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Home > Operations Management Viewpoints > How the BBC Reshaped Its Finance Function

Operations Management Viewpoints

How the BBC Reshaped Its Finance Function

by Zarin Patel

Table of contents

Introduction

In the past four years Zarin Patel has focused on repositioning the BBC’s finance department, boosting its efficiency and finding new and innovative ways of reducing costs. Her key focus is now on delivering more with the same amount of money and resources. She became the broadcasting corporation’s first female finance director in 2004. A member of the BBC’s executive board, Patel is responsible for financial strategy, planning, control, and corporate reporting activities. She joined the BBC in 1998, having previously spent 15 years with KPMG, one of the “Big Four” accountancy firms. She qualified as a chartered accountant after graduating in economics at the London School of Economics in 1982. Named as one of the most powerful people in the British media by The Guardian, Patel recently graduated from Harvard Business School, where she spent two months before returning to her role at the BBC in November 2008. She is also Governor of the University of the Arts, London.

Financial Pressure at the BBC

When a business has to adapt to an economic downturn, finance’s instinctive role might be to keep the creative drive in check, to communicate tough messages and to shepherd the business through an uncertain period.

In such an environment, you might expect the focus on financial stability to influence the core skills that are sought in finance managers. At the BBC, where finance’s role is so much about demonstrating value in our decision-making and how we spend the licence fee, this expectation might be even more pronounced.

The current economic downturn has given rise to unprecedented levels of uncertainty across all business sectors. People have had to contend with new jargon, and with language, previously reserved for the trading floor, being used in news reports and staff communications. In addition, every area of the business is being challenged to find new and innovative ways to reduce its cost base, to create headroom against already pressured budgets, and to actively manage financial risk.

The BBC has been facing similar challenges and financial pressures; however, operating in a fixed revenue business, with clear accountability not only to the BBC Trust, the group of independent trustees, but also to the licence fee payers themselves, adds an extra dynamic to our approach to risk. Our reputation, both editorial and financial, has to be a constant consideration in decision-making.

One of the biggest and most reported casualties of the recent downturn has been the property market; and there seems to be limited respite predicted from the current conditions in the coming financial year. Following the licence fee settlement back in 2006, the BBC embarked on a review of its property strategy to raise additional income to invest in program making.

The strategy which emerged, to streamline our property portfolio and exit 30% of our buildings over the coming five years, has inevitably been affected by such a sharp decrease in commercial property activity. Empty offices across the UK give us a very clear indication that we need to review our timetable. Even though the longer-term strategy remains intact, we have had to revisit both the assumptions we made in valuation of assets, and the timing of any receipts.

Property is, of course, only one of several areas where we have been streamlining our activities and making bold decisions to reduce our cost base and generate additional income.

Finance Redesign

BBC Finance embarked on an ambitious redesign of the entire function in 2005, with the target of reducing the cost of finance to below 1% of annual income and, as part of this, reducing finance headcount by approximately 50%. By simplifying processes and our operating model, we aimed to drive out cost and create efficiencies across all areas of the business. The new finance structure, including a shared service center based in Cardiff, has now been operating successfully for two years.

Our ambition for finance did not stop at simply reviewing and restructuring internal processes. The complementary, and equally important aspect of the remodeling exercise, was the re-tender of the Finance and Accounting Services contract, which moved to a lower cost model with a new partner, Steria (a leading European IT service provider), at the start of 2007. The contract re-tender alone delivered £20 million per annum of savings back to the BBC.

The contract with Steria is just one of a number of strategic contracts that have been placed with supply partners over the past five years for services such as human resources and technology, to ensure that the BBC’s resources are focused on its core remit, which is producing quality output.

The new contract with Steria involved the off-shoring of elements of both core and noncore finance services. At the time, this was an entirely new approach to contract delivery for the BBC, and a decision which inevitably attracted debate. However, once the decision had been taken, the benefits have given us confidence to consider other ways of delivering value to the license fee payer through our outsourced contracts. The move has also served to further highlight the need for strong governance and clear and consistent communication between our own finance community and our supply partner.

Now that we are two years into this 10-year contract, we have the opportunity to move into the next stage of the relationship, with a much clearer understanding of the services provided and the governance required to develop the relationship.

For me as CFO, a clear indicator of success for this contract will be its ability to keep moving and adjusting its model in line with developments in corporate governance and technology. Innovation has always been a huge part of our ambition for the contract, and we aim to lead the way, in terms of contract management, to develop new ways of solving old problems.

The first stage of the finance redesign, as described above, was very much about delivering efficiency and reducing costs. We needed core finance and change management skills in the business to implement new processes, roll out new reporting processes, and embed new models.

We anticipated that the BBC and its needs were likely to develop and evolve, as indeed they have.

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Further reading

Books:

  • Collins, Jim. Good to Great: Why Some Companies Make the Leap…and Others Don’t. New York: Collins Business, 2001.
  • PricewaterhouseCoopers Finance and Cost Management team. CFO: Architect of the Corporation’s Future. Chichester, UK: Wiley, 1997.
  • Taleb, Nassim Nicholas. The Black Swan: The Impact of the Highly Improbable. London: Allen Lane, 2007.

Periodicals:

  • Harvard Business Review
  • McKinsey Quarterly

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