Consultants' cost cutting won't cure strategic market ills

 

You wonder what is going on in the boardrooms of UK media-land when such media titans as Emap, ITV and News International have to resort to employing management consultants to tell them how to run their businesses.

Colin Grimshaw, deputy editor of Media Week
Colin Grimshaw, deputy editor of Media Week

In each case, it's the same American outfit - Boston Consulting Group - that has been called in to perform its Inspector Clouseau routine. Based in Boston, it was created by alumni of the neighbouring Harvard Business School, an institution that believes itself to have swallowed the map on good business practice - indeed, BCG bills itself as "the world's leading adviser on business strategy".

Having ripped apart that most conglomerate of British media companies, Emap, which led to a sell-off of its resulting component parts, it is now looking for similar "efficiencies" within ITV and News International.

In the case of the latter, to a degree, you can excuse James Murdoch, a Harvard alumnus himself. He has only recently assumed the top mantle, so to commission an efficiency study of the publisher's diverse operations might make sense - especially when so many of them lose money.

It is a puzzle that such a reputedly hard-headed businessman as Rupert Murdoch has for many years continued to fund substantial losses at The Times without complaint. The last filed accounts for Times Newspapers, for the year to June 2006, show a loss of £81m, even though The Sunday Times is believed to be a decent profit contributor.

Add in the £10m loss-making News Magazines (now axed by BCG) and the £17m losses in the first 10 months of thelondonpaper's operations, and you can see why Murdoch Jr might be concerned where his Pa was ambivalent.

Over at ITV, the problem is that, no matter how hard management tries to turn the business around and talk it up to the City, the share price continues to head south. Maybe getting in BCG might convince investors that management is serious about improving performance. But, ITV's problems are huge. Fundamentally, ITV cannot prosper as a plc - it needs to be part of a global entertainment group.

As for structural efficiencies, it is usually the case that management knows what needs to be done, but can have someone else to blame when the management consultants prescribe the nasty medicine.

So, getting in firms such as BCG for its textbook solution, doubtless requiring a flatter management structure and the removal of several layers of middle managers, looks like the last refuge of a scoundrel.

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