Now for the Grann Finale

On January 2, the day she moved into her new office at Random House, Grann tries out the conference room.

She’s the perfect female, perennially best-selling author Tom Clancy says flatly, “good wife, good mother, good boss, and a dear friend.” He’s trying to explain why he and a few dozen other writers whose books sell several hundred thousand copies a year are so devoted to Phyllis Grann, their former publisher.

Unsatisfied with simple perfection, Clancy pushes on. “Most of the money I make is because of her,” he says, then adds with disarming, nine-figure false modesty, “I’m a good storyteller – but I’m not the greatest writer. I don’t use language as well as I should. But she keeps moving me along.”

He tries another approach: “Like Spielberg makes movies, she makes books.” But even that leaves Clancy searching.

“She’s Supergirl,” he finally blurts out.

In late September, Phyllis Grann shocked the book world by announcing she would leave Penguin Putnam, the $750 million publishing empire she assembled over 25 years and could not have dominated more completely if her name were on the building. Most executives with her career would have simply retired. She was the first woman CEO in publishing, and the head of an imprint that’s reputed to be 50 percent more profitable than any of its peers. Instead of bowing out, however, Grann trotted out F. Scott Fitzgerald’s crack about American lives’ having no second acts, vowed to have one of her own, then sat back to watch the frenzy of speculation about her next move.

Two months and a day later, Random House, Inc., announced that Grann would be joining the publishing behemoth – one that’s been struggling with its profit margins lately – in the nonexecutive role of vice-chairman, a job she starts this month.

A small woman, even in heels, with a preternaturally youthful face that leaves you thinking of Barbara Walters (she says she’s 62, but her Barnard classmates are all 65), Grann will admit only that she will work closely with Random House CEO Peter Olson. “It’s not really clear what I’m going to do,” she says. “Peter and I are going to discuss it, but I’ve already got some of my own ideas.”

Much of the gossip stems from the vague and cagey terms both Grann and Olson use to describe her new job. “I met her through the business,” Olson says, “but she’s become a close personal friend. She was the only non-Random House publishing person at my wedding.” Last September, Olson married Candice Carpenter, the Internet shooting star who founded iVillage. “One of our first dates was dinner with Phyllis and her husband.”

But Olson chuckles at the suggestion that Grann will soon have operating responsibilities of any kind: “She’s not going to be running an imprint. She’s not going to be running a publishing division. We’re not going to Putnamize Random House. She’s here so I can discuss with her the evolving economics of the book business. There’s no one else I could do that with. She’s going to do some big thinking about the future.”

“I don’t believe it for a second,” says an editor at a rival publishing house, surmising that Grann’s true role needs to be concealed because of a noncompete clause in her expiring contract with Penguin Putnam. “Otherwise, it doesn’t make any sense.”

“Phyllis can’t help herself,” a friend says of her sharklike inability to rest. “She’ll tell herself that she’s not going to be involved in operations, but she’ll find a problem and forget what she said.”

“I know that Phyllis believes she can bring some authors to them,” says Martin Garbus, the publishing lawyer. It’s true that Grann still enjoys the personal loyalty of tent-pole Putnam authors like Clancy, Patricia Cornwell, Nora Roberts, Robert B. Parker, W. E. B. Griffin, Robin Cook, Jack Higgins, and Lawrence Sanders, any two of whom would make a profitable imprint for Random House. Still, few of these writers will be tempted to follow her if she has no direct control over the editing and marketing of their books.

“I think maybe instead of buying another company,” an industry sachem says of Olson, “he bought a person.”

Grann’s secret formula for success sounds rather simple. “Lew Wasserman taught me,” she says, reflecting on the lessons of Hollywood management, “that you’re only as good as the talent you have under contract and the talent that walks out the door every night. You have to take care of these people.”

Taking these words to heart, Grann ran Putnam very much in the Steve Ross mogul mode, something Clive Cussler discovered four years ago when his contract was up at Simon & Schuster. “She flew out to Arizona to see me,” Cussler says. “I said, ‘I’ve been in the business for 30 years, and you’re the first representative of a publishing house to come to my house.’ “

Personal attention doesn’t stop once an author signs up. “The little things are important,” Grann says. “If you’re coming to town to do a little Christmas shopping, it’s nice to have a car pick you up.”

And Grann catered to her authors; she even pampered them. “A publishing company with a lot of repeaters,” Grann observes of the writers who produce bestsellers over and over again, “can afford to spend a lot more on its authors than on the machinery of publishing.”

“We had a very heavy courtship,” biographer A. Scott Berg remembers. “When I met her in 1989, half the books on the New York Times best-seller list were Putnam books. It was terrifying. She called me right after my Goldwyn came out and said that she wanted me to write a biography of Charles Lindbergh. She pursued me for a year. She’d call up and say, ‘I’m coming out to L.A., can we have dinner? You pick the restaurant, bring anyone you want, I’ll pay the bill.’ And once you get past the photographs of the grandchildren, dinner with Phyllis is wonderful.”

Berg worked on Lindbergh for eight years before calling Grann to find out who his editor would be. “She said, ‘Send it to me. I’m going to be your editor,’ ” Berg remembers. “There was silence. She said, ‘Don’t worry, I’m really good at this.’ I said, ‘But you’re running this company.’ I thought it would be months before I heard from her.

“Within three days, she’d read it,” Berg says, still astonished at the feat. “Within two weeks, she’d edited it. Big points, small points, she’s got perfect pitch. She hears the music of a manuscript.”

That ability to read quickly, and edit decisively, has been a central feature of her personality as well as her professional success. “Phyllis is a tremendous reader,” confirms Stacy Creamer, a former Putnam editor. “Everyone had to keep up with her. If you couldn’t read a manuscript overnight, you looked like a slow reader.”

“My mother doesn’t need much sleep,” says David Grann, a writer (her other two children are Edward, a filmmaker, and Alison, a radiation oncologist). “At any hour of the night, you’d wake up and she’d be reading. She’d read five, six books a week. When we went on sailing trips, she’d bring a suitcaseful for the week. Even then, her office would have to send more.”

Authors became good friends. “We hopped the Atlantic on the QE2 together,” Clancy says proudly. Dick Francis plays host to the Granns every February at his home on Grand Cayman Island. Art Buchwald persuaded them to buy a house near his on Martha’s Vineyard 25 years ago.

Colleagues at other publishing houses, like Olson, also grew close to her. Grann has dinner several nights a week with industry stalwarts like former Knopf head Robert Gottlieb, Doubleday publisher Steve Rubin, and current Knopf president Sonny Mehta.

If friends were family, employees were like children – especially when their health was at stake. When Faith Sale, a Putnam editor, was battling cancer for two years before succumbing in 1999, “Phyllis sent a car to pick her up every morning and take her home each night,” Creamer recalls. “She didn’t care about how much work Faith missed.” And leaving the company didn’t release one from Grann’s maternal grip. A former employee had a medical emergency in the Caribbean and Grann flew with her husband to meet her and be sure she got proper medical attention.

“Her Jewish-mother qualities obfuscate her very effective dealings with the world,” Gottlieb says of the sincere doting and meddling. “She’s a Jewish mother with the mind of a bear trap.”

Grann never let sentimentality blunt her lead-sled-dog style of management, always out front, always pulling her share and more. “The world divides into the people who get on with her and the people who don’t exist,” says one former employee. “There would be no eye contact at meetings. She’d look blank if you said good morning.”

And she can be stunningly candid. “Phyllis is very, very aware of which of her repeaters are good,” Gottlieb says, “and in what ways – and which of them are unspeakable. She’s smart and she’s honest. I remember one time I called her up about a writer and said, ‘Listen, Phyl, I’ve got to read something by this person. It’s now, you know, six successful books.’ And she said, ‘Absolutely not, I’d be mortified.’ “

Confident in herself, her tastes, and her intellect, Grann never worried about impressing others with a more august list. Her strength was in sales, and she knew it. She saw room to grow even among best-selling authors. Having passed up the chance to acquire Clive Cussler once, she recently jumped in with both feet, increasing his already impressive sales by 100,000 copies. How? “If I could figure out what she does,” says Esther Newberg, an agent who represents a handful of writers like Patricia Cornwell, Daniel Silva, and Steve Martini, who all left other houses to go with Grann, “I’d beat up on all the other publishers until they did it.”

“I wish I knew,” Sonny Mehta pitches in, “because I’d be doing it, too.”

Part of the magic at Putnam was Grann’s Thursday-morning breakfast meeting. “It’s the only breakfast meeting where no food is served,” her successor, Susan Petersen Kennedy, says. “For Phyllis, all phone calls need to be returned immediately. Breakfast was the only time you could have a long meeting.”

The 8:30 a.m. event had a war-room atmosphere, with representatives of every department – editorial, publicity, sales, and marketing – reporting in to Grann, who made decisions like a Mike Milken-style bond trader, constantly evaluating and re-evaluating her positions.

“Putnam publishes 75 books a year,” Grann says, explaining the composition of her list. “About 25 were repeat best-sellers, 15 were books that we would need a huge campaign to make, 10 were books where we were just starting things and we didn’t know where it was going, and 10 were mistakes we probably shouldn’t have published.” The trick was to make sure no piece of information was overlooked, no opportunity missed. She had hundreds of little tweaks and trims – a few more cities on a publicity tour, a smaller reprint, another ad – that might make the crucial difference in a book’s momentum.

“She didn’t want anything to creep up on her,” one editor who used to work with Grann says. “She had a hyper-alertness about bad news.

“Phyllis has a sometimes breathtaking ability to deadhead books before they were even published,” the editor says. Folding up shop on a faltering title was one way to keep the margins up.

“If you didn’t put the whole above all,” Grann says darkly about life at Penguin Putnam, “it didn’t work for you there.” When a book wasn’t performing to her expectations, especially if the author showed little hope of becoming a repeater, she gave no quarter.

She rarely ceded control. “There were people who thought it might be difficult for two strong women to work together,” says Susan Petersen Kennedy, who joined the company to start Riverhead as an independent imprint. “But it was clear that I was doing something very different. She said, ‘I’m not going to read any of your books until they are published. I don’t want to influence what you do with my opinions.’ And she kept to that.”

“As long as you make your margins,” Grann explains, “I don’t care. You can spend your money any way you like, but you have to make your margins.” Petersen Kennedy agrees: “She’s not into charity.”

But Grann’s implacable will also had an obverse. If she believed in a book, she would go to the mat – again and again. In the case of Lance Armstrong’s It’s Not About the Bike, Barnes and Noble’s buyers were having trouble mustering enthusiasm for what they considered a relatively obscure sports memoir. Frustrated with the chain’s response, Grann saddled up and rode down to the company’s headquarters off Union Square, the first three chapters of the book under her arm. “She told them,” Creamer says, ” ‘You’re missing this and you need to take more.’ ” Impressed that the CEO took the time to pitch the book herself, B&N did – and it became a best-seller.

Instead of berating her employees over costs, Grann ran tutorials about the financial ramifications of every day-to-day decision. “We have, department for department, the lowest head count of any of our competitors,” David Shanks, Grann’s financial lieutenant and now the CEO of Penguin Putnam, says. “We had this philosophy that we would make people understand how they fit into the big picture. We would have financial meetings where a lot of people came so everyone understood how and why we were making decisions.”

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

Now for the Grann Finale