Why Bigger Isn’t Always Better

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Few industries command the attention that media companies achieve on a seemingly daily basis. This is due in part to the impact of their creative product on our culture, the great value we place on entertainment, and media organizations’ insatiable hunger for promotion. It is also due to their heavy deal-making pace.

In recent years, large media companies have largely pursued a growth-through-acquisition strategy. Looking to the future, this approach may have dire consequences.

Growth by acquisition has become far harder to achieve, as there are few consolidation opportunities left, regulatory pressures are increasingly making acquisitions more difficult and high multiples make the economics difficult to justify. Media companies that cannot grow organically will be left behind and their stock prices will continue to languish.

NOT WIRED FOR GROWTH

More worrisome, a Booz Allen survey looking at the organizational DNA of media companies has found that the larger ones are simply not wired for organic growth.

Media organizations face a critical fork in the road as they grow larger and more complex. They can either rewire their DNA in a way that supports organic growth, or they can resign themselves to an uphill journey in which progress will come slowly and only with great effort.

Organizations, like people, have a unique DNA-type structure that not only defines them but drives their actions in specific situations. This is the underlying premise of our DNA assessment, which includes data from nearly three hundred individuals in media companies and thousands of profiles.

Responding to an online questionnaire, media-company management and staffers provided a range of information about their organizations. These data were subjected to a statistical analysis that grouped the respondents’ organizations into seven core DNA types: Resilient; Just-in-Time; Military; Over-Managed; Outgrown; Fits-and-Starts; and Passive-Aggressive.

The first three are the healthy DNA profiles, whereas the remaining four have some serious flaws. Like all organizations, media companies must be designed in a way that allows them to formulate a clear strategic vision if they are to be successful. But this alone is not enough.

In order to drive significant, organic growth, the companies must also be able to execute upon that vision. It is in this area where the media DNA profile tells the most devastating tale.

Looking at large media companies, the three healthy DNA types represent just 17% of the overall DNA responses (Resilient, 9%; Just-in-Time, 6%; Military 2%). These are the profiles that are best suited to executing an organic-growth plan. Unhealthy profiles total an overwhelming 69% (Over-Managed, 15%; Outgrown, 0%; Fits-and-Starts, 9%; Passive-Aggressive, 45%). The remaining responses were inconclusive.

The very high percentage of Passive-Aggressive responses speaks to a pervasive inability to execute on the part of large media companies, yet successful organic growth requires the relentless pursuit and delivery of top-notch execution.

At small media companies, just 32% of respondents displayed the Passive-Aggressive profile, far less than their larger brethren showed. Further, these smaller organizations exhibited healthy profiles nearly twice as frequently as the big media companies: 30% versus 17%.

It appears that as media companies increase in size, they lose the organizational strength, execution skills and flexibility they had as smaller companies and therefore create impediments to organic growth.

While this loss is not unique to media companies, it is more pronounced within the media industry. For example, the healthy profile rate for large media companies was 29% higher and the Passive-Aggressive rate was 36% higher than for large companies in other industries.

Unhealthy organizational profiles manifest themselves in a number of ways that impede execution and stunt the internal growth that is so necessary to media companies today. In unhealthy organizations there tends to be a lack of understanding of how and by whom decisions are made, along with poor coordination of activities and limited knowledge or information transfer. The corporate staff tends to spend more time auditing rather than supporting the business units, and managers at various levels are far too involved in micromanaging and second-guessing subordinates’ work.

TOO MANY CHIEFS?

This micromanagement may be due to the reality that promotions occur too frequently in unhealthy-profile media companies, with management tending to move employees up before they have mastered the skills for their current and/or new job.

These organizations also tend to give promotions or raises for reasons other than superior performance, which exacerbates the highly political, second guessing, environments that often thrive in media companies. Lastly, unhealthy media organizations as a whole often do not provide balanced incentives across the organization or actively manage career development opportunities for their employees.

These unhealthy approaches and culture have a significant, detrimental impact on the organization’s ability to execute and drive organic growth. Micromanaging limits innovation because employees don’t feel empowered to bring forward new ideas. This can be particularly destructive in an industry that lives and dies by its creative output.

Highly political and Passive-Aggressive organizations often fail to build an appropriate analytical understanding of their markets, which is critical for sustained, organic growth. Egos tend to get in the way of facts and decision-making is often clouded by opinion and past experience that may no longer be relevant.

REWIRING DNA

Fortunately, large media companies need not resign themselves to sub-par performance. Organizational DNA can be rewired. However, it is up to senior managers to take action and implement real solutions.

Executives in companies who have rewired their DNA have met with extremely positive responses — finding themselves and their organizations better able to execute on the growth objectives for the organization.

We believe such DNA rewiring represents the proper direction for the media industry, a path that will allow large organizations to continue growing as consolidation slows. While not easy to accomplish, this rewiring needs to be at the top of every media company’s senior-executive agenda. For those who make the effort, a healthy profile and, far more important, healthy growth await.

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