Peter Drucker vs. Radio

My long-time friend, John Parikhal, was interviewed five years ago by Steve Rivers regarding the future of radio.

A number of years prior, I asked Parikhal to interview management guru Peter Drucker when he was a featured speaker at one of my management seminars. John was a long time Drucker fan because of his track record of brilliantly seeing the future.

I share this because in his Steve Rivers interview -- well before the current recession -- John believed what was about to happen to radio was predictable.

And it wasn't the economy that was suspect.

Here's what he said (and keep in mind this was in 2005):

RIVERS: Between now and 2010, what do you see as true "radio killers"?

PARIKHAL: The biggest killer of all will be current management--unless they stop dancing to Wall Street's whip, institute formal training and recruitment, start surrounding themselves with smart people who challenge them, create cultures of FORMAL innovation, and begin to get serious about spot loads. Radio can control this. They can't control Steve Jobs, the Internet or any of the other so-called killers.

What are your thoughts on today's radio, and what are the biggest problems facing radio in the next five years?

Radio's biggest long-term problem is simple and has very serious long-term consequences: It's not attracting talented people. It's driving them away. Business genius Peter Drucker has been right for 50 years about what happens to business. In his brilliant (and very practical) book "The Daily Drucker," he says, "the first sign of decline of an industry is loss of appeal to qualified, able and ambitious people". Unfortunately, in radio under its current model, people are a "cost center" instead of an asset--a short-term form of illogic that leads to mediocrity at best and unintentional sabotage at worst.

And why is this so critical now?

The recession is ending.

The economy is beginning to come back.

Radio ad sales are improving for the first time in years. But a lot has happened since 2005 that begs the question -- is the radio industry ready to become a growth business again?

Stations are a mere shadow of their former selves.

Morning talent fired -- some companies are even paying their talent's full salaries not to be on the air so the corporation can have an advantageous way to report their financials. It's insane.

Local radio has been depleted at best and eliminated in too many cases.

No one is home -- to put it bluntly.

Studios empty with one person wandering the hallways in between voice tracking assignments.

Never mind that radio CEOs show little interest in the digital future or finding ways to create content inspired by their radio brands for the Internet and mobile space. No radio company is spending even 3% of its annual operating budget on new media.

Have you seen Apple's stock lately? Through the roof. And not just lately -- during the recession Apple grew profits while other companies failed. The reason is because Apple used the past three years to cement itself as the new media leader in both consumer electronics and content distribution. Yet radio CEOs apparently think they don't need to be part of the new media revolution. (In the interest of full disclosure as I have said many times, I own Apple stock).

It's business as usual for radio CEOs.

And, unfortunately, as Parikhal predicted -- the downfall of the radio industry was never the economy (radio has weathered many recessions before). This time it was all about the industry's disregard for talent and managerial skill.

In essence -- it was not only as Peter Drucker said ("the first sign of decline of an industry is loss of appeal to qualified, able and ambitious people") but the systematic thinning of the ranks of existing talent in the name of cost-cutting.

As far as surrounding themselves with smart people who challenge them -- dream on.

Create cultures of formal innovation -- not in radio since 1996.

And begin to get serious about spot loads -- less is more failed and now that the economy is rebounding but stations cannot really charge advertisers the rates it deserves to charge, I am afraid more commercial clutter is in our future.

So here we are.

Recession easing up.

Advertisers increasing buys.

And what's left is depleted radio formats, nationally syndicated repeater radio and a non-local focus that makes radio seem like listeners and advertisers can live without it.

What is ominous is that the major operators who have long considered their employee assets as "cost centers" have nothing in the pipeline to reignite radio.

No one to show them the way to the digital future.

One national PD.

A few corporate managers.

In some cases CEOs who would never even be picked out of a lineup as good leaders -- especially in an economic recovery.

Cumulus had its multi-day managers meeting this past week in Atlanta and some attendees wrote to me with their comments.

Cumulus brought motivational speakers in who, I'm told, were enjoyed and appreciated. People like former NFL coach Dan Reeves.

But some observed that the motivational speakers seemed at odds with the message that management was sending -- that their company was going to be tightly controlled from headquarters.

Keep in mind that this is just one consolidator but the others are not much better.

Look at the comments from Cumulus employees:

On the speech by Eric Rhodes:

"Eric suggested we break the rules, not conform and don't worry about getting caught. He says true innovation in our industry has always come from the non conformists and rule breakers. I don't think Lew liked that part, since this whole conference is about conformity to Lews way of doing radio".

Bob McCurdy from Katz was next.

"Great speaker, great message. In summary and oversimplified review, bottom line is our ads suck and we need to invest more time and energy learning and developing strategy and creativity and compelling ads. He shared some great new and old tools that Katz has developed to help sell the story of radio.

Then two guys from the RAB got up, one spent 20 minutes talking about this great new revenue stream - co-op - and suggested radio stations are leaving millions on the table and the RAB was there to help us get it done!"

The assessment of the managers meeting?

"Other than McCurdy's intellectual and passionate presentation behind the scientific reasons our medium is so important and the need for immediate improvement, the day was useless".

After the earlier Dan Reeves talk -- one Cumulus manager in their infinite wisdom -- summed up what was wrong with the company.

"The coach talked about involving young people and getting buy in and participation. This came on the heels of Lew exclaiming that the management philosophy of hiring good people and letting them do their jobs is a failure. Lew says you have to create great systems and structures first then find good people to manage the system".

There it is.

In the words of a manager who received this message loud and clear from his CEO.

The management philosophy of hiring good people and letting them do their jobs is a failure.

You have to create great systems and structures first then find good people to manage the system.

But, I wonder -- who is developing "the system" if the task of managers is simply to carry out what someone else developed without "buy-in" or input.

This defies Peter Drucker.

My friends, as the economy picks up -- our own John Parikhal and Peter Drucker, the management expert who called it right for 50 years -- know more than Lew Dickey, John Hogan, Fagreed Suleman and their clones put together.

If radio wants to be a growth industry, it will have to get back to doing quality live and local radio.

CEOs will also have to deal with the fact that consumers will increasingly want their entertainment in a new form on mobile devices such as smart phones, iPods and iPads.

Radio needs to be a leader in generating new -- non terrestrial radio content -- at the same time it is reinvigorating live local programming.

But none of this can happen until the Wall Street infused radio industry stops looking at people as a "cost center" instead of a "profits center".

Greed is why CEOs miss this point and claim that everyone else just doesn't understand the business.

I think it's the other way around.

They don't understand the business and until they do -- recovery or not -- radio and radio's role in the mobile future --- will not be a growth industry.

It's sabotage -- pure and simple.

For those of you who would prefer to get Jerry's daily posts by email for FREE, please click here. Then look for a verifying email from FeedBurner to start service.
Thanks for forwarding my pieces to your friends and linking to your websites and boards.