CBC Cuts: Does Mother Know How to Budget? (Part 1)

“It must be remembered that there is nothing more difficult to plan, more doubtful of success, nor more dangerous to manage than a new system. For the initiator has the enmity of all who would profit by the preservation of the old institution and merely lukewarm defenders in those who gain by the new ones.”  -Machiavelli

The CBC is a complex organization.  It operates in both official languages on a national, regional and local basis and in several aboriginal languages in the north.  It has both TV and radio networks and stations, numerous audio and video specialty channels, a substantial internet presence, rents or owns dozens of buildings and hundreds of transmitters and equipment.  It has thousands of employees from a wide variety of disciplines.  It is more complex than most other large companies or government departments.  It is without question our most important cultural organization.   

However, CBC, like all public services, is facing budget cuts and the following analysis indicates that the CBC may not have the right management skills or systems for implementing cuts of the magnitude announced recently by the federal government. For years CBC has gone along without effective management systems and this could prove disastrous today as the CBC must cut millions of dollars in expenditures and maximize revenues.  Improved management would mean significant savings, along with increased revenues, and go a long way to meeting the Corporation’s need to cut $115 million (plus no inflation funding for salaries and no funds for severance payments) from its budget over the next  three years.

Background: When new employees join CBC it takes a few years to understand where they fit in the vast and byzantine organization.  When a new CBC president is appointed, which tends to happen every five years, it takes the better part of the five years to grasp the scope and complexity of the Corporation.   What most new presidents fail to understand is that the organization is so complex, it is all but impossible to manage, unless state-of-the-art management systems are in place. 

Over the years efforts have been made to implement better ways of managing resources but an organization made up of so many competing interests tends to undermine those efforts, especially when it is known that the president will be replaced in a few years.  One technique that two presidents have used is to put one person in charge of all CBC English and one responsible for all CBC French services.  This can have the effect of favoring one area over another, e.g., TV over radio, and may not solve the basic issue of developing effective management systems and controls. 

This is especially true when the senior people involved have little or no experience working in or managing a large broadcasting organization.   The senior management team of CBC should have a healthy mix of seasoned broadcasters, who have actually made radio/TV programs, and people familiar with the business tools for managing and overseeing the human, technical and financial resources of a large broadcaster. 

Appointing a president every five years, who in reality can be no more than a figurehead, but who has the power to hire or promote inexperienced people into senior roles, has led to a situation where the senior management team may have less actual broadcasting experience today than ever before in CBC’s history.  The Prime Minister has traditionally appointed CBC presidents to a fixed 5-year term but the president is not accountable to the CBC Board of Directors, only to the Prime Minister.  The Prime Minister should appoint the president to a no-fixed term and make the president answerable to the CBC Board.   The president is effectively answerable only to the entity that appoints him or her so the PM should delegate the selection of the President to the Board, or agree to ratify through an OIC the choice of the Board.

Current Situation: Richard Stursberg’s new book about his time at CBC, The Tower of Babble, is rife with factual errors but it does confirm the hodgepodge of management systems and lack of business planning at CBC. 

When management finds an organization difficult to manage, a first response is to issue snap-shot reports on financial and other performance.  Performance reports, however, can just be papering over the fact that there are no real management systems in place.  In addition to the above mentioned reports, CBC issues an annual corporate plan, numerous reports on corporate policies, reports on transparency and accountability, reports on corporate bylaws, reports on official languages, environmental performance reports, reports on Access to Information requests and it just began issuing quarterly reports on revenues, expenses and programming achievements.

Reports from consultants are another technique to try and establish independent “facts.”  In 2011 CBC hired Nordicity to do a report on how Canadians compared to other countries in terms of financing their public broadcaster.  The report supported the idea that CBC is under funded relative to other countries.  Nordicity was also asked in 2011 to write a report defending TV advertising on CBC, using some unconvincing arguments and repeating much of the first report.  Seemingly independent of its work for CBC, Nordicity took the comparative international analysis much further and presented the findings to a U.K. audience last summer.  In this report Canada (CBC) is the worst performing public broadcaster on the basis of audience ratings, an element missing in their reports for CBC.  The entire thrust of the U.K. study seems philosophically at odds with their CBC studies.  All of these reports are available on the CBC’s or Nordicity’s web sites.  Reports can serve many useful purposes, including conveying the impression, especially externally, that management is in control and on top of all issues facing the Corporation.  Reports on performance are a necessary (sometimes even legal) requirement but they are not a replacement for good management systems. 

One small window we have on the CBC labyrinth is the annual financial reports of the CRTC.  For the first time in 2011 the latter contained more complete data on CBC revenue, expenses and staff. It is the only public source for information about the number of staff employed by the CBC. 

CBC’s Finances:  All the reports issued by CBC are woefully lacking information about CBC staff.  The CBC’s annual report and the corporate plan report the number of visible minority staff but do not contain data on staff in total or by medium.  This is unusual since CBC staff account for a majority of CBC expenses, as much as 60% according to CBC president Hubert Lacroix. The CRTC financial reports provide year-over-year comparisons of CBC staff numbers, revenues and expenses, as well as comparisons with private TV and radio.

The CRTC financial reports contain data on all the licenced broadcasting outlets of CBC/Radio Canada, including five specialty channels.  CRTC reports do not contain any information about unlicensed CBC activities, such as cbc.ca or satellite radio channels.  The latter accounted for approximately $100 million in annual expenses and an estimated 500-1,000 additional staff in 2010.  This is basically the difference between the total expenditures shown in the CBC’s April 1- March 31, 2009-10 annual report, and the results in CRTC’s September 1-August 31, 2009-10 financial report. The staff and expenses of CBC Head office may also be excluded from the 2010 CRTC data. The CRTC data we review here deal only with licenced activities of CBC.  It would be beneficial if the CRTC reports were to provide data on cbc.ca and other such services and breakout data on all English and French radio and TV separately. The CRTC financial reports, including a more detailed breakdown of major private station groups and CBC English and French finances can be found here.

The table in part 2 provides a summary of the information contained in CRTC financial reports per the CBC. CMRI has compiled the data from the original CRTC reports. 

Some highlights in the CRTC financial data, comparing 2010 to 2009:

     Revenues and Expenses

·        CBC revenues declined by 2% in 2010 to $1.767 billion; the Parliamentary grant represented $1.14 billion (65%) of total revenues

·        despite the reduction in revenues, total CBC expenditures actually increased very slightly to $1.663 billion in 2010; program expenses increased modestly by 3%

·        but one area, sales and promotion expenses, increased by 15% overall.  Sales and promotion accounted for $136 million in 2010, with increases of 17% at CBC TV and almost 40% at CBC News Network and RDI; an explanation as to why sales and promotion expenses of the CBC’s main TV services increased so markedly seems in order. Combined these increases in TV sales and promotion budgets accounted for roughly $20 million, which seems to have been taken from CBC radio budgets (see below)

·        CBC administration expenses accounted for $210 million in 2010, a decline of 18% from the previous year, led by a 34% reduction in CBC radio administration expenses.  This begs the question as to how this was accomplished in a one year period.  It would be useful if CRTC were to provide more details on this large $200-plus million expense category

·        CBC reduced salary expenses by almost $100 million in 2010 to $837.6 million (-10%), a remarkable achievement for one year and one needing some explanation

·        overall expenses of CBC TV (+3%) increased in 2010, as did the expenses of CBC News Network (+13%), ARTV (+7%), bold (+16%) and the Documentary Channel (+4%). Reseau de l’Information had a modest decline of 3% but CBC radio decreased expenses by 9% or by almost $35 million, meaning that radio services took a major financial hit in 2010 and appear to have been singled out, inadvertently or not, to bear the brunt of CBC cost cutting.  The result was noticeable on air as mid-day local programming was reduced by half and many daytime time slots consisted of repeat programming. 

·        Just weeks ago CBC filed limited 2011 financial data with CRTC and it shows CBC radio suffered an additional $27 million dollar reduction (-10%) in 2011.  Both CBC English and French TV services increased their expenses in 2011, meaning that radio has been sacrificed to fund CBC TV.  Does anyone at CBC other than the VP in charge of the books realize this?

Part 2 reviews 2010-11 staff numbers and advertising revenue....