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Phil Soar: You should be kinder to your CEO – they have an impossible job

by EN

About ten years ago one of our larger companies (which shall be nameless but was a three letter acronym) decided to change its structure to introduce vertical controls over its events. This was instead of relying on the show directors to have overall control of their shows. One of the ‘verticals’ was a single data department holding the emails/addresses/mobile numbers of every single show’s customers. The new director of data gathered together all the databases and exercised complete central control of how many emails and mailings and texts each show could send out. If a show director wanted to send an email to her exhibitors or visitors, she had to put in a request to the dreaded data department.

The powers that be had decreed (for some unexplained reason) that no-one on the database should ever receive more than six emails a year. So, when a show director wanted to send a generic communication to everyone called (say) marketing manager, she would often be told: “No – they have already received their six emails this year.” If her show was in January, she might be OK – if in November, well…………….

The result was predictable. Show teams simply started building their own databases on their own PCs, emailing them secretly and not telling the data department about it. This not only took a great deal of time, but also rendered the benefits which might come from centralised data moot.

So they ended with a lot of pissed off show directors, data disorganisation and almost certainly fewer visitors.

Should we organise by role or by event?

This is a good example of the enormous difficulties all large groups seem to have in organising themselves effectively. Are there synergies across 100 trade shows? And should we organise vertically (by roles) or horizontally (by event)? By product, or by geography? And is it possible to have an effective mix of all these options – four dimensional matrix management? And has anyone ever solved it? (Answer to the last question – No).

The main problem is that most normal businesses in the world need just one chief executive, but an exhibition group really needs at least fifty. Trade Show groups, despite their profitability, are not normal businesses. Somewhat oversimplifying, most businesses in the world sell one product (or similar products) in a variety of markets and ways. Exhibition groups have dozens of totally different products selling to totally different customers without any centralised system of distribution.

Most businesses need one CEO, trade shows need 50

The issues each large trade show group faces are, expressed simply:

  1. Do you have a venture capital model, which leaves each knowledgeable team pretty much alone to run their own event, or a pyramid model which regards the “group” as the important thing and tries to control most services centrally?
  2. Do you have country CEOs managing everything in their geography, or product CEOs who control all shows in their particular domain (eg travel, security, IT) wherever in the world they are run? This is a perennial headache. Let’s say a good security show starts in the UK, then its show director takes his exhibitor base to France and Spain. But there is already a French CEO, who naturally assumes that the French Security Show is in his balliwick. Who gets the credit? Who makes the decisions? Who gets the credit for the profit in his/her bonus?
  3. Do you try to have ‘vertical’ directors who are in charge of certain key functions (notably data, IT, HR, legal, accounting, operations) across the whole group and deny these functions to the show directors? In some cases this has extended to all sales staff being brought together, whatever their event, as a single team and the same with all marketers.

Sell the space, find the visitors, bank the cheques

The trade show business is ultimately nothing other than the shows themselves, and each show (or group of similar shows) is really a business in its own right. Each team needs to know and understand its own industry. Beyond that, the strategy should be very, very simple – sell the space, attract the visitors, bank the cheques – and the rest will sort itself out.

A group can own all sorts (and I will quote Clarion merely as an example) – DSEi, the massive defence show, and ICE, a large gaming show and The Baby Show (no explanation needed) but the team which understands the defence world could hardly be expected to perform well selling space to a nappy supplier.

As Exhibition Groups succeed and expand, they will buy events in different product sectors. On the surface this is fine – a trade show is a trade show. But they are not of course. There are certain skills – tradecraft if you like – which are transferrable – but an understanding of any particular sector, the years of getting to know a business and the main players in it, of gaining their confidence and understanding what they need from the event…………..that cannot be easily transferred. The staff on an acquisition can find it very difficult to deal with new and different systems. And as a result, their staff numbers shrink. I recall buying three shows from another UK organiser a couple of years ago. We took 15 staff with the shows – within six months only one remained.

The venture capital model – or the pyramid model?

As I mentioned above, there are two ways to run a group – the venture capital way and the traditional pyramid.

The venture capital model is less common. This is to treat each event as a business in its own right – as an independent investment which has been made by the owner as if the owner was a venture capitalist. Put the money in and largely leave it alone. Reward the show director really well, because she is the key to that business. This was – to a greater or lesser extent – the Blenheim model. Brian Wiseman ran the clothing shows, Sue Maddix the IT shows, Penny Hanson the giftware shows. But this came about not because of any profound philosophical insight, rather because the company was expanding so fast that there was no other option.

The other model is the pyramid. To try and make sense of the cacophony of assets they have acquired or launched, companies create a pyramid of group exhibition directors, of ‘HR business prevention units’, of ‘group data divisions’ which try to control and have oversight of what the exhibition directors do.

Most of you will recognise this model.

The existence of the pyramid causes personnel distortions. Naturally good staff want to rise in any organisation. A pyramid gives them a concrete structure to climb. So in the pyramid we invariably find group exhibition directors and group marketing directors and HR directors and legal directors. These are a way for the board to manage a multiplicity of assets – divvying them up across second or third level management. One obvious problem is that the best show directors always get promoted to be group exhibition directors and thus they no longer do what made them really valuable to the company – which is running a single show very well. The Peter Principle.

The pandemic generated a startling reappraisal of these layers. At least three of our major groups got rid of at least one senior management layer at the start of Covid and so far have not replaced it. The chairman of one of these groups told me: “We decided that these were not the people who were driving the company, not the people who were creating new shows and ideas, and we could afford to continue without them.” But one was bound to ask: “Well, what were they doing before then?”

The creation of business prevention units

At some point most large groups appoint an outside CEO whom they hope will restructure things in some sort of coherent way (I was appointed to Blenheim as an outsider and I remember a reception which was somewhat frosty – the first call I had was from the top drawer team asking me to bring them new waste paper bins). And the most common response for an outside CEO is to try to replicate structures with which they are familiar.

In the two most notable recent cases, the late Andrew Roberts at Reed (RX) and Tim Cobbold’s team at UBM, took the view that the most logical way to organise a large exhibition group was to replicate the structure which is familiar in most outward facing product orientated businesses.

That was to have a sales department” where all the sales teams sat together, a marketing department (ditto) an operations department (the equivalent of a production department in a classic business) plus vertical teams in areas such as data and HR (often referred to as the business prevention units). The individual trade shows would draw on these departments. So the XXX Annual Exhibition would buy sales resource from the sales department, marketing resource from the marketing floor etc. There would be someone, called something like brand director, who would be given responsibility for Brand XXX but who faced the rather interesting problem of not having anyone directly working for her.

There are few, if any, economies of scale in our business

Exhibition groups have very few economies of scale. In other words, having 50 shows doesn’t make you any more efficient than having 10 shows. Indeed, I would argue that we often have dis-economies of scale.

This is very rare – it is hard to think of any other industry which does not have some economies of scale as it grows. In general we see that the profit margins of our larger groups decline as they grow bigger. This is partly because the earlier core shows are the most profitable, but also because the larger the group the more layers of expensive managers are required to keep the whole thing on the road.

Another dis-economic factor is core suppliers – venues and stand building turnkeys. In most businesses, the bigger you are the better terms you can negotiate – but it doesn’t work that way in exhibitions. The reason is somewhat counterintuitive. There are relatively few turnkey suppliers and only a small number of venues. They can afford to do a good deal at cost for a small, new trade organiser – the effect on their profit is small and they are helping to encourage future business. But they cannot do that with the major trade show groups which form the bulk of their business. Those are the customers on which they must make a profit – if they don’t then their whole business model collapses.

There can still be some economies of scale. A centralised financial and invoicing function can be successful if integrated with tools such as Salesforce for accurate information dispersal. A very good operations department can handle a number of shows in a single country because they will be dealing with a small number of venues and turnkey suppliers.

Groups flip back and forth from country to product  

Groups tend to bounce back and forth on this – having a vertical structure which doesn’t really work, switching to horizontal one and finding the same thing, then back again. Running on the basis of product divisions, then having a new CEO who changes it to country based, then changing back again four years later when that doesn’t seem to work quite well enough.

The conclusions are not complex. It is well known that organisations work best up to around 150 people – this is the maximum number who can know everyone and through which all necessary information can be shared. After that size, organisations start to become sclerotic, begin to struggle to arrange themselves and start adding layers. Some companies – Goretex is an example – only allow their offices/factories to grow to around 150 people. As soon as they exceed that level, Goretex opens a separate office.

Our structural inefficiencies (I might posit impossibilities) would be a massive problem for most companies with normal margins. But trade shows are traditionally so profitable (for reasons I have discussed many times here) that they can afford apparently inefficient structures. If they couldn’t, and if their profits were truly marginal, maybe someone would come up with a different way of running them. As you have probably perceived, personally I prefer the venture capital model – but it remains remarkably rare.

 

 

Picture: Phil Soar at the AEO Centenary Awards by Jonny Donovan

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