with always make improvements
to its organizational structure.
Free online registration to access NYTimes.com, but users must register
to used.
NYTD want to get a strong message that we were a different business, a
different company, and a different culture, therefore NYTD formed a
culture committee. Beside that NYTD sought to create an experimental
culture.

Bureaucratic

controls,

procedure,and

paperwork

were

minimized
9

NYTD developed a bottom-up approach to budgeting, with this approach

give opportunity for employees to be involved in setting their own
goals and expectations for a given financial period.
One website for all information
Have the classification of ad.
How about the organization and control are consistent with strategy :
Yes, the organization and control consistent with the strategy. Because
each strategy has been involved in a real information and can be verified
on the condition of the company.
2. What impact has NYTD had on the rest of the Company?
NYTD as decentralized divisions of New York Times company has the
following effects:
Many senior newspaper executives would have been actual
uncomfortable with entrusting priceless New York Times brand to an
operating unit that they didnt control and decision making biases. This
is accordance with literature review that decentralization, also called
departmentalization is the policy of delegating decision-making
authority down to the lower levels in an organization, relatively away
from and lower in a central authority
(http://en.wikipedia.org/wiki/Decentralization).
A team approach and a spirit of openness were emphasized and
information was shared. This accordance with literature review that
one advantage of the decentralized structure, if the correct controls
are in place, will be the bottom-to-top flow of information, allowing
decisions by officials of the organization to be well informed about
lower tier operations (http://en.wikipedia.org/wiki/Decentralization).
3. How does the way NYTD is managed compare to the way a
venture capital firm manages a startup? What insight, if any,
do you draw from this comparison?
Venture Capital:
1.

Different stages of finance

2.

It might bring culture which may not be suitable for growth

10

3.

Increased intervention may increase lead time of product development

Company:

1.

Company managements decision would be the final decision

2.

Company can increased its investment in any condition

3.
4.

They can choose their own culture

Bottom up Approach
NYTDs way to managed company are by take advantage of the
better pricing that the corporation is able to get from vendors and choose
what budgeting type to manage cost and expense of the company in this
case is using bottom up approach, company can handle company as their
own, because their decision would be the final decision but by using
venture

capital,

entrepreneurship,

described
venture

in

wikipedia.com

capitalists

typically

as

have voting

form

of

rights as

a determinant of firm policy direction inaccordance with the number of

shares owned. Using venture capital might bring culture which may not
be suitable for growth because company which is have capital in join
venture has their own culture that can different with NYTDs culture.
Beside that, since 1995 NYTD had its own culture and at mid 1999
NYTD had its culture Internet culture. From these differences managed
NYTD as their own is better than using a venture capital firm, because
NYTD can decide their way for better future by its self without venture
capital firms intervetion.
4. What impact do internal perceptions of NYTDs performance
have on its operations?
All the media attention lavished on dotcoms contributed to an internal
perception that NYTD was the glamorous side of the business. NYTD
required to increase profitability by improving efficiency of greater
operational costs. Because they focus on revenue generation only, not
concerned about expenses.
The ultimate business model for media websites was as uncertain as
ever, people felt operation could not possibly take full advantage of the
Internets

vast potential.

As

an integral part of the newspaper,

11

NYTimes.com was perceived internally as a credible part of the

corporation. Many senior newspaper executives would have been acutely
uncomfortable with entrusting the priceless New York Times brand to an
operating unit that they didnt control.
The end of 2000, NYTD having pressures to achieve profitability, as a
result, management decided to pursue greater operating efficiencies by
centralizing operations. Using bottom line target especially bottom up are
critically important when NYTD had been in a loss position. This is
supported by research conducted by wikipedia.com and its based on with
the literature, bottom line or generally called net income is the income
that a firm has after subtracting costs and expenses from the total
revenue, whereas a bottom-up approach is the piecing together of
systems to give rise to grander systems, thus making the original systems
sub-systems of the emergent system. In a bottom-up approach the
individual base elements of the system are first specified in great detail.
Since NYTD do this way, like developed a bottom line and bottom up
approach to budgeting, revenue of the company raised highly exceed
what budgeted and from the expected.
5. Would you change in NYTDs existing organizational structure?
I would change organizational structure. Environmental changes
and organizations increased product line compel to change in structure.
Beside that I want use Functional Organizational Structure because that
structure have many advantages. If use Functional Organizational
Structure we can get easier budgeting and cost control are possible,
flexibility in the use of manpower, and a broad manpower base to work
with.
6. If so, how would the change you propose affect :
a. NYTDs culture and leadership style?
The New York Times newspaper was steeped in tradition and
operationally very conservative. NYTD sought to create an experimental
culture . Some defined processes were allowed to develop, but were never
12

considered to be set in stone. Information was shared, and decision

making was transparent.
I think NYTD can developed good culture and leadership style with :
There should be informal culture as they are hiring young employees to
retain them.
There should be some necessary distance between senior executive and
other employees.
Internets culture should meet with culture of head corporate.
Should be coordinating leadership and decentralized functionality.
b. NYTDs likely budget?
NYTD developed a bottom-up approach to budgeting. Though most
solid ideas for new projects were generated by experienced executives
and journalists, ideas for new content and new features were encouraged
from throughout the organization.
Yes, NYTD developed a bottom-up approach to budgeting. Changes
will be done is NYTD using 2 approaches, top-down and bottom up. This is
consistent with the literature review that should be in the budgeting using
a combination of both approaches (top-down and bottom-up), (Anthony
and Govindarajan, 2007).
This is consistent with the literature review that should be in the
budgeting using a combination of both approaches (top-down and
bottom-up), (Anthony and Govindarajan, 2007).
c. The way NYTDs performance is judged?
Performance evaluation approach in which a fund manager's skill is
judged by the extent to which the manager's investment decisions
resemble the decisions of managers with distinguished performance
records.
I think NYTDs performance is primarily evaluated by the following
questions:
1. Can we tolerate the loss we are generating?
2.

Are we having any significant operating problems?

13

3.

If any damages being done to the core business or the core brand?
If NYTD can handle that problem, we can say NYTD have good
performance. This is consistent with the literature review that how a
company can handle that problem. (Anthony and Govindarajan, 2007).
d. The way new ideas for the websites are generated?
There are 2 ideas for the websites are generated :

Cross functional culture

Innovative ideas from employees are appreciated.

14

CHAPTER IV
CONCLUSION

4.1 Conclusion of this case study analysis are:

1. New York Times Digital develop a bottom-up approach to budgeting.
Its good because bottom-up budgeting is most likely to generate
commitment to meeting the budgeted objectives. In addition, research
has

shown

that

budget

participation

has

positive

effects

on

managerial motivations for two reasons (Anthony and Govindarajan,

2007):
a. There is likely to be grater acceptance of budget goals if they are
perceived as being under managers personal control, rather than
being imposed externally. This leads to higher personal commitment
to achieve the goals.
b. Participative budgeting results in effective information exchanges.
The approved budget amounts benefit from the expertise and
personal knowledge of the budgetees, who are closest to the
product/market environment. Further, budgetees have a clearer
understanding of their jobs trough interactions with superiors during
the review and approval phase.
2. New York Times Digital operated as a confederation of websites in a very
decentralized structure.
4.2 Recommendations for The New York Times Company:
For the company:
To make an effective budget preparation process blends the two
approaches, top-down and bottom-up (Anthony and Govindarajan,
2007).
For the society:
15

1. To make people know about the condition of company

2. To know more about the system that the company used, and
could be a reference to their company.
For the knowledge:
Can learn more knowledge about budget participation, how to control
the organization, and organizational structure in New York Times
company.

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http://mba.tuck.dartmouth.edu/cgl/downloads/20006_NYTDigital.pdf
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Ardichvili, Alexander and K. Peter Kuckinke. 2002. Leadership Styles and
culture values among managers and subordinates. Received on
http://unpan1.un.org/intradoc
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10, 2011
Afzal moman. 2010. Centralization vs Decentralization. Received on
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Govindarajan, Vijay, Robert N. Anthony. 2007. Management Control
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http://faculty.ed.umuc.edu/~sdean/ProfPaps/Bowie/F09/Hockel.pdf.
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Martin,

James.P.

2008.

Organization

control.

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http://www.sbnonline.com/2008/08/organizational-control-gettingcredit-for-how-well-your-company-is-managed/. Access on April 17,

2011.
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