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Now for the Grann Finale

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Random House never had Putnam's financial discipline, and in the current economy, Peter Olson has some hard financial decisions to make. Last week, a wave of new layoffs was announced (though the numbers are quite modest), and the coincidence of Random's economic troubles and the arrival of Grann's keen financial eye has only fueled interest in what her role will be.

Born in London before the war to a British mother and Russian Jewish father who had immigrated to Paris, Phyllis Grann came to New York early in 1940. In the fifties, she went back to Paris, where much of her father's family and fur business had relocated after the Russian Revolution, to finish high school. But she returned to New York two years later to start at Barnard.

Upon graduating in 1958, she took a job as secretary to Nelson Doubleday. Moving to William Morrow, she quickly became an editor and had her first best-seller. But in February 1962, she met a medical student named Victor Grann. By September, the two had married and moved to Chicago for Victor's internship.

She returned to New York a year later. Her indefatigable reading and nose for talent led in 1970 to a job at Simon & Schuster, which led to a bigger position running S&S's mass-market imprint, Pocket Books. But her professional life really went into high gear in 1976, when she was hired to be the editor-in-chief of Putnam, which had just been bought by MCA/Universal the year before.

"She essentially built it from scratch, because it had a negative image," former Simon & Schuster CEO Dick Snyder says of Grann's decision to move. At the time, Putnam was publishing a massive list of 250 hardcover titles but bringing in only $10 million in revenue. "When Phyllis started," Snyder says, "it was almost worse than zero in dollars."

What happened over the next twenty years transformed Grann, the company, and, in many ways, the entire industry. Stanley Newman, the MCA executive who hired her, had worked out a financial strategy for making Putnam profitable. Newman's emphasis was on fewer, larger authors who could be published in hardcover and paperback by a coordinated team. "Stan's idea," Grann says, "was to have two separate entities totally dependent on each other."

Newman introduced Grann to Rena Wolner, who took on the paperback duties. "Then he said, 'You ladies had better get along,' " Grann recalls, " 'otherwise you're both fired.' "

By 1984, they were still working together, and Putnam had grown into a $100 million operation, with Grann in charge of the combined company.

"There was nobody with a mind like hers," Snyder says of Grann's innovations. "In those days, they used to spread their authors out: Hey, we'll come out every three years. Phyllis was really the first to prove that an author was like a brand -- you could come out every year. That, in itself, was a revolution."

"You've left a huge thing out of the story -- Luck!" Grann says suddenly. After all, the mid-eighties saw a sudden shift in retailing patterns. The growth of chains and price clubs selling books at 40 to 50 percent off created a new mass market for hardcover books. "No one knew you would have heavily discounted books," Newman says. "It just turned out that our model fit into that sort of retailing very well."

Then Bantam books signaled a sea change by publishing Iacocca. "Everyone was taken by surprise by the Iacocca book," says David Shanks of the auto executive's 1984 memoir, "which was the first one to break out in hardcover because of discounting. Phyllis was just the first to move on that."

Grann began to see that a house like Putnam could be built around a limited number of high-performance books like Tom Clancy's second novel, Red Storm Rising, which sold nearly a million copies in 1986. "We just caught the wave," Wolner says. From 1983 to 1993, with no increase in the number of titles, sales rose from $100 million to $220 million.

By 1987, Grann had become close to Universal's legendary heads, Lew Wasserman and Sidney Scheinberg. They grew to trust her conservative financial approach. "Sid and Lew came to me and said, 'We need a new CEO -- and you're it,' " she says. "I said fine, but you'd better find me a good CFO."

Whatever lack of confidence she had in her financial skills soon faded. "I knew Phyllis years ago, when she didn't know how to read a balance sheet," recalls Garbus. "Now she's terrific at it."

The surprising thing about Grann's own unexpected rise from talented editor to corporate chieftain is that it happened without the usual work-family tensions. Despite a two-hour-plus round-trip commute to Connecticut each day, Grann managed to remain fully present at both home and office. "I only really appreciate now, as I work to maintain a family life of my own, the energy it took," says her son David. "You never had a sense that work took precedence over family. It was only later that I understood her level of devotion to her job."

By the mid-nineties, Putnam had grown beyond anyone's initial dreams, but it could not keep pace with the industry trend toward conglomeration. "These companies grew and grew and grew," Garbus says. "And then they claimed it was a bad business."

At the same time, the entertainment industry was also in turmoil. MCA was bought by Matsushita, who in turn sold Universal to Seagram, which had little interest in publishing. Grann appealed to Seagram's Edgar Bronfman Jr., who gave her a year to find a buyer for Putnam. She picked up the phone and called Garbus, who eventually made the match with Penguin.

"For Penguin, it was a remarkable transformation," Garbus says. In the fall of 2001, Penguin Putnam had become that rare thing, an integrated, articulated, and high-functioning corporation. Then, suddenly, Grann resigned. "I was absolutely stunned," says Stacy Creamer, who had grown up from being Grann's assistant to being one of her most trusted editors. She decamped to Doubleday shortly after.

There was, it turns out, a long-festering tension between Grann and her own corporate master, Pearson CEO Marjorie Scardino. "They're two queens," says a person familiar with both women, "and you can only have one queen in the kingdom."

"DK was clearly the breaking point," Gottlieb says, referring to Penguin's recent acquisition of innovative illustrated publisher Dorling Kindersley, rescuing it from bankruptcy. Engineered in England, the deal was a priority for Scardino but anathema to Grann. Though she won't confirm that Dorling Kindersley caused the mischief, she will say that "for the first time in 40 years, I had serious business differences with management."

"She obviously didn't want it," Gottlieb says, "and didn't want to be stuck with the results.""You won't be able to talk about my effect on this company for at least a year," Grann says, sitting on a gray leather couch in her empty new office in Random House's Times Square tower. The expensive but still institutional furniture is all pushed out against the walls, save for a small round table dead center in the room. Letting her eye wander toward a large bouquet of salmon-colored roses interspersed with baby's breath, a gift from Olson, that dominates the room, she stops herself. "No, more like eighteen months."

All around her in the publishing world, people were talking about the rolling waves of layoffs and job reorganizations at Crown, Knopf, and the Random House imprint. These moves come hard on the heels of the company's new fiscal year, which began just after Olson's conspicuous efforts to get the belt-tightening message out. "We will be challenged to meet our corporate performance targets," he said in his year-end message to the troops before mentioning plans to "take a fresh, hard look at improving every aspect of the way we conduct our business."

"It's very hard to run a company like Random House," Dick Snyder says off-handedly. "You're just a bigger and bigger player, and you're forced to go to market every day because you have to feed that machine. You know that show Little Shop of Horrors? That plant, that's you're infrastructure: 'Feed me.' "

Naturally, even her friends assume that Grann's well-honed sense of what is essential -- and what is not -- will come into play. "She's got a great job," Stanley Newman observes. "Peter Olson will ask her opinion about how to reorganize that company. But it will be his decision. She won't execute it. There are a lot of talented people at Random House who haven't been told no for a long time."

Photographed by Brian Doben


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