Cover Story - Retuning the BBC

The idea that the BBC has management consultants crawling all over it continuously turns out, almost disappointingly, to be just another one of those urban myths. Along with the notion that the corporation is entirely the creature of the demon John Birt, it makes a good story.

But the reality is more straightforward.

Like most large organisations, at any one time there are likely to be consultants working on something. But the BBC has managed to create most of the recent rumpuses over restructuring and its future in digital broadcasting all by itself. The new structure, separating commissioning and programme making, bears all the hallmarks of Birt’s own work, with the announcement rushed out in his very own tact-free style.

In fact, if the job of the management consultants is to put an organisation’s assets to work, many would like to see Auntie sweating quite a bit more.

Just consider those assets: a brand name that commands respect across the globe; archives containing riches to match any Hollywood studio; news gathering and current affairs programmes of unsurpassed authority.

The BBC’s audience, as stakeholders, are entitled to ask whether Birt, director-general since 1992, and his management team are using consultants enough. Because when Murdoch can cream off a large part of the audience by sewing up the top sports programming and delivering it over his own networks and those of his business partners, the BBC needs all the help it can get.

The reality, of course, is that Birt has his hands tied by the very public service mandate that allows viewers to ask questions. His product, the corporation’s programming output, is measured not just by its share of the audience – which has held up, even grown, in the face of increasing competition from ITV and the satellite and cable channels. The BBC’s remit means it is judged on quality, distinctiveness and the way it caters for minority interests, too. Scope for financial deals is similarly limited.

There are plans to sell off the BBC’s transmission facilities, yielding u100m for reinvestment. But it probably cannot go in for more extensive relationships with partners like Pearson or spin off other capital assets, like its studio resources, without a change in its status.

When it comes to revenue, the new age of digital broadcasting means the BBC can start looking at the prospect of income from pay per view and subscription channels. But the main source of revenue for the forseeable future will be the licence fee. This stands at u89.50 a year, around a third of the price of a full subscription to Sky and is scheduled to increase at slightly less than the retail price index over the next five years.

What Birt and his team have been able to tackle with conspicuous success is the cost of bringing programmes to the nation’s screens. In the three years following his appointment, the average reduction in the unit price of programmes has totalled 19 per cent. And, contrary to his reputation as a beancounter, the weight of external consultancy input has been directed towards improving programming, particularly the clarity of processes that contribute to it.

“The consultants don’t know your business but they can help you articulate what you think,” says David Docherty, director of strategy and channel development for BBC network television. Docherty, who says he has used various consultancy companies, thinks it is helpful to have “someone outside the politics, people thinking differently, someone trained to help improve processes in organisations”. Paul Robinson, the ex-head of Radio One programming, holds a similar view.

“We needed the consultants to answer the unanswerable questions,” he says. Robinson was responsible for the 10-year strategy study for BBC Radio carried out in 1994/95. He is now general manager of talk radio, the national commercial station.

Robinson chose McKinsey to help on the project because he says it had the best ideas. Touche Ross and Price Waterhouse had also been shortlisted.

Birt knew and trusted them because they had previously worked on a programme strategy review for head of production Alan Yentob, and the then head of radio Liz Forgan.

Robinson set up a consultancy team composed of in-house individuals selected for their ability to contribute lively ideas and challenge the conventional wisdom. Three in-house analysts were co-opted to the team together with secretarial support. BBC heads of department led sessions looking at different aspects of radio’s future, like audience, costs of production and intellectual property rights. McKinsey’s commitment was one partner part time and one associate full time over a period of six months.

Each group met to brainstorm their issues and commission additional research if it was needed. “That’s where the role of consultant comes in,” says Robinson. “They were able to ask ‘what are the issues that affect the audience’ – and come up with some convincing answers”. He clearly has a lot of time for McKinsey.

“I found McKinsey excellent,” he says. “Innovative. They presented ideas clearly. They plotted things out clearly on a flip chart. They asked questions like ‘can you do the same programme cheaper or make it more popular, more distinctive?’.”

Robinson believes the competition from the BBC is that much greater as a result of the consultancy exercise. Above all, he says, “it brought greater clarity to the process of programme making”.

A much more critical reaction greeted Producer Choice, introduced in April 1993 with the help of Price Waterhouse. The process is designed to bring more competition into programming and reduce unit costs – which may explain its lack of popularity with the independent producers who have to work within it.

Sarah Dickenson, the freelance presenter and writer now at Ladbroke Radio, appreciates the opportunity it has given the independent programme makers but finds the system slow.

“The system is severely constipated,” she says. “But before, there wasn’t a glimmer of an opportunity to make editorial programming for the BBC.

If they want innovative, refreshing material presented in an interesting way they’ve got to take the laxative and get the system running”. Michael Bartlett of independent producers Business Sound is even more critical.

Bartlett regards the system as excessively bureaucratic. In part, he blames the consultants for a lack of understanding of the BBC and blind adherence to analysis tools that did not allow for the subtlety of the task. They were “people who knew nothing about the way things worked, forcing things into boxes”.

Docherty deals deftly with criticism about the commissioning process.

“You try to reflect people’s genuine concerns and be more or less helpful,” he says. “But at the end of the process there are bound to be difficulties.

You construct a system that overcomes as many of them as possible. Sometimes it can seem mechanistic. But sometimes you have to stick your finger in the air and say ‘it takes this long’.”

And Robinson is dismissive about the criticism that the consultants have helped turn the BBC into an even more bureaucratic organisation where everyone does a business case before they move.

“A business case is not bureaucracy,” he says, “it’s just good sense”.

He believes the BBC is still a bit discursive, a little low on action.

But he thinks it is not particularly bureaucratic – at any rate no more so than most large organisations tend to be. He recognises, though, that the organisation was ripe for change.

“It had to happen – and the consultancy projects made it happen,” he says.

And the process raised issues that crossed network boundaries and forced the networks to work together instead of in isolation, he says. For example, one discovery was that on Radio 2 jazz was not very popular but among Radio 3 audiences it was second only to classical music. So jazz went to Radio 3, bringing more listeners, reducing programming costs and increasing the distinctiveness of radio output.

That this seemingly not-too-difficult solution took help from McKinsey to make it happen suggests a lack of clarity and direction. In an organisation like the BBC whose greatest asset is its people this is a problem – and one that Robinson acknowledges they still have.

“There are lots of individuals,” he says. “They are very bright; they agree about many things – but they also disagree a lot. That’s still part of their problem.”

Clarity usually comes from inspirational leadership – which the BBC seems to lack at the top levels. Even with it, it is hard to see how the gap between the corporation’s ambitions and its revenue can be filled. Competing for sports coverage and investing in digital broadcasting means that gap is widening.

As Forgan has said, the digital revolution will make TV a bit like a supermarket where everything we want is available when we want it. If the BBC is to compete successfully in the entertainment supermarket then the licence fee has to go up significantly.

The other main option, a radical destructuring of the organisation to release its formidable assets, might make a few of us richer as consultants but all of us poorer as stakeholders.

Nicholas King is a business writer and consultant

A corporation run by consultants?

This is a myth. The recent restructuring and initiatives like “Extending choice in the digital age” have been almost entirely in-house productions.

Projects using consultants are managed and led by a BBC person. Like many large organisations, however, the corporation has been a source of substantial fees over recent years.

1997: World Service and BBC production to be integrated – KPMG appointed in October 1996 to “assess relative cost of programming”.

1994/5: 10-year programme strategy for network TV and radio – McKinsey supported in house teams including BBC group heads, led by David Docherty and Paul Robinson.

1993/4: programme strategy review led by Alan Yentob and Liz Forgan.

McKinsey supported BBC teams with external investigations.

1994: BBC commissioned Pims Europe to compare the costs of World Service and domestic radio.

1993: Producer Choice initiative introduced – Price Waterhouse in support.

Stretching the talent

The BBC is maintaining its audience, making more programmes with lower unit costs and, some say, greater imagination. But licence fee revenue alone is not enough to outbid the growing competition for talent and sports rights. Prices for sporting rights, surging ahead of inflation, have been absorbed in some cases but some sports, for example, motor racing, have been abandoned to ITV and BSkyB.

Combined revenues of cable, satellite, ITV and Channel 4 are already more than u2bn per annum greater than those of BBC Television. ITV alone has u1bn more to spend each year than BBC1.

The government-based imperative to invest in digital services will add substantially to the BBC’s costs – some commentators predict a u200m-u300m shortfall.

As part of the 1993 review, the BBC agreed to find aggregate efficiency savings of 16.9 per cent. By the end of this financial year, the savings will be of the order of 19 per cent and the BBC has accepted equally rigorous targets for future years.

Since 1990 the BBC has shed 8,500 staff (from a total headcount of around 33,000) but is making more programmes.

In the past three years the average unit price of BBC TV programmes has fallen by 19 per cent. In 1995/96, the BBC produced 19,334 hours of TV for u1.13bn; in 1993/94, 18,165 hours for u1.07bn.

Over the past six years, despite the increased competition from satellite, BBC1 has held its audience share steady, while ITV audiences have slipped 6 per cent. After a dip caused by vastly increased commercial radio competition, the BBC now accounts once again for over half of all listening in the UK.

Over the next decade, the total revenues of BBC Television will rise by about 6 per cent, while those of its commercial competitors are estimated to grow by around 75 per cent in real terms, with the revenues of subscription channels set to rise three- or four-fold. The BBC will end up with less than one-fifth of total UK television revenues.