Trends in Organizational Structure
MSOs Move Towards Centralization

Hali Croner
Mel Croner

By Mel Croner, Chairman and Founder, and Hali Croner, President and Chief Executive Officer, The Croner Company

Background
A valid and relevant compensation survey, particularly in a niche industry, requires careful matching of the participants’ positions with the survey benchmark jobs. In some surveys, matching titles suffices. However, compensation surveys with a limited number of participants operating under stringent reporting rules, such as CTHRA’s Cable and Satellite MSO Compensation Survey conducted by The Croner Company, require detailed and in-depth job matching. While The Croner Company endeavors through its annual participant planning meetings to identify and adapt each of its surveys to the reality of the industry’s situation, organizations change rapidly and not always in the same way.

To ensure the continued relevance of CTHRA’s Cable and Satellite MSO Compensation Survey to its participants, The Croner Company (Croner), undertook a study of the organizations of the cable multiple systems operators (MSOs). The universe of medium-to-large MSOs is limited to less than 20 companies. Most of these companies participate in the CTHRA MSO survey, and all are members of CTHRA. The challenge of this study was to understand and diagram, at a schematic level, the organizations of the seven MSOs who agreed to participate in this study while protecting the identity of each participant.

For each of the seven MSOs participating in this study, Croner met telephonically with one or more senior executives of the company. In most cases, Croner had received a schematic organization chart of the participant’s organization in advance of the call. Croner’s representative identified all major functions, verified reporting relationships and discussed recent organizational changes and trends. For each participant, Croner prepared an enhanced schematic organization chart that reflected Croner’s understanding of the participant’s organization. This organization chart was sent to each of the participants for review and editing. Each participant returned the initial schematic organization chart with corrections, additions and deletions. Croner then prepared a final draft schematic organization chart and resubmitted it to the participant. Any final changes were noted, and a final schematic organization chart was prepared for each participating company.

The seven schematic organization charts plus accompanying interview notes were compared, and similarities and differences were identified. From this analysis it was clear that there are two prevailing organization models in the MSO industry. While almost all of the companies responding reported that changes are underway in their organizations, these two models accurately define, we believe, prevailing organization trends among major MSOs operating within the United States.

Centralized Organizations
There is a clear trend among all of the participants toward the centralization of functions. Exactly how high these functions report in the organization is not wholly consistent, but most centralized functions report either to the Chief Executive Officer (CEO) or to the Chief Operating Officer (COO). In every case but one, the COO reports to the CEO.

This centralization has a number of root causes, major among which are greater use and availability of technology in such areas as dispatch, provisioning, network operations and even sales. Certainly increasing human resources costs have figured into decisions to centralize MSO organizations.

Some MSOs are moving toward centralization at a slower rate than others. These companies fall into the category of decentralized organizations that will be discussed below. However, four of the seven MSOs surveyed fall into the category of centralized organizations.

In organizations that fit the category of centralized, formerly autonomous or semi-autonomous field organizations are transitioning to markets, with accountability for revenues, costs and profit and loss migrating to centralized positions, usually at the organizations’ highest levels.

In a complementary manner, centralized corporate functions are dominating MSO organization in this category. Corporate functions (e.g., legal, finance, product development/research, strategy, technology and human resources) typically report to the CEO. Operating functions with lines of business such as commercial, residential and ad sales/media, sales and marketing, customer care operations and public relations/government affairs for the most part report to the COO.

Sales and marketing typically report to a senior executive who reports to the COO. Sales personnel located in the field report to a centralized sales and marketing executive. Similarly, installation, provisioning and maintenance are located in a few area offices that report to a centralized executive. This paradigm also is typical for technical operations, maintenance and network operations.

Call centers are located in various geographical regions, but serve numerous systems. Also, technology enables backup, call balancing and centralized measurement of efficiency, input, throughput and customer satisfaction.

In the centralized model, divisions, regions, areas and systems serve, primarily, as the company’s “feet on the ground” rather than as operating entities. Some government relations positions are resident in decentralized locations, but most report upstream to a centralized government affairs/public relations executive. Support functions such as human resources and finance often have personnel in decentralized locations, but reporting is to a centralized executive.

Most importantly, in the centralized model, responsibility for revenue, costs and profit and loss rests upstream in a centralized organization.

Decentralized Organizations
MSOs with decentralized organizations follow the form of traditional, field-centric MSO organizations. Two of the seven MSOs surveyed follow this decentralized organization form. (One participating MSO is undergoing major organizational changes and does not adhere to either the centralized or decentralized model.)  Purely corporate functions report to the CEO. These include content acquisition, chief technical officer, legal counsel, analytics, corporate finance (including mergers and acquisitions), consumer services, government affairs and corporate public relations. The focus of most field-facing corporate functions is upon strategy, policies and uniformity across the company.

Typically, operating functions, including division, regional and area executives report to the COO.

Area executives are accountable for the revenues, costs and the profit and loss of the geographical area(s) assigned. In this organizational form, the area executive is the “ship captain,” administratively responsible for all or most functions of the system(s) in the area. Lines of business such as commercial, residential and advertising/media report to this field area executive.

In this paradigm, a field organization supports each area. These support functions include technical operations, customer care, project management/construction, government affairs and public relations, finance and accounting and human resources. Sales and marketing typically report to an area executive with sales revenues rolling up to the respective profit and loss statements of each area executive.

Often each area has its own engineering, public relations/government affairs, technical operations; e.g., network operating centers, lines of business such as commercial and B2B, finance; and sales and marketing.

Call centers and customer care centers as well as technology centers often are semi-centralized. However, these functions have a dotted line or dual reporting relationships with one or more areas.

The MSOs that use the decentralized form of organization, typically have disparate geographic areas.

Trends
The trend toward centralization among MSOs is quite clear. Even the companies with decentralized organizations have centralized such functions as technical operations centers and call and customer care centers.

The advantages of the decentralized organization are clear. There is an unshared accountability and control that rests with the area executives. The MSO’s profit and loss rolls up from the areas. However, standardization is difficult to achieve as are uniform practices. Each area tends to have its own personality, unique practices and quirks.

Centralized organizations are able to create and maintain more uniform operations. Unless corporate organizations add great numbers of staff, it is obvious that headcounts are lower in centralized organizations. Conversely, investments in technology are, perforce, higher with a concomitant need for much more robust technical staffs.

MSOs clearly are voting with their feet. MSO organizations are moving quickly from decentralized to centralized organization forms.

Implications for CTHRA’s Compensation Surveys
Croner has responded to the results of this study by adapting CTHRA’s surveys. Given the range of centralized and decentralized organizations, we have revised the descriptions of the Top Operating Segment executives and will be collecting and reporting for positions with and without shared profit and loss accountability.

We also will be reporting for all management positions surveyed, whether the position serves at corporate or in the field, and whether profit and loss accountability is shared or is the sole responsibility of the incumbent. In addition, we will be collecting and reporting on the titles of the incumbent’s supervisor to assist in locating the position’s “place” in the organization.

We are grateful for the commitment of CTHRA’s members to share information on their organization as an important way to keep the survey timely and valid. CTHRA and Croner remain committed to keeping the survey relevant and current.

HR Pulse is a bi-monthly resource published exclusively for the members of the Cable and Telecommunications Human Resources Association.

www.CTHRA.com  c c [email protected]