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BBC Trust review of BBC Online management Controls Nov 2011

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BBC Trust review of BBC Online management controls

Foreword

The BBC Trust commissioned an independent review of the effectiveness of BBC Online’s management controls as a follow-up to its service review in 2008.

We are encouraged by the review findings, which give us assurance that weaknesses identified in 2008 in BBC online controls have since been addressed by BBC management. We are confident that steps they have taken to strengthen governance arrangements will help maximise the public value generated by this important BBC service.

Background

In May 2008 the Trust completed its service review of BBC online. We found that the service was highly valued by its users but highlighted some significant weaknesses in the service’s financial controls as well as the strategic and editorial oversight exerted by management. We asked the Executive to strengthen management controls and committed to review these controls when they had been implemented. More recently, the Trust asked the BBC Executive to gain a better understanding of the market in which BBC Online operates and any potential areas of sensitivity.

In June this year, the Trust commissioned Helena Renfrew-Knight of Scintilla Associates to carry out a follow up review assessing management’s controls in each of these areas. Her report is attached to this note.

Key findings

The review focused on the following three areas: financial oversight; editorial and strategic leadership; and market impact and distinctiveness.

Financial oversight. Scintilla Associates concludes that concerns raised in the 2008 Service Licence Review of BBC Online have been addressed and controls are in place to ensure that spending on BBC Online is accounted for robustly and accurately.

Editorial and strategic leadership. The 2008 Trust service review highlighted the need for stronger editorial leadership and identified that the devolved nature of the BBC’s management of online activities made it difficult to discern the service’s overall strategic direction. Scintilla Associates concludes that these concerns have been effectively addressed.

Market impact and distinctiveness. BBC Online operates in a fast-evolving and complex market and we are aware that finding the right balance between creating offers that audiences value and avoiding undue negative competitive impact can be challenging. We are encouraged that Scintilla Associates found that clear processes are in place for assessing market impact both retrospectively (for the existing products) and prospectively (for planned new activities).

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We also welcome the regular industry engagement events now being held as it is vital that the people working for BBC Online are engaged with the market in which they operate so that they understand any potential sensitivities relating to BBC activity.

During the course of the review Scintilla Associates highlighted some areas where processes for assessing market impact could be strengthened further. We welcome BBC management’s plans to address these by documenting their assessments of market impact more consistently and ensuring that the competitive impact assessment process is closely integrated with the rolling programme of product reviews.

Conclusions and next steps

We are satisfied that the concerns raised in our service review of BBC Online have been addressed by BBC management and commend staff for this achievement given the challenging context in which BBC Online operates. While strengthening its governance arrangements the service has also: been working towards a 25 per cent budget reduction; begun to move staff and activities to Salford; and, maintained the provision of a high quality and highly valued public service to the UK audience in a fast-changing market.

Under the terms of the Charter and Agreement, we are due to carry out a second service licence review of BBC Online in 2012-13. We do not anticipate that this review will look again at BBC Online’s governance arrangements. Instead, in common with our other service reviews, it will focus primarily on the output and audience impact of the BBC’s online activities.

Trust Review of BBC Online

Management Controls

Final Report

Helena Renfrew Knight

6 October 2011

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Contents

This report is structured as follows:

1. Executive Summary 3

2. Background to the Review 8

3. Context 9

4. Financial Oversight 11

5. Editorial and Strategic Leadership 18

6. Market Impact and Distinctiveness 27

Appendix A: Interviewees 32

Appendix B: Additional Information on Financial Management 33

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1. Executive Summary

1.1 Background to the Review

This review has been undertaken as a follow up to the Trust’s service review of BBC Online

published in May 2008. The headlines of the previous review were that bbc.co.uk was an

excellent service that is highly valued by users and meets the majority of its Service Licence

commitments but that improvements to management’s control of the service were needed and

that the Trust would restructure the Service Licence to offer better accountability. The Trust has

therefore commissioned this follow-up review specifically to investigate:

• Financial oversight: whether spending on BBC Online is now accounted for robustly and

accurately

• Editorial and strategic leadership: whether BBC Online is now managed in a way which

enables it to develop editorially and technically in ways which maximise public value.

• Market impact and distinctiveness: whether the ways in which BBC Online’s market

impact and distinctiveness are assessed both prospectively and retrospectively are

effective and efficient.

The review has aimed to focus on leadership and top level systems. It has not attempted to

conduct an audit of all activities. The findings are based on interviews with BBC Online Senior

Management and documentation provided by them. The report has been fact-checked by BBC

Management.

1.2 Context

Since 2008, BBC Online has undergone a period of extensive change and re-organisation,

having moved from a loose federation to a co-ordinated service managed within five portfolio1

and 10 product areas2. The magnitude of this change should not be underestimated in a

context where 1,700 roles were funded by the BBC Online Service Licence (falling to 1,300 by

2013), in an operation with Service Licence funding of £120m for 2011-12. Following

agreement of a new strategy for BBC Online in early 2011, plans are in place to meet the

2013/14 target for reduction in the Service Licence, resulting in a cash budget reduction of

1 These are Audio & Music; Knowledge & Learning; iplayer & TV; Children’s; and News, Sport & Weather.

2 Homepage, News, Sport, TV & iplayer, Search, Weather, Radio & Music, Knowledge & Learning, CBBC, CBeebies

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£20.2m3 and a gross Service Licence reduction of £34m. In addition, six of the 10 products

have moved from London to Salford.

1.3 Financial Oversight

The concerns raised in the 2008 Service Licence Review of BBC Online have been addressed

and controls are in place to ensure that spending on BBC Online is accounted for robustly and

accurately:

• There is a single overall budget in place, documented in the annexe to the BBC Online

Service Licence at portfolio4 level. This is reported to the Trust on a quarterly basis,

providing assurance that regular monitoring is taking place and that issues can be identified

and addressed before year end;

• Financial responsibilities are clear, with Ralph Rivera, Director of Future Media, holding

ultimate responsibility for spending on BBC Online as the Executive Director who sponsors

the Service Licence. Service Licence spend, split by Division is reviewed monthly at the

Online Direction Group (ODG), and the FD Forum. In the future, on a quarterly basis, the

ODG and FD Forum will receive reports of expenditure split by product. The detail of

expenditure is monitored on a monthly basis through the line management and financial

reporting structures of the Divisions;

• A Senior Finance Partner dedicated to BBC Online was appointed in July 2010. His

principal function is to monitor spend on BBC Online across Divisions, proactively question

any anomalies and consolidate inputs from Finance Partners to provide an overall picture of

expenditure on the Service Licence split by the 10 products; and

• Guidance on allocating costs was developed and reviewed by the BBC’s auditors in 2008.

As issues arise they are discussed and resolved by the FD Forum.

Financial controls and management processes are now being developed to support the recent

move to a product management approach which brings together editorial and technical

management. This is complicated by the fact that the BBC’s Finance systems do not mirror the

BBC Online Service Licence or products. This means that manual spreadsheet driven

processes are required in order to report and monitor expenditure at the product level. The

implementation of these has just begun and will needed to be refined with experience, with the

Senior Finance Partner, BBC Online starting in the 1st quarter 2011-12 to produce quarterly

financial reports broken down to product level. Similarly, In terms of day-to-day financial

3 BBC Trust, Approval of BBC Online Strategy, January 2011

4 The five portfolios are Audio & Music; Knowledge & Learning; iplayer & TV; Children’s; and News, Sport & Weather.

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responsibility, the new product management arrangements, as described in interviews and the

PQF strategy are also still in the process of being implemented and the Product Direction

Groups do not have access to overall financial information for their product area. Rather

managers only have visibility of the areas for which they hold the budget unless their

counterparts share information with them and the expenditure is monitored through the controls

of the Divisions in which it is incurred.

A couple of areas were raised by the Executive for consideration during the Trust’s next review

of the BBC Online Service Licence. These were the possibility of:

• including development costs within the Service Licence as, with the move to more

staggered releases, the definition of development spend is becoming increasingly

challenging to differentiate from the Service Licence; and

• merging the BBC Online and Red Button Service Licences.

1.4 Editorial and Strategic Leadership

The 2008 review pointed to the need for stronger central editorial control and identified that the

devolved nature of the BBC’s management of online activities made it difficult to discern the

service’s overall strategic direction. These concerns have been effectively addressed through:

• The creation of the Online Direction Group in 2010 which is seen as operating at the right

level to ensure senior attention for BBC Online and has demonstrated its ability to lead

BBC Online editorially and strategically through its delivery of the strategy for BBC Online,

approved by the Trust in January 2011.

• The appointment of a member of the ODG as Executive Editor, BBC Online who attends

the Editorial Strategy Group, MOTS and Quarterly Performance Reviews (QPRs); and the

development of the Editorial Strategy Group (ESG) and the Editorial Management Group

(EMG) which enable the development of pan-service editorial approaches;

• The development of the three year strategy for BBC Online through a highly iterative

process involving Finance, Strategy & Operations, driven by the catalyst of the Putting

Quality First (PQF) programme and the requirement for a 25% reduction in budget. A

measure of success was that a uniform cross-the-board approach was not adopted– some

Products lost 12% their budget, others lost 50% - the average was 25%;

• The processes put in place by the General Manager, BBC Online and his team to ensure

co-ordination and communication across the service. These are relatively new and

include: Quarterly Performance Reviews which allow the whole business to keep track of

significant strategic and technological developments such as Mobile and Social Media;

monthly BBC Online performance reports which provide the ODG with visibility of

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performance, key developments and issues across BBC Online; and support for the

embedding of shared technical and editorial management through HR’s Ways of Working

workstream; and

• The move to a shared, scalable technical platform. This reduces duplication and the

adoption of common standards facilitates innovation and engagement with external

suppliers.

New portfolio management tools are in development to support the enhancement of BBC

Online’s operation as a single service. The initial priorities areas are Engineering Excellence,

Marketing and Staff Skills and Behaviours.

An area for further consideration is how to address the potential gap between strategy and

governance and operational management i.e. between the ODG and product management,

raised in interviews with General Managers and Portfolio Heads.

1.5 Market Impact and Distinctiveness

The 2008 Review identified that BBC management needed to demonstrate more clearly how

bbc.co.uk delivers public value while considering potential negative market impact. In order to

do this a number of governance processes have been put in place which have gone a long way

in addressing the concerns raised. During the course of the Review, BBC Online management

has been very responsive to suggestions for potential refinements to the MOT process to

enhance its effectiveness and is implementing them immediately.

A formal MOT process has been established to ensure market impact and distinctiveness are

assessed annually for each of the 10 BBC Online products. The terms of reference and

template set out a robust process and a set of questions for the MOT to consider. The Fair

Trading team undertakes a retrospective CIP for each product. The Director of FM and the

Executive Editor, BBC Online are involved in the final discussion of the MOT and the summary

of the MOT is considered by the ODG and the EMG. In view of the importance placed on the

MOT to document that a thorough assessment of Market Impact has taken place, there is

potential to improve its impact and effectiveness by more fully addressing the questions set out

in the MOT template and by ensuring all relevant data is available to Fair Trading to enable the

retrospective Competitive Impact Principle Assessment (CIP) to be completed prior to the final

MOT discussion so that its findings can be included.

Responsibility for referring developments for prospective competitive impact assessment lies

with the Product Direction Groups. Fair Trading Advisers work very closely with these groups

and provide advice on development plans as well as undertaking formal prospective CIPs.

Meetings with industry are now planned twice a year, providing more transparency of BBC

Online’s plans. In addition, individual product areas also engage with their industry sectors.

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The external spend quota ensures engagement with outside suppliers and external links

monitoring ensures that BBC Online points traffic to external sites.

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2. Background to the Review

This review is a follow up to the Trust’s service review of BBC Online published in May 2008.

The service review was largely positive about the public value provided by the service and

found that it was highly valued by its users. However, during the course of the review, it was

found that there were inadequate financial controls – to the extent that actual spending on the

service was found to be 48% higher than previously reported5. The Trust also identified some

weaknesses in both the service’s strategic and editorial oversight.

The Trust required the Executive to develop a new system of management control for the

service and committed to reviewing this one year after its implementation. A new system was

created and approved by the Trust in summer 2008. However, a series of ongoing and

significant changes to that system were made through to spring 2010 and the Trust delayed its

review until the system was largely in place and stable.

The aim of the review was to check whether management control of BBC Online is now

effective. The review focussed on the following areas:

• Financial oversight: the review investigated whether spending on BBC Online is now

accounted for robustly and accurately

• Editorial and strategic leadership: The review investigated whether BBC Online is now

managed in a way which enables it to develop editorially and technically in ways which

maximise public value.

• Market impact and distinctiveness. The review considered whether the ways in which

BBC Online’s market impact and distinctiveness are assessed both prospectively and

retrospectively are effective and efficient.

The BBC Trust Unit commissioned a consultant, Helena Renfrew Knight, to undertake the

Review to provide some independence and distance in a review of operational matters by the

Trust.

The review has aimed to focus on leadership and top level systems. It has not attempted to

conduct an audit of all activities. Inputs to the review included interviews with key individuals

nominated by the General Manager BBC Online (see Appendix A for list) and documents

supplied by these interviewees. The report has been fact checked by BBC Management,

5http://www.bbc.co.uk/bbctrust/assets/files/pdf/regulatory_framework/service_licences/service_reviews/report_bbc.co.uk

_review.pdf, P61

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3. Context

The long term vision for BBC Online is “to become the universal gateway to the past, present

and future of the BBC, embracing audiences within a single, integrated offer that is available in

multiple languages, on any device, and in any location6.” It provides connected storytelling

through one service, 10 products and four screens7.

BBC Online brings together 10 audience-facing products with a shared technological platform

and user interface as illustrated in Exhibit 1 which are line-managed in the Divisions, and co-

ordinated by a small central team which, for management purposes, is situated within the Future

Media Division.

Exhibit 1: Overview of BBC Online

Shared technology platform

and user interface

Key Roles

Chair, Online Direction Group(Director, Future Media)

Executive Editor, BBC Online(Currently Director of Archive, within Vision Division)

BBC Online Central Team (Within Future Media Division)General ManagerManaging Editor

Finance PartnerMarketingAudiences

Homepage

10 products

News

Sport

TV & iplayer

Search

Weather

Radio & Music

Knowledge & Learning

CBBC

CBeebies

Source: Interview with Andy Conroy, General Manager, BBC Online

BBC Online has undergone a period of extensive change and re-organisation. Previously it was

a loose federation of 65 products rather than a co-ordinated service managed within five

portfolio and 10 product areas8. The magnitude of this change should not be underestimated in

a context where 1,700 roles were funded by the BBC Online Service Licence (falling to 1,300 by

2013), in an operation with Service Licence funding of £120m for 2011-12. Following

agreement of a new strategy for BBC Online in early 2011, plans are in place to meet the

2013/14 target for reduction in the Service Licence, resulting in a cash budget reduction of

6 BBC Online 2011/12 Plan

7 http://www.bbc.co.uk/blogs/aboutthebbc/2011/06/connected-storytelling-one-service-ten-products-four-screens.shtml

8 The 5 portfolios are Audio & Music; Knowledge & Learning; iplayer & TV; Children’s; and News, Sport & Weather. The

10 products are Homepage; News; Sport; TV & iplayer; Search; Weather; Radio & Music; Knowledge & Learning;

CBBC; CBeebies

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£20.2m and a gross Service Licence reduction of £34m. In addition, six of the 10 products have

moved from London to Salford.

Finding the optimum management model has been an iterative process. Following the Trust

review which completed in May 2008, the Executive responded in July with a new regime which

included a Controller, BBC Online and a pan-BBC forum to lead on all matters relating to the

service, constituted as the BBC Online Board. The Controller was in place immediately and the

Board met for the first in November 2008. The Executive reviewed the effectiveness of this new

regime in the second half of 2009. Their conclusions, agreed by Executive Board in December

2009, included a series of refinements to the operating model. In order to meet the scale and

nature of the changes ahead, it was decided to elevate the seniority of the Board. The Online

Direction Group (ODG), its replacement, is chaired by a member of the Executive Board with

specific delegation of authority from Executive Board for the strategy, budget and performance

management of the service. A single nominated member of the ODG, provides overarching

editorial leadership for BBC Online. A new role of General Manager, BBC Online was created

to support the ODG, oversee performance against the service licence and ensure the efficient

and effective operation of all associated business processes.

These changes were made rapidly: the ODG held its first meeting in February 2010 and work

for what became the 2010 Online PQF Strategy started in March. As a result of this work, the

next evolution of the operating model saw the creation of the Product Direction Groups with

responsibility for delivering on a product’s contribution to the service and with it the budget.

These were created immediately after the public announcement of the Online Putting Quality

First (PQF) Strategy in January 2011.

BBC management believe that this model is working well and can now be reviewed by the BBC

Trust.

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4. Financial Oversight

4.1 Summary

The concerns raised in the 2008 Service Licence Review of BBC Online have been addressed

and controls are in place to ensure that spending on BBC Online is accounted for robustly and

accurately:

• There is a single overall budget in place, documented in the annexe to the BBC Online

Service Licence at portfolio level. This is reported to the Trust on a quarterly basis,

providing assurance that regular monitoring is taking place and that issues can be identified

and addressed before year end.

• Financial responsibilities are clear, with Ralph Rivera, Director of Future Media, holding

ultimate responsibility for spending on BBC Online as the Executive Director who sponsors

the Service Licence. Service Licence spend, split by Division is reviewed monthly at the

Online Direction Group (ODG), and the FD Forum. From 1st quarter, 2011-12, on a

quarterly basis, the ODG and FD Forum will receive reports of expenditure split by product.

The detail of expenditure is monitored on a monthly basis through the line management and

financial reporting structures of the Divisions.

• A Senior Finance Partner dedicated to BBC Online was appointed in July 2010. His

principal function is to monitor spend on BBC Online across Divisions, proactively question

any anomalies and consolidate inputs from Finance Partners to provide an overall picture of

expenditure on the service licence split by the 10 products.

• Guidance on allocating costs was developed and reviewed by the BBC’s auditors in 2008.

As issues arise they are discussed and resolved by the FD Forum.

Financial controls and management processes are now being developed to support the recent

move to a product management approach, bringing together editorial and technical

management. This is complicated by the fact that the BBC’s Finance systems do not mirror the

BBC Online Service Licence or products. This means that manual spreadsheet driven

processes are required in order to report and monitor expenditure at the product level. The

implementation of these has just begun and will needed to be refined with experience, with the

Senior Finance Partner, BBC Online starting in the 1st quarter 2011-12 to produce quarterly

financial reports broken down to product level. Similarly, In terms of day-to-day financial

responsibility, the new product management arrangements, as described in interviews and the

PQF strategy are also still in the process of being implemented and the Product Direction

Groups do not have access to overall financial information for their product area, rather

managers only have visibility of the areas for which they hold the budget unless their

counterparts share information with them.

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A couple of areas were raised by the Executive for consideration during the Trust’s next review

of the BBC Online service licence. These were the possibility of:

• including development costs within the Service Licence as, with the move to more

staggered releases, the definition of development spend is becoming increasingly

challenging; and

• merging the BBC Online and Red Button service licences.

4.2 Background - BBC Online Budget

Expenditure on BBC Online is greater than its regulated Service Licence spend. Its expenditure

headings as reported in the Annual Report are Content; Distribution; Infrastructure; and Other.

However this wider definition is only applied at the year-end and plays little role in the routine

management of the individual service licences. Development spend is reported separately. The

bbc.com budget is managed by BBC Worldwide and the World Service online budget is

managed by Global News.

This Review has focussed on the regulated Service Licence element which is the Baseline

Budget formally agreed for the individual service licence, but which covers only the content

element of spend.

4.3 Issues from 2008 BBC Online Service Licence Review

The review found that financial oversight had not been sufficiently effective, resulting in a 48%

overspend, due to the devolved management structure for online activities in the BBC and as a

result of misallocation between cost centres. Weaknesses identified included: a lack of

centralised financial management for the service as a whole; inconsistent cost allocations to

online activities in each output division; and blurred definitions of spend on publishing online

content and site maintenance and that required to develop new technology applications and

upgrade the BBC’s infrastructure. The management structure of bbc.co.uk was seen as the

main reason for the service exceeding its budgetary parameters. A reorganisation in 2007 had

devolved budgets to the output divisions to enable a more integrated model of commissioning

and production. However, the review found that this resulted in BBC management no longer

having effective control of bbc.co.uk as a single service.

The 2008 review required BBC management to develop clear guidance and principles for cost

allocation; improve systems and processes to ensure that reliable data is collected and reported

on; break down the Service Licence into more manageable budget elements; and subject the

proposals for improvement to independent review by the BBC’s auditors.

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4.4 Actions Implemented by BBC Online

A number of actions have been taken to address these issues and are described in the sections

below:

4.4.1 Overall budget is in place for BBC Online, broken down into five editorial areas in the

annex to the BBC Online Service Licence and reported on to the Trust on a quarterly

basis.

4.4.2 Financial responsibilities are clear with mechanisms for monitoring and re-allocation in

place

4.4.3 Finance staff in place to support consolidation and monitoring processes

4.4.4 Regular scrutiny of budgets and expenditure

4.4.5 Clear, written guidance on principles for allocation of costs to linear and online,

developed and reviewed by the BBC’s auditors

4.4.1 Overall budget in place for BBC Online

The requirement for a 25% reduction in target through the Putting Quality First (PQF)

programme has been a significant catalyst in the re-organisation and development of a single

strategy and overall budget for BBC Online, broken down into editorial areas. Five portfolio

areas9 have been defined, encompassing 10 products10; financial management and quarterly

reporting by product has recently been introduced.

The BBC Online Service Licence sets out the service budget agreed by BBC Management and

the BBC Trust. In Part III of the Licence, the budget is split into five main editorial areas against

which the BBC Executive, in its quarterly financial reports, reports to the BBC Trust. This

provides reassurance that the Executive is monitoring expenditure on a regular basis and that

issues can be identified and addressed before year end.

A recent development has been to prepare the BBC Online 2011-12 budget by the 10 product

areas. However, this is a complex and time-consuming process, which is seen as being too

onerous to complete more than quarterly. It requires Finance Partners to complete spreadsheet

templates manually for their product areas which are then consolidated by the Finance Partner

for BBC Online. This quarterly report will be used by the General Manager, BBC Online as part

of the PQF tracker to enable early identification of under/overspends.

9These are Audio & Music; Knowledge & Learning; iplayer & TV; Children’s; and News, Sport & Weather.

10 Homepage, News, Sport, TV & iplayer, Search, Weather, Radio & Music, Knowledge & Learning, CBBC, CBeebies

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4.4.2 Financial Responsibilities and monitoring mechanisms

Financial responsibilities were understood and explained by all interviewees. In terms of day-to-

day financial responsibility, the new product management arrangements as described in

interviews and the PQF strategy are still in the process of being implemented. However, this

does not represent a risk to financial control as financial management is undertaken by line

managers within the Divisions.

Ralph Rivera has ultimate responsibility for spending on BBC Online as the Executive Director

who sponsors the Service Licence. The Online Direction Group (ODG) has delegated authority

from the Executive Board (EB) to provide leadership on all matters pertaining to BBC

Online/Mobile. It agrees the Online strategy, budget (including high-level breakdown) and

priorities for EB sign off. The Future Media Finance Director is Finance Director for the BBC

Online Service Licence (in addition to the BBC Red Button Service Licence) and therefore has

responsibility for the financial aspects of the Service Licence. Each ODG member is

accountable within the ODG for the bbc.co.uk budget for the division that they represent.

Day-to-day financial responsibility for each product was described as being delegated by the

ODG to the individual Divisions and to the Portfolio and Product Managers within them as

illustrated in the diagram below.

Exhibit 2: Product Financial Management

Editorial Lead

Product Manager

Portfolio Head

General Manager

ODG

X 5 X 2

.

Source: Interview with John Turner, FD BBC Online

This is also described in Putting Quality First - BBC Online Strategy 2010-13 as “Shared

accountability for every product between an ‘Editorial Lead’ and FM&T Product Manager who

together will combine editorial, design and technology expertise. This partnership will have joint

accountability for the product’s RQIV ‘contribution’ to the overall targets in exchange for joint

budgetary responsibility across editorial and technology resources.”

In interviews, however, it became apparent that in practice, financial management by product is

not yet well developed in all product areas. Rather detailed monthly reports are produced for

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editorial budget holders (who are not necessarily the Portfolio Heads) within the Divisions and

for the General Managers within FM. They are not consolidated into BBC Online product areas

and managers only have visibility of other areas if their counterparts share them with them.

The Review considered two areas in more detail: News and Radio & Music. The overall budgets

for these two product areas are set at the start of the year and monitored on a quarterly basis.

On the technical side, financial responsibility is taken by the General Managers. On the editorial

side, however, neither Portfolio Head had financial responsibility for the whole product. Rather

responsibility and management is split, according to the Divisions and teams where the work is

undertaken. More detail is supplied in Appendix B.

4.4.3 Finance staff in place to support consolidation and monitoring processes

A dedicated senior Finance Partner for BBC Online was appointed a year ago in response to an

internal review of BBC Online, in December 2009 and the earlier internal audit review which

identified the need for dedicated financial management resource for BBC Online. He works

very closely with the Finance Partners from the Divisions, consolidating their inputs in order to

draw up the quarterly reports by product area, monitoring spending on BBC Online across

Divisions and proactively questioning any anomalies.

4.4.4 Regular scrutiny of budgets and expenditure

BBC Online’s spend against budget is monitored regularly. The ODG and the FD Forum review

reports of spend split by Division on a monthly basis, and will review split by product on a

quarterly basis. The FD Forum, chaired by the BBC Online Service Licence Finance Director

provides a forum for the Finance Directors across the BBC to meet and discuss any financial

issues in relation to monitoring and managing spend on BBC Online including the Service

Licence, Development Spend and External Spend. This meets monthly, before the ODG.

The BBC Online service licence is reported on at the overall level to the Executive Board on a

quarterly basis as part of the reporting on all service licences. On a day-to-day basis, spend is

monitored through the line management and financial reporting structures of the Divisions and

through the Product Development Groups. Management of the BBC Online product areas is

evolving to encompass ongoing financial management.

4.4.5 Guidance and principles for allocating costs

The 2008 review required the BBC’s management to develop clear guidance and principles for

cost allocation and subject the proposals for improvement to independent review by the BBC’s

auditors. The BBC’s management responded with a Management Control Paper (MCP) which

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was reviewed by the BBC’s auditors, KPMG. KPMG’s report concluded that the MCP set out

“an appropriate approach to governance and accountability around bbc.co.uk business strategy

and controls... its success depends upon creation and implementation of detailed processes,

definitions and cost allocation methodologies (including non-content costs: distribution,

infrastructure and development).” This work has been undertaken and the allocation principles

are summarised in note 2c to the audited Group Financial statements. The BBC Online Finance

Director11 gave his assurance that “the guidance is clear in as far as it can be – there are always

new questions that make you re-examine it.” Part of the role of the FD Forum is to discuss

issues of cost allocations and work through scenarios as they arise, a paper from BBC Vision

was provided as an example of this12. Guidance on Service Licence reporting13 was made

available to the review by the Head of Group Reporting which provides definitions and guidance

categories of expenditure.

In practice, judgments on allocations are made by the production accountants and Finance

Partners in the Divisions. An interview undertaken with the Finance Partner for News gave

reassurance that guidance on allocations is available at a more detailed level14 (the

implementation of multimedia newsrooms makes this area one of the most complex in terms of

allocating costs between linear and non-linear content). Further guidance is contained in the

External Spend definitions document produced by BBC Online which covers distribution,

development and external spend definitions and has been circulated to all the Finance Partners.

Variations in the overheads allocated to BBC Online raise challenges for the management of

the overall service licence expenditure. The Senior Finance Partner is currently working with

Corporate Financial reporting in Cardiff to understand how overheads are allocated to Online, to

be able to validate that they are being allocated correctly and to understand how they are likely

to change as the PQF targets are achieved. This will enable more effective management of

overhead recovery and budgeting around it.

4.5 Future challenges

The definition of development spend is becoming increasingly challenging and BBC

management would encourage the Trust to consider its inclusion within its Service Licence in

the review of BBC Online next year.

The separation of BBC Online (IP enabled) and Red Button (was a linear enhancement, through

TV) is also resulting in complexity. For example, iplayer on Virgin falls under the Red Button

11 John Turner, who was in this role at the time of the Review

12 Protocols, Cost Allocation against Linear TV and BBC Online Service Licences

13 British Broadcasting Corporation, Home Services Divisions , Service Licence Reporting Guidance, July 2011

14 Newsgathering – Allocation of Cost to Service Licences

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licence while iplayer over the Internet falls under the BBC Online licence. Connected TV is on

the Red Button service licence.

18

5. Editorial and Strategic Leadership

5.1 Summary

The 2008 review pointed to the need for stronger central editorial control and identified that the

devolved nature of the BBC’s management of online activities made it difficult to discern the

service’s overall strategic direction. These concerns have been effectively addressed through:

• The creation of the Online Direction Group in 2010 which is seen as operating at the right

level to ensure senior attention for BBC Online.

• The appointment of a member of the ODG as Executive Editor, BBC Online who attends

the Editorial Strategy Group, MOTS and Quarterly Performance Reviews; and the

development of the Editorial Strategy Group(ESG) and the Editorial Management

Group(EMG) which enable the development of pan-service editorial approaches;

• The development of the three year strategy for BBC Online through a highly iterative

process involving Finance, Strategy & Operations, driven by the catalyst of PQF and the

requirement for a 25% reduction in budget. A measure of their success was that a uniform

cross-the-board approach was not adopted– some Products lost 12% their budget, others

lost 50% - the average was 25%;

• The processes put in place by the General Manager, BBC Online and his team to ensure

co-ordination and communication across the service. These are relatively new and

include: Quarterly Performance Reviews which allow the whole business to keep track of

significant strategic and technological developments such as Mobile and Social Media;

monthly BBC Online performance reports which provide the ODG with visibility of

performance, key developments and issues across BBC Online; and support for the

embedding of shared technical and editorial management through HR’s Ways of Working

workstream; and

• The move to a shared, scalable technical platform. This reduces duplication and the

adoption of common standards facilitates innovation and engagement with external

suppliers.



Marketing and Staff Skills and Behaviours.


governance and operational management i.e. between the ODG and product management,

raised in interviews with General Managers and Portfolio Heads.

19


The review identified that the devolved nature of the BBC’s management of online activities

made it difficult to discern the service’s overall strategic direction. Investment plans were

presented according to output division, rather than from the perspective of the service as a

whole. The review found that bbc.co.uk needs stronger central editorial control and more

consistency in look and feel and approaches to external linking. It also stated that more

effective editorial control was necessary to ensure that the service is distinctive.



below:

5.3.1 The creation of the Online Direction Group as a senior governance and direction setting

group

5.3.2 The appointment of a member of the ODG as Executive Editor, BBC Online and the

development of the Editorial Strategy Group and the Editorial Management Group to

ensure strong, central editorial leadership and control

5.3.3 The development of shared editorial and technical product accountability and product

management processes

5.3.4 The BBC Online strategy development and annual business planning processes

5.3.5 The portfolio management processes put in place by the General Manager, BBC Online

and his team to ensure that the 10 products operate as a single service

5.3.6 The move to a shared, scalable technical platform.

20

5.3.1 Creation of the Online Direction Group as a senior governance and overall direction setting group

The diagram below sets out a summary of the governance structures for BBC Online.

Exhibit 3: Overview of BBC Online Governance

Governance summary

1

Online Direction Group

Executive Board

EditorialStrategyGroup

FinanceDirectors

Board

Digital Media Measure

-ment Group

ExternalSupplyGroup

Product Direction

Group

Business drivers Business support

Online Editorial

Management Group

Source: ODG(11)014 PQF HR Org Des - Governance

The Online Direction Group (ODG), created in 2010, is responsible to the Executive Board for

the overall strategy of BBC Online and its delivery. The ODG meets monthly and is chaired by

Ralph Rivera, Director of Future Media.

Each of the Divisions of the BBC is represented on the ODG. Its membership includes: Director

of Future Media (Chair); Director of Archive Content (Executive Editor, BBC Online); General

Manager BBC Online; Controller Radio 1; Director Scotland, Journalism; COO, North; Director,

World Service; Finance Director, Future Media; Head of Strategy, Future Media; Director of

Marketing & Audiences, MC&A; Head of Planning & Performance, BBC Online (acting as

Secretary).

Establishing the ODG as a sub-committee of the Executive Board ensures that BBC Online gets

senior management attention and has facilitated communications and collaboration. It has a

clear status in the wider corporate hierarchy alongside the Divisional boards. Its early, very clear

mandate to reduce costs by 25% served to focus attention on developing an integrated,

coherent strategy for BBC Online. The ODG identifies areas where BBC Online is a service and

21

not just a platform; where it needs to be more than the sum of products and where value is

added by the products being together. The ODG is seen as “trying to come to the right answers,

people aren’t biased to their areas15” and as a decision-making group that makes things

happen. Its approach is seen by BBC Online as very successful and a good example of cross-

BBC working.

The ODG is managed very carefully by the General Manager and the Head of Planning &

Performance and they are working to improve its processes. For example, recently more

meeting time has been allocated to exploring a couple of issues more thoroughly, with much of

the ODG’s business being undertaken through its papers. Good routines have been developed

with papers going out on time and the Board reading them in advance. Setting out a planned

work schedule for the ODG means it is possible to turn down ad hoc items and operate more

strategically.

5.3.2 Ensuring strong, central editorial control through the Role of Executive Editor, the Editorial Strategy Group and the Editorial Management Group

Executive Editor

One member of the ODG is appointed on a rotating basis, for a renewable term of a year, to act

on the Group’s behalf in editorial matters as Executive Editor, BBC Online. The remit covers

both strategy and operational management. The current Executive Editor, BBC Online is Roly

Keating, Director of Archive Content, who has embraced the role and is very involved, attending

the Editorial Strategy Group, MOTs and Quarterly Performance Reviews. A conscious effort is

made to ensure that he and the Director of Future Media attend meetings together and are seen

to lead together both editorially and technically.

Editorial Leadership is provided by the Executive Editor, BBC Online and the Managing Editor,

BBC Online through the Editorial Strategy Group and the Editorial Management Group. The

Managing Editor provides a weekly report on editorial issues to the General Manager, BBC

Online and to the Executive Editor, BBC Online.

Editorial Strategy Group (ESG)

The Editorial Strategy Group is recently established and has met only twice to date. It meets

quarterly bringing together the Portfolio Heads and engaging them with the detail of BBC

Online’s agenda. The Portfolio Heads act as the hinge between the editorial management of

the product and the wider management of the Division. For example, the main role of the

15 Portfolio Head interview

22

Portfolio Head for the CBBC service is running the CBBC channel; while he has an interest in

the website, it is not his main concern.

The ESG looks at pan-service editorial issues. For example, for the Home Page refresh, the

ESG will look at editorial aspects, for example branding; getting right mix of content; new ideas;

stream of media; options for users to make it more informative or entertaining. (The ODG will

consider it from the point of view of where it fits with other products; its role as distributor of

traffic; and technical issues.) At the ESG meeting, the Portfolio Heads receive a report on the

main editorial developments over the past quarter; report on outcomes from MOTs; the

summary of any ODG product review; and have an opportunity to input into the current quarterly

performance review theme.

The Portfolio Heads interviewed said that the group still has to find its remit but were

enthusiastic about helping to shape it and felt that there is a role for senior editorial figures to

meet to compare notes, peer review, share information and deal with issues that are cross-

cutting but editorial in nature e.g. the approach to social media and the plans for the Home

Page.

Editorial Management Group (EMG)

The Editorial Management Group is mandated by the ODG to form a point of editorial control. It

is an operational group whose main role is co-ordination. It is chaired by the Managing Editor,

BBC Online. Its members are Editorial Executives from the 10 products, nominated by the

Portfolio Heads and charged with spotting issues in their product areas that may be relevant to

the other Editorial Executives. It is seen, by the Portfolio Heads, as an effective forum for

information sharing forum and dealing with the “nuts and bolts”. The group’s discussions cover

cross-BBC editorial issues like the plan for BBC Online to respond to category 1 deaths; or

developing the framework/rules for links for the next generation of navigation on the site. For

these types of pan-service issues, the Executive Editor canvasses views from all the product

areas, puts a framework together and gets agreement to use it.

5.3.3 The development of shared editorial and technical product accountability and product management processes

Ralph Rivera and Roly Keating have made themselves more visible as joint leaders of the

service as a whole. They are seen to be leading meetings together, thereby signalling to the

business that editorial and technical are in synch and avoiding the problems that had previously

arisen from the perception of variant editorial and technical strategies.

The product management structure, introduced at the start of 2011, brings together an “Editorial

Lead or Leads” and a “Technical Lead” for every product as illustrated in the exhibit below. The

partnership has joint budgetary responsibility across editorial and technology resources. 80%

23

issues are resolved through normal editorial chains of command. Others are escalated to the

Managing Editor, BBC Online.

Exhibit 4: Product Management

Portfolio Head

Editorial Lead

Product Manager

General Manager

Shared responsibility for product

Everyday oversight of product

Editorial Technical

Senior role, providing connections into rest of BBC

Senior role, 2 GMs cover 10 products

Source: Interview with Andy Conroy, General Manager, BBC Online

For each product, the Portfolio Head, General Manager, Editorial Lead(s) and Product

Managers meet weekly or fortnightly along with representatives from Marketing, Audiences, and

UX&D as a Product Direction Group (PDG). Only significant, strategic changes would need to

go to the ODG.

Shared product management and accountability has taken much HR effort to implement. The

Ways of Working initiative, run by HR in conjunction with the General Manager, Online, has

involved facilitated meetings attended by the Portfolio Heads and GMs and the level below to

discuss how well they were working together, how information is shared, and how well the

Product Direction Groups were working. A questionnaire to identify areas where the PDGs

were working less well has resulted in workshops on creativity and space for innovation; product

management processes and the impact of agile working; and UX&D. The approach to Change

Management has been shared with other HR Directors across the BBC and there has been

interest in adopting the principles in other parts such as the Nations and Regions.

5.3.4 The BBC Online strategy development and annual business planning processes

Processes used to set the direction

A number of processes are in place to set the strategic direction for BBC Online and to monitor

progress as illustrated in the exhibit below.

24

Exhibit 5: Summary of Direction Setting and Monitoring Processes for BBC Online

Annual Plan3 Year StrategyQuarterly Thematic

Review of Annual Plan

Annual MOT for each product

(x 10)

Monthly Performance

Report

3 Year Strategy

Putting Quality First: 2010-13 BBC Online’s Strategy is in place and has been approved by the

BBC Trust. This outlines BBC Online’s commitment to doing fewer things better by reducing the

number of products; broadening horizons by presenting internal and external links; and creating

a common platform for the whole of BBC Online.

Annual Business Plan

The annual business plan sets the targets for the year ahead for reach, quality, impact and

value for money in the context of the three year strategy. It sets out the overall highlights for the

year along with product specific plans and success measures.

5.3.6 The portfolio management processes put in place by the General Manager, BBC Online and his team to ensure that the 10 products operate as a single service

These are relatively new and include monthly BBC Online performance reports, Quarterly

Performance Reviews and MOTs.

Monthly Performance Reports

Monthly Performance Reports are being developed to enable effective overview and

management of the service. The minimum performance data in support of the new 10 product

structure has been available since April 2011; some additional indicators are not yet available

but will be from the second half of 2011-12. These reports will provide the ODG with a

comprehensive picture of product performance and developments. Because of the reporting

constraints already discussed, on a monthly basis the Finance page of the Performance Report

is high level, split by Journalism, Vision, North, A&M, F,M&T, Other (MC&A, C&S) and Central

Overheads. However, on a quarterly basis financial information will also be available split down

to the product level.

Quarterly Performance Reviews (QPRs)

QPRs were introduced at the start of the year and two have taken place to date (on Mobile and

Social Media). The idea is to focus once a quarter on a particular aspect of BBC Online that is

worth thinking about at service level. They are attended by ODG members; Director of Future

Media; the Executive Editor; Portfolio Heads; General Managers; the Head of Planning &

Performance; Audiences; Marketing; Strategy. Someone from the Divisions is chosen to chair.

A briefing is sent out in advance and materials are prepared to ensure that the discussions are

25

purposeful. The resulting recommendations are discussed and endorsed at the ODG with

feedback loop set for 2 ODG meetings time.

The QPRs are seen as being very effective and creative, enabling sharing of ideas and co-

ordination across the Service.

MOTs

The purpose of the MOTs as stated in the MOT terms of reference is as follows: “BBC Online

MOTs are a system of regular, robust editorial and governance reviews, established in March

2009 in response to the Trust’s Review of BBC Online (May 2008). MOTs are designed to be

inclusive and constructive, focusing on strategy, quality, distinctiveness, value for money and

potential competitive impact.”

The MOT is a rigorous, formal process, calendared a year ahead, with a set template. It is

described as “a wide-ranging review, a mini-version of a service review” with an agenda

blending editorial and technology issues. The Executive Editor and Director, FM attend the final

discussion and this is where they get the biggest deep dive into the products and can contribute

to developing their plans.

Both the ODG and the ESG discuss the outputs of each MOT. (Separately and more tactically,

the ODG reviews products when strategic issues or priorities arise). The Managing Editor, BBC

Online, who has responsibility for the MOT process, described its intention as raising the senior

team’s awareness of key issues and getting their input and views. Cumulatively the MOTs are

seen as very effective in enabling senior management to understand the overlaps between

products and exposing how to run the service as a whole better. MOTs are discussed in more

detail with reference to Market Impact and Distinctiveness in Section 6.

5.3.6 The move to a shared, scalable technical platform

BBC Online has been undergoing a process of slow centralisation, developing the “common

platform”, a scalable technical infrastructure that is shared across multiple products. As a result

there is now much less duplication of technology (for example media players) and the adoption

of industry standards make it easier for external suppliers to work with the BBC. This positions

BBC Online to be at the leading edge and take advantage of technical developments. The two

General Managers own all issues related to the technical development of BBC Online. They

work very closely together, understand the platform and can define and develop it in the

knowledge of all products, both pointing out the constraints and responding to editorial needs.

5.4 Areas for future development



26

Marketing and Staff Skills and Behaviours. It is planned to put in place regular reviews of these

areas and schedule discussions at the ODG.


governance and operational management i.e. between the ODG and product management as

none of the Portfolio Heads or General Managers sit on the ODG. This was raised as an issue

both by Portfolio Heads and General Managers.

It was also felt that at a product level, there is good joint working, but there is limited cross-

product communication – for example, Radio & Music have set up bilateral discussions with

Knowledge but are doing this on their own initiative. Facilitating cross-product working and

discussions would be welcomed.

27

6. Market Impact and Distinctiveness

6.1 Summary

The 2008 Review identified that BBC management needed to demonstrate more clearly how

bbc.co.uk delivers public value while considering potential negative market impact. In order to

do this a number of governance processes have been put in place which have gone a long way

in addressing the concerns raised. During the course of the Review, BBC Online management

has been very responsive to suggestions for potential refinements to the MOT process to

enhance its effectiveness and is implementing them immediately.

A formal MOT process has been established to ensure market impact and distinctiveness are

assessed annually for each of the 10 BBC Online products. The terms of reference and

template set out a robust process and a set of questions for the MOT to consider. The Fair

Trading team undertakes a retrospective Competitive Impact Principle (CIP) Assessment for

each product. The Director of FM and the Executive Editor, BBC Online are involved in the final

discussion of the MOT and the summary of the MOT is considered by the ODG and the EMG.

In view of the importance placed on the MOT to document that a thorough assessment of

Market Impact has taken place, there is potential to improve its impact and effectiveness by

more fully addressing the questions set out in the MOT template and by ensuring all relevant

data is available to Fair Trading to enable the retrospective Competitive Impact Principle

Assessment (CIP) to be completed prior to the final MOT discussion so that its findings can be

included.

Responsibility for referring developments for prospective competitive impact assessment lies

with the Product Direction Groups. Fair Trading Advisers work very closely with these groups

and provide advice on development plans as well as undertaking formal prospective CIPs.

Meetings with industry are now planned twice a year, providing more transparency of BBC

Online’s plans. In addition, individual product areas also engage with their industry sectors.

The external spend quota ensures engagement with outside suppliers and external links

monitoring ensures that BBC Online points traffic to external sites.


The 2008 review found that more needed to be done to ensure that all parts of bbc.co.uk are

distinctive. The review identified that BBC management needed to demonstrate more clearly

how bbc.co.uk delivers public value while considering potential negative market impact. Licence

fee payers needed assurance that the BBC is spending their money effectively on distinctive,

high quality content that promotes the public purposes and that it does not have undue negative

market impact. The BBC Trust therefore asked BBC management to develop a system of

28

assessing online output both prospectively (in the case of new propositions) and retrospectively

(in terms of existing offerings), taking into account:

• public value - contribution to the public purposes, underpinned by reach, quality, impact

and value for money

• distinctiveness

• potential market impact.

The review also found that external stakeholders had difficulty in obtaining information and

lacked a clear point of contact who could give an account of the BBC’s overall online activities.



below:

6.3.1 Formal MOTs, designed to build assessment of market impact and distinctiveness into

BBC Online’s governance processes

6.3.2 Prospective Assessment of Market Impact

6.3.3 Monthly Performance Management Reports providing a market position ranking for

each product and summary of MOT outcomes

6.3.4 Market engagement

6.3.1 MOTs

Formal MOTs have been designed to build distinctiveness and market impact into BBC Online’s

governance processes. The Terms of Reference for the MOTs highlight their focus on strategy,

quality, distinctiveness, value for money and potential competitive impact. There is an annual

calendar of MOTs to ensure that all 10 products are covered every year. The MOTs are seen

as an auditable and effective way of formalising regular product reviews.

The MOT structure has been refined to mirror the three ‘strategic filters’ used to develop the

Putting Quality First Strategy for BBC Online:

1. Contribution to the five editorial priorities

2. Identifying what makes BBC Online distinctive

3. Minimising market impact

In terms of distinctiveness and market impact the template for the MOT sets out a set of

standard considerations and questions against which each product should be evaluated, as set

out in the Exhibit below.

29

Exhibit 6: Sections from MOT template on Distinctiveness & Market Impact (from MOT ToR)

Identifying what makes BBC Online distinctive

Online distinctiveness is a function of how successfully we express the BBC’s values in

everything we do.

• Does the product display the BBC’s distinctiveness values?

- For all platforms: Impartiality; Accuracy; Creative innovation; Britishness; Trustworthiness

- Particularly important Online: Audience participation; Topicality/ updatedness; Ease of use

& great design; Universal accessibility; access to BBC archive

• KPIs include “Original & Different” survey question - “the site feels original and different from

most other websites I’ve seen”.

Minimising market impact

• What is the competitive positioning of the product in the wider market?

• Are similar offerings provided by third parties on a commercial basis?

• Have third parties made any public announcements of an intention to invest in this area?

• Is this a high risk area (e.g. a history of complaints/ noise)?

• Is there a potential partnership dimension with an external organisation?

There is a well-established process for each MOT which involves significant research and

preparation resulting in a draft report; a meeting attended by the Managing Editor, Research

Managers, Product Manager, Editorial Lead, Fair Trading representative, Portfolio Head, Head

of Performance and Planning and the Senior Finance Partner; and a one and a half hour

session with the Executive Editor and the Director of Future Media. A record is kept of the

discussion and copied to the ODG as a matter of record.

Competitive Impact Principle Assessments (CIPs) are intended to be an integral part of the

MOT process, but because they require specialist knowledge, and are governed by a complex

set of rules agreed with the Trust, they are carried out by the Fair Trading team. The initial MOT

meeting gives the Fair Trading representative the opportunity to understand the product in

depth, to identify any areas of likely concern, and to ask detailed questions about those areas of

the subject specialists. In the past, the completed CIP has not always been available for the

final MOT session but as a result of the discussions undertaken during the course of this

Review, the process is being amended to ensure that it now will be. A copy of the CIP is

retained by the Fair Trading team for auditing purposes and is also put on file with the rest of the

MOT documentation.

30

While the questions on Market Impact set out in the template may be covered in discussion

during the MOT sessions (e.g. whether similar offerings are provided commercially and potential

for partnership), they are not consistently documented. Given that this process has been set

up to be auditable and effort is already being expended in producing a report, a future

development would be to ensure that these questions are more explicitly addressed.

6.3.2 Prospective Assessment of Market Impact

Responsibility for prospective competitive impact assessment lies with the Product Direction

Groups and ultimately with the Portfolio Heads and General Managers. The triggers for this are

set out in the Executive Board Paper, Management Controls for the Assessment of Potential

Market Impact of BBC Online, April 2009. If any of the answers to the three key trigger

questions set out below are yes, then the development must be referred:

• Are similar offerings provided by third parties on a commercial basis?

• Have third parties made any public announcements as to an intention to invest in this

area?

• Is this a high risk area (e.g. history of complaints/noise)?

These questions are considered in conjunction with a traffic light system which provides more

context to help staff determine whether to refer. Approximately 300 people were trained on

these triggers by Fair Trading when the management controls around prospective assessment

of Market Impact were first introduced in 2009. Fair Trading provide and administer an online

training programme which is mandatory for all staff identified by the business as coming into

contact with Fair Trading issues. In the future, Fair Trading plan to extend this online training to

all staff at grade 8 and above unless agreed by Divisional and Fair Trading Senior Management.

Fair Trading also administer a more in-depth, face-to-face training with senior staff. Both types

of training have to be renewed every three years.

The Managing Editor and General Manager feel that the Product leads are generally very aware

of areas of possible sensitivity. In addition, the Fair Trading advisers are semi-embedded within

the product teams and are involved in discussions of potential developments. This means that

developing the CIP is a two-way process and there are no surprises. The CIP is generally

signed-off just before launch to ensure that it is current. If necessary, the Controller of Fair

Trading will hold up the launch if the CIP is not agreed and in place.

Often the CIP requires ongoing actions, e.g. 6 monthly reviews and the Fair Trading team takes

responsibility for ensuring that these are followed up. The outcomes of the CIP from one area

would be discussed at the EMG to highlight the implications for other product areas.

The MOT process considers how a product might be developed and the potential market impact

of such plans. For example, within the Weather MOT, the conclusion was reached not to

develop a separate mobile weather app but to include some features within the news app. The

31

CIP had concluded that Fair trading approval should be sought before any developments to the

weather provisions for mobile are made.

6.3.3 Monthly Performance Management Reports

The Monthly Performance Management report product dashboards provide a market position

ranking as well as measures for Reach, Quality, Impact and Value for Money. This ensures that

managers are aware of the BBC’s competitive positioning in each product area. It also sets out

the summary outcomes of the MOTs and CIPs for each product, providing an overview of

potential market impact issues across the business.

6.3.4 Market engagement

BBC Online has put processes in place to ensure that it is more transparent in sharing its plans

with the market. It has made its plan for 2011-12 available online16 and staff from the BBC's

online and technology teams publish blog posts on developments on the BBC Internet blog17.

Twice a year an industry event is held, covering all 10 BBC Online products and open to all

suppliers. The Director of Future Media gives an overview of BBC Online’s plans and is open

about the roadmap.

There is evidence that product areas also engage with their industry sectors individually which is

important as the sectors are so diverse. The external spend quota ensures engagement with

outside suppliers and external links monitoring ensures that BBC Online points traffic to external

sites.

16 http://www.bbc.co.uk/blogs/bbcinternet/img/BBC_Online_FY11_12_Workplan_for_June_Briefing_170611.pdf

17 http://www.bbc.co.uk/blogs/bbcinternet

32

Appendix A: Interviewees

Roly Keating, Executive Editor, BBC Online

Andy Conroy, General Manager, BBC Online

Matt Garside, Head of Performance and Planning

Ian Hunter, Managing Editor, BBC Online

John Turner, Finance Director, Future Media

Edward Spurway, Senior Finance Partner, BBC Online

Mark Friend, Controller Multiplatforms and Interactive, Music and Radio

Karl Burnett, HR Director, Future Media & Major Projects

Steve Herrmann, Portfolio Head (News & Weather), Editorial Lead (News)

Alison Bexfield, BBC Trust Unit, Chief Financial and Compliance Adviser

Neil Ashton, Finance Partner, News

Daniel Danker, General Manager, POD

Phil Fearnley, General Manager, News & Knowledge

Grace Boswood, Strategy

Ed James, Head of Group Reporting & Analysis (by phone)

Sian Graham, Head of Fair Trading Advice

33

Appendix B: Additional Information on Financial Management

This appendix provides further information on financial management considered during the

Review. A “deeper dive” was undertaken in the areas of News and Radio and Music.

Additional information was also provided on ongoing financial management and scrutiny. This

appendix is structured as follows:

1) News Online Budget Management

2) Radio & Music Online Budget Management

3) Regular Scrutiny of Expenditure and Budgets

1) News Online Budget Management

News has moved to a multiplatform way of working to increase efficiency. The implication of

this is a difference between the way that News is managed and the way that it reports the

Service Licence financially. The process of creating financial reports by Service Licence

requires manual compilation using spreadsheets which can only be undertaken after the actuals

have closed. This means it is difficult to intercept any problems before the Service Licence

financials are reported to the News Board, so any review, challenge and adjustment has to be

made in the following month.

Costs are allocated to Service Licences according to an agreed methodology. Online is

marginally costed - an example was given of the Robert Peston blog - it is considered that

whether or not Online existed there would always be a Business Editor within the BBC so an

allocation of time and cost associated with the Robert Peston blog is not allocated to BBC

Online.

The Portfolio Head does not have responsibility for the financial management for News Online

overall, just the cost centres and teams that he manages directly - the Finance Director, News

manages the overall budget. The News Online product is fairly static as the main elements are

people costs and the budget controls are set at the start of the year. The Editors in News are

responsible for an area of output that is not platform-specific. For example, the Editor of

Panorama is responsible for both the TV and Online aspect. Finance challenges the Editors to

manage to their bottom line not to the individual service licences.

For every creation of a new post or investment proposal in News, a form has to be completed

on which Managers have to set out which Service Licence it will affect. This ensures that

Finance has visibility of planned expenditure by Service Licence.

34

There is flexibility between the editorial and technical budgets, for example, a technical

developer post was kept, but financed by the editorial team because it had been identified by

them as a potential bottleneck

2) Radio and Music Online Budget Management

The Radio and Music product budget is split at the start of the year into 3 areas: technology;

Audio & Music editorial; and Scotland. The technology portion forms part of the total budget of

FM’s Programme On Demand (POD) group. Daniel Danker is GM, POD. The technology portion

is forms part of the total budget that the General Manager, Daniel Danker runs. The Portfolio

Head, Mark Friend, has responsibility for the editorial elements that fall within Audio & Music.

He pairs with Daniel Danker on the technical side and they agree on priorities and budget,

undertaking a monthly review of the numbers. When necessary, the technical and editorial

budgets can be flexed to meet business needs, for example, additional budget was found on the

editorial side to fund technical development work for mobile.

However, in addition, there is a separate budget controlled by BBC Scotland's Head of Radio,

Jeff Zycinski, for the website that runs alongside BBC Radio Scotland. On a day to day basis

Helen Munro, BBC Scotland's Editor of Music manages the Radio Scotland and Music online

budgets. Following a decision taken by all the nations including Scotland about 12 months

ago, the nations are represented on the product groups by Ian McTear from Northern Ireland.

There is also a monthly conference call which Helen Munro joins.

3) Regular scrutiny of expenditure and budgets

BBC Online’s spend against budget is monitored regularly. The ODG and the FD Forum review

reports of spend split by Division on a monthly basis, and will review split by product on a

quarterly basis. The BBC Online service licence is reported on at the overall level to the

Executive Board on a quarterly basis as part of the reporting on all service licences. On a day-

to-day basis, spend is monitored through the line management and financial reporting structures

of the Divisions and through the Product Development Groups. Management of the BBC Online

product areas is evolving to encompass ongoing financial management.

Scrutiny by the ODG

Finance forms part of the Monthly Performance Report which is circulated beforehand and

discussed at every meeting. The Finance section of the Monthly Performance Report covers:

• spend against budget for the service licence, split by Journalism, Vision, North, A&M,

FM&T, Other (M,C&A, C&S) & Central Overheads;

• external spend; and

• value for money, i.e. cost per user reached.

35

In addition, the minutes of the ODG record that the Group spends a substantial amount of its

time discussing Finance issues e.g. rollover; use of contingency funds; external spend; PQF

finance and people plan; BBC Online Annual Plan.

It is planned that the ODG will receive quarterly reports, split by product, on performance

against the Service Licence.

FD Forum

The FD Forum, chaired by the BBC Online Service Licence Finance Director provides a forum

for the Finance Directors across the BBC to meet and discuss any financial issues in relation to

monitoring and managing spend on BBC Online including the Service Licence, Development

Spend and External Spend. This meets monthly, before the ODG.

A monthly update report (reviewed by the Senior Finance Partner, the Finance Director and

General Manager of BBC Online) is prepared for the FD Forum. This forms the basis for the

Monthly Performance report of the ODG as described above. In addition, it covers issues such

as rollover requests, bidding for Online central provisions funding, external spend targets,

quarterly reporting process.

Product Development Groups

The Product Development Groups (described in more detail in Section 5) are operational groups

which meet weekly or fortnightly and discuss budgets and financial issues on an ongoing basis.

Documents

BBC Trust - Review of BBC Online management Controls ...€¦ · BBC Online operates in a fast-evolving and complex ... 2 Homepage, News, Sport, TV & iplayer, Search, Weather, Radio