Q&A: Richard Payne, BBC

(The last couple of years have seen a major transformation at the British Broadcasting Corporation - the world's largest broadcaster with an annual budget of over $6 billion. SSON's Jamie Liddell speaks with the man overseeing much of that transformation, Richard Payne, about the programme's objectives, the challenges he and his team have faced, the role played by outsourcing and offshoring, and what's next for finance at the BBC.)

SSON: Richard, over the last couple of years the BBC’s finance function has been through a very significant transformation programme. What was the objective of this programme and what were the drivers behind it?

Richard Payne: There were two basic drivers behind the transformation in the BBC since 2006. The first driver was really a reduction in the cost of finance, so an efficiency objective. We judged that finance was running at circa 2% of revenue, and we wanted to bring it down to less than 1% of revenue, which was a more appropriate benchmark. So that was one key driver. The second key driver was that it was judged in 2005 that the BBC was about to go through some big changes and transformation: there was licence-fee negotiation but, more importantly, its response to digital online broadcasting which was going to create some structural changes. So we needed a finance function that was capable of supporting that.

SSON: And what was your own role?

RP: Let me give some context. There were two legs to the transformation: one was an outsourcing retender; the other was an internal restructuring around a shared service centre. IBM was appointed as the lead partnership consultancy for the internal transformation; I was an associate partner in IBM and from 2006 led the IBM input into this process. So from 2006 through 2007 I was programme-directing the internal transformation project. Then in 2008 I joined the BBC and have now taken over the operational running of the shared service centre and the outsource contract, and I also support the CFO Zarin Patel and the group financial controller Chris Day in the change agenda going forward.

SSON: Can you give us an overview of the programme in terms of what was done, when?

RP: The programme really started in 2005, when the vision and the basic framework for what was going to be achieved were set out. There were five basic elements to the transformation. The first element was to create a management accounting shared facility in one place – not in London, but in a lower-cost location – which would support across 17 divisions. The starting-point here was that management accounting was done in each of these 17 divisions, so one leg was to create a shared service centre, and that was to be hosted in Cardiff on the BBC Wales site.

A second element was the creation of a finance partner capability in each of the divisions, so the retained finance organisation in the divisions would be based on the business partnering model. Thirdly, our base is SAP R3, so the third strand of this was to enhance our SAP capability; what we implemented was a SAP Portal which enabled all users to have a single sign-on across our SAP estate. We introduced SAP BPS – business planning system – across our production cost management, so we had a single tool that could do bottom-up cost management across all of our projects (we judge a programme – a content TV programme – to be a project); and SRM to manage a new procurement catalogue.

And what that was supporting was the fourth leg, which was self-service processes out with the users, so business users across the BBC had been used in the past to using their own administration units to do a lot of requisitions and procurement and so a lot of this change is predicated upon self-service through SAP Portal which we branded as MyBusiness. And then the fifth item – which was a key item to this – was to retender our outsource contract. We had an F&A outsourcer from the mid-‘90s, which was an onshore outsource, based alongside the BBC head office, and we now tendered this to be an offshore contract, and the intention there was to create a significant saving in doing that, and also realign how we could better team with a partner.

SSON: With the benefit of hindsight what would you say were the biggest challenges you encountered during the programme? And did you recognise that these would be challenges before you embarked on the project?

RP: Yes, the speed and scale of the change wasn’t without its challenge… One key element I suppose was stakeholder management across 17 divisions: clearly taking away their internal finance capability and convincing them that it could all be serviced out of a central site was critical. We recognised that, and there was a lot of stakeholder management resource put into this – more perhaps than I’ve experienced on some other projects I’ve been involved in – to manage that.

Another one was: in the SAP design and reconfiguration work, it was closing down the design specs in time to be able to implement this – and again, given the nature of what we were doing, which was creating the SAP Portal, and the implications that had across the business, and developing a project-costing tool which impacted right across the business, there were a lot of changes right up until the eleventh hour (and indeed some of those still continue).

Another challenge – which we probably didn’t recognise at the time – was the actual stage of stabilisation of both the shared service centre and the outsource contract. I think we may have been a little naðve in an expectation that you go through the transition and then come to a point where, hey, off you go to operate: I think the textbooks are a little light on the stabilisation phase, which is probably anything from 12 to 18 months, and that’s certainly been a big issue we’ve addressed for the last 12 months, and I think we’re bringing that to a close.

SSON: Again in hindsight is there anything you’d have done differently if you could do it all again?

RP: Yes, hindsight is an interesting one… One of the areas is that I think we probably should have integrated operational management of the new environment far more into the transition phase. What we did was, we effectively had a large transition team which had consultants, contractors and some BBC folk, who were handing over to an operational team which was being recruited and staffed-up. In hindsight what we should have done is have the operational team earlier and actually had far more ownership of this. That was a key one.

Going back to my points around stabilisation: I think we should have planned to resource and put more investment into the stabilisation period; that would have made life a little easier. The other point is whether we should have staggered these changes. We tried to do – we did, sorry! – process, systems, people and outsource all in one big bang. Should we have staggered it? Again, hindsight’s interesting: the problem would have been that we wouldn’t have achieved some deadlines that we wanted to achieve, to get all this done prior to the BBC reorganisation which happened in 2007 under the brand of Creative Futures. So that’s an interesting one, that one.

One of my colleagues in the BBC did make the point that when I was a consultant that "if you’d told us how difficult it was going to be, maybe we wouldn’t have done it! But then you wouldn’t have had a job… This is an interesting cycle…"

SSON: You mentioned outsourcing again there, and it does sound like outsourcing has been a massive factor in the overall transformation equation: why did the BBC decide to go down this road rather than looking to keep those processes in-house?

RP: Well, the outsourcing decision was really made back in the mid-‘90s, and one interpretation of why the BBC went for outsourcing back then was it wanted to implement a new ERP and chose R3, so in the mid-‘90s it was going through the change of implementing a new system and also recognised that it needed to consolidate a lot of F&A processes. My interpretation is that the decision was made then that it was easier to do that inside an outsource relationship rather than trying to do it in-house. So the decision was then made and BBC folk were transferred into the outsource operation, and the outsourcer was heavily engaged in the implementation of R3.

Going forward – as part of this Future Finance transformation, we recognised that there was a good opportunity here for offshoring and that we could indicatively cut costs by around 50% by taking that step. So we felt that having got an outsource mentality, and the structure established, that we could then go into a transition into a new offshore relationship which would significantly reduce cost.

SSON: Without betraying any commercial confidentiality, obviously, can you give us some idea of how you selected your provider in terms of the criteria you were looking for?

RP: We went through a full-blown procurement process and an evaluation; I think the main criteria were really capability, price – obviously, because that was a key driver for this – culture and a commitment to change. The interplay of those four factors, I would argue, was key in the final decision-making.

SSON: So what’s next for Finance at the BBC? How much more transformation can you undertake?

RP: What we’ve done is addressed the efficiency objective, so we’ve significantly reduced the cost of finance. Where we’re going next is the finance effectiveness agenda, and there are a couple of points to this. One is, are we adding value as a finance function in controlling risk within the BBC, so that’s one area that we’re continually alert to. We have experienced a change in governance structure; the BBC Trust was created in 2007 and, again, the way the BBC was run has changed, so we need to make sure that we are exercising sound financial management under that structure. We will continue on the efficiency journey under the continuous improvement banner, and we are continually looking for further efficiencies.

Another area is that of capability; particularly in our finance partnering model, we need to ensure that we do have the right capabilities working with business management in our divisions, to provide the appropriate level of financial insight and advice. The fourth area is we will be looking at our SAP and general finance systems estate, because we do need to upgrade SAP – we’re not on Version 7 yet – and we do need to consider what is the future of our integrated back office? We’ve focused on the finance function; now we need to look on a wider scale: what is the opportunity for greater integration across our back office, and how do we apply our systems landscape to that?

SSON: So a lot of work done already, but a lot of work still to do, by the sound of it…

RP: Yes, I think stability here will be a constant state of change – which is the very nature of the BBC, and why it’s a challenging place to be!