SBJ/July 11-17, 2011/In Depth

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  • Austerity measures force more cost controls

    When the United Kingdom’s new coalition government began to make good on its campaign to reduce government spending, Olympic officials worried that the axe might fall on them and feared significant cuts would require an overhaul of Olympic planning.

    “[We] knew they would come,” said Dennis Hone, CEO of the Olympic Delivery Authority, which is responsible for the construction of the London 2012 venues. “They had to treat us like any other part of the public sector. But we’d run what I’d like to think was a pretty tight ship here.”

    Hone and others only hoped that the government saw the same thing. It did, and after reviewing the Olympic budget, the government last year proposed cutting only $43 million, a sliver of the $14.8 billion being spent to host the Games.

    London organizers were in the middle of their planning process for the 2012 Olympics when the global recession hit. The resulting economic storm had already forced them to make difficult decisions about spending. Their ability to do so resulted in several savings that future cities might borrow as they look to contain the ever-escalating costs of hosting an Olympics.

    After being awarded the Games in 2005, London organizers had three years to secure land and finalize venue

    LOCOG
    Organizers reduced the number of athlete apartments planned by nearly 1,000 units.
    construction planning before needing to cut nearly $1 billion from their budget after the recession. They achieved $64 million in cuts by canceling plans to build a temporary facility to host badminton and rhythmic gymnastics competition, relocating those sports to an existing venue, Wembley Stadium, instead.

    Organizers also shelved plans to have a private company build the Olympic Village. The credit market was in shambles and the reality was that no private company could finance the $788 million project. The Olympic Delivery Authority shaved costs by reducing the number of athlete apartments by nearly 1,000 units.

    Organizers created additional savings by building a single facility to serve as the Main Press Center, which serves global news organizations, and International Broadcast Center, which serves Olympic rights holders. Historically, the Olympic organizers built separate facilities for the users.

    “We had to rationalize the design, get the cost down, take a lot of the amenities out of the building and use temporary facilities,” said David Higgins, the former CEO of the Olympic Delivery Authority.

    Securing those cost savings wasn’t easy. Moving badminton and gymnastics required approval from both sports federations; building one facility for the press and broadcast center required approval from the International Olympic Committee. However, the resulting approvals may make it easier for other organizing committees to pursue similar savings in the future.

    The idea of developing temporary stadiums — an Olympic first — might also benefit future organizing committees. London organizers have already offered to help Rio de Janeiro, which is hosting the 2016 Olympics, by breaking down and shipping the temporary basketball venue built for the 2012 Games. If the cities can get two uses out of one basketball venue, they would not only save a minimum of $100 million, they would also eliminate the white elephant that the stadium would become after the Games.

    “One of the great challenges for the Olympic movement moving forward is to make sure we have an Olympics that can go to countries … around the world,” said Hugh Robertson, the United Kingdom’s sports minister. “This shouldn’t just be leading foreign East nations, North American nations, European nations. It should go to developing nations, too.”

    Another idea that future host cities could borrow arose from the coalition government’s efforts last year to cut Olympic costs. The government advocated cutting a wrap planned to go around the Olympic stadium. Olympic organizers agreed to cut public funding for the wrap, which was designed for aesthetic, not functional, purposes, but to keep the design element and seek a private sector sponsor.

    It was a gamble. There are no corporate signs in or around Olympic venues, so whoever sponsored the wrap would be able to take credit for it only in print or advertising and promote it internally. But the London Olympic Organizing Committee found a partner, which it expects to announce soon.

    “I think in this instance going to the private sector and getting the private sector to fill in the gap, they will see that as good business for the future,” Hone said.

    The previous London Games of 1948 were known as the Austerity Olympics. The event was underfunded, coming on the heels of World War II, when the country was still rebuilding itself. While the word austerity is being tossed about frequently across Europe, none of the Olympic organizers believe next year’s London Games will be branded the same way as the 1948 Olympics. In fact, there’s optimism that the austerity measures being taken in the United Kingdom will end at the same time the torch is lit for the London 2012 Olympics.

    “There’s a feeling 18 months into [the austerity program] that we may be through the worst bit, and this will be a great national celebration,” Robertson said.

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  • Others leading the Olympic effort

    Sebastian Coe
    Chairman
    LOCOG

    General consensus is that without the leadership of the 1980 and 1984 gold-medal distance runner, London wouldn’t

    be hosting the Olympics. Coe made a stirring speech during London’s bid presentation that many credit with swaying some final undecided voters to award London the Games over Paris. Coe subsequently became chairman of London’s organizing committee for the Games (LOCOG), serving as the public face of the event. He leans on his experience as a member of Parliament to manage political relationships with the mayor and U.K. government and makes most — if not all — of the ceremonial, public appearances at news conferences for LOCOG.

    Hugh Robertson
    Minister of Sport

    The conservative member of Parliament was given oversight responsibility for the Olympics in 2010 after the new coalition government was formed. When the United Kingdom began undertaking austerity measures to cut its budget, Robertson became the point person in the effort to find cost savings from the Olympics. He did so by pushing for private-sector support of some remaining facility costs. Over the next year, he will continue to oversee the Olympic budget and work with LOCOG to be sure the Games are delivered at a reasonable cost.

    Roger Mosey
    Director of
    London 2012, BBC

    The former director of BBC Sport is undertaking one of the most ambitious broadcasting initiatives in Olympic
    history. The broadcaster will offer mobile, online, broadcast and possibly 3-D coverage of competition. It has pledged to show every hour of every event in high definition, delivering a total of 5,800 hours of programming over 17 days. The effort represents an enormous increase from the 300 hours of programming it offered from the Beijing Games.

    Chris Townsend
    Commercial director
    LOCOG

    The longtime marketer is responsible for overseeing the generation of all the pounds and pence that will pay for the 2012 Olympics. He has managed the domestic sponsorship, ticketing, merchandising and Paralympic broadcast negotiations for the 2012 Olympics. His team has raised more than $1 billion in sponsorship revenue, generated unprecedented demand for Olympic tickets, and sold the domestic broadcast rights to the 2012 Paralympics to Channel 4 for $16 million.

    Doug Arnot
    Director of Games
    Operations
    LOCOG

    Few people have more experience planning an Olympics than Arnot. The American attorney served as the managing
    director of venues and operations for the Atlanta Games and managing director for event operations for the Salt Lake City Games before taking a role planning Chicago’s bid for the 2016 Olympics. At LOCOG, he will oversee the most crucial elements of the 2012 Olympics, from accrediting and validating guests, to managing the massive staff and volunteer work force across more than 20 venues and the Olympic Park.

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  • Here today, gone tomorrow?

    Like Olympics hosts before them, the London Games will feature many new facilities for competition. However, instead of being left with white elephants after the event, London organizers plan several temporary structures that will be removed once the Games are over. Here are some highlights:

    Aquatics Centre

    LOCOG

    Sports: Diving, swimming, synchronized swimming, modern pentathlon
    Permanent or temporary: Permanent, with a temporary extension during the Games.
    Specs: Will serve as the gateway to the Olympic Park; designed by acclaimed international architect Zaha Hadid and features a wavelike roof.
    After the Games: Venue will be used by the community, clubs and schools, and elite swimmers.

    Basketball Arena
    LOCOG

    Sports: Basketball, handball
    Permanent or temporary: Temporary
    Specs: With a 1,000-ton steel frame, one of the largest temporary venues built for any Olympic Games; will share a back-of-house area with the Velodrome and BMX track.
    After the Games: Arena will be taken down and parts of it are expected to be reused or relocated elsewhere in the U.K.; London organizers have offered to break down and ship the venue to Rio de Janeiro, which is hosting the 2016 Olympics.

    BMX Track
    Sport: BMX cycling
    Permanent or temporary: Temporary
    Specs: 400-meter track is next to the Velodrome in the north end of the Olympic Park.
    After the Games: Track will be reconfigured and will form part of a new VeloPark for the community.

    Greenwich Park
    Sports: Equestrian events, modern pentathlon
    Permanent or temporary: Temporary
    Specs: London’s oldest Royal Park, dating to 1433; cross country course will be built in the park, and a temporary main arena will be within the grounds of the National Maritime Museum.
    After the Games: Course and arena will be removed.

    Handball Arena
    LOCOG

    Sports: Handball, goalball, modern pentathlon
    Permanent or temporary: Permanent
    Specs: Will feature more than 3,000 square meters of external copper cladding, mostly recycled.
    After the Games: Will be adapted to become a multiuse sports center for community use and athlete training.

    Hockey Centre
    Sport: Field hockey
    Permanent or temporary: Temporary
    Specs: Will feature two fields, one with spectator seating and one for use as a warm-up area.
    After the Games: Center will move to the north of the Olympic Park, joining a group of facilities in the area known as Eton Manor. It will have 3,000 permanent seats with the ability to increase up to 15,000 for major events.

    Lee Valley White Water Centre
    Sport: Canoe slalom
    Permanent or temporary: Permanent
    Specs: Features include two canoe slalom courses and a 10,000-square-meter lake.
    After the Games: The two courses and the facilities building will remain but the temporary seats will be removed; center will become a venue for canoeing and kayaking for the community.

    Olympic Stadium
    LOCOG

    Sports: Track and field, decathlon
    Permanent or temporary: Permanent
    Specs: Most sustainable Olympic Stadium ever built; 75 percent lighter in terms of steel use; low-carbon concrete made from industrial waste; capacity of 80,000 seats.
    After the Games: Will continue to be a venue for sports, cultural and community events; English Premier League’s West Ham United will assume ownership of the stadium.

    Velodrome
    Sport: Track cycling
    Permanent or temporary: Permanent
    Specs: Most sustainable venue in the Olympic Park, from the sourcing of wood for the track and external cladding to the installation of a 100 percent naturally ventilated system that eliminates the need for air conditioning.
    After the Games: A new mountain bike course and road-cycle circuit will be added to create a VeloPark for the community.

    Water Polo Arena
    Sport: Water polo
    Permanent or temporary: Temporary
    Specs: Will contain a warm-up pool and a competition pool; adjacent to the Aquatics Centre.
    After the Games: Arena will be taken down, but elements are expected to be reused or relocated elsewhere in the U.K.

    Source: LOCOG

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  • Eyeing the homestretch

    On a recent June afternoon in London, Paul Deighton strides into his spartan, 15th floor office in Canary Wharf carrying the 2012 Olympic torch. He raises it and holds it inches from his eyes, scanning its honeycomb design with a look of admiration.

    The torch was revealed a day earlier at St Pancras International station, becoming the latest physical evidence of the London Olympic Organizing Committee’s (LOCOG) long march to the 2012 Games. Though Deighton, LOCOG’s chief executive officer, wasn’t in attendance, he knows the specs of the torch by heart and ticks them off like a stamp collector detailing the significance of a prized postmark.

    “It’s 800 millimeters tall. Made of aluminum alloy. It weighs 800 grams. It has 8,000 circles representing the 8,000 torchbearers. And what else can I tell you? Designed over there,” Deighton says, pointing out a floor-to-ceiling glass window, “in East London. Engineered to the north of here in Essex, and manufactured in the midlands in Coventry, the heart of manufacturing in the U.K. It’s quite light.”

    After handing the torch to a colleague in the office, Deighton notes that he wouldn’t be among those 8,000 torchbearers. “I don’t know how much time you spend in this country,” he says, “but the general attitude is that we shouldn’t have any advantages as a result of our position.”

    Sitting the relay out would be unthinkable for many previous Olympic chief executives. Billy Payne ran the Olympic torch across the football field at the University of Georgia in the 1990s, and Mitt Romney passed it on in Utah before the Salt Lake Games in the early 2000s. But Deighton will abstain from the opportunity, and his decision to do so is reflective of his understated, behind-the-scenes management of the 2012 Games.

    GETTY IMAGES
    Olympic mascot Mandeville joins Deighton to open the London 2012 store at Heathrow Airport in March.
    During his five years of working on the Olympics, Deighton has earned a reputation as an understated team player with unshakable optimism, strong interpersonal skills and sharp business instincts. Those attributes have been critical, as he’s balanced the interests of groups ranging from government to sports federations to the International Olympic Committee, and confronted the unprecedented challenge of the recent global recession. His success has positioned him as the first CEO of a summer organizing committee since 1996 to manage an Olympics from beginning to end.

    “This is a very difficult job,” NBC Olympics President Gary Zenkel said. “It’s a seven-year cycle, a six-year run. There are a lot of changes that happen naturally. Macro changes. Economic changes. Public opinion shifts and wanes. There are government changes. Local priorities change. I can’t imagine and haven’t witnessed anybody who has dealt with that better than Paul. He’s doing a fantastic job.”

    One of the reasons Deighton has succeeded to date is because of the partnership and division of responsibilities he shares with LOCOG Chairman Sebastian Coe. The gold medalist and two-time world record holder in the 1,500 meters attends media events like the torch unveiling and responds to the majority of media requests, while Deighton oversees the day-to-day operations of raising sponsorship money, controlling expenses and developing operational plans for the Olympics. It’s a combination that’s served each of them well.

    “He’s got a chairman that’s good at the public facing bit, and he’s got enough on his plate for Christ’s sake without
    GETTY IMAGES
    having to worry too much about the public facing side of it,” said Simon Clegg, the former CEO of the British Olympic Association and the current CEO of Ipswich Town Football Club.

    With Coe’s help, Deighton has built an organizing committee that is positioned to deliver the Games on time and under budget. Venues are on track for completion this summer, test events are beginning, and anticipation is mounting in Olympic circles that LOCOG will deliver a Games that may not rival the spectacle of Beijing 2008 but will be a more than fitting encore.

    “Some of the qualities you will see in abundance are energy, enthusiasm and vibrancy, and the combined weight of that will create an atmosphere that will be unprecedented,” said Darryl Seibel, the head of communications for the British Olympic Authority. “It will be very different but no less remarkable [than Beijing] due to Paul and Seb and their team.”

    Answering the call

    Chief Executive. London Organising Committee for the Olympic Games. A role of the greatest national importance for an outstanding and visionary leader. The person: Skills and experience must include exceptional team building and leadership qualities …

    The more Alison Deighton read the classified in The Economist, the more it grabbed her attention. It seemed written for her husband Paul, who was seated nearby watching a soccer game that Sunday.

    “This job is for you,” Alison said, looking up.

    Deighton, who was the chief operating officer of Goldman Sachs’ European division at the time, scanned the ad and chewed over the opportunity. He had spent 22 years at Goldman, the bulk of his professional carer, and seen the firm expand its European operations from 100 employees to 4,000, but the Olympic job did seem written for him. He called the headhunter at Odgers Berndtson and added his name to a list of 500 candidates.

    He doubted he would be considered because his background as an investment banker didn’t make him the prototype to become CEO of a sports organization, but he interviewed well and ultimately earned the approval of the U.K. government, the mayor of London and the British Olympic Association.

    Though it was the only job Deighton said he would leave Goldman Sachs for, he was still unsure of what to expect
    GETTY IMAGES
    Deighton is content to do much of his work behind the scenes while LOCOG Chairman Sebastian Coe (right) serves as the public face of the effort.
    when he was named CEO in December 2005. He had no sports experience, he had never worked with the government and he knew next to nothing about the IOC.

    “I came to it expecting to be surprised, to have moments of enormous challenge, to have moments when it would be quite unclear to me how we would get through and sort something out, to have moments when we had difficulty with different partners,” Deighton said. “So I came in expecting a real challenge. But that was why I was interested in doing it.”

    Deighton made up for the gaps in his knowledge after he started the job by collecting loads of information about the Olympics. He traveled to New York and met with Zenkel and other NBC executives. He visited Vancouver 2010 CEO John Furlong. “He went around and really educated himself,” Zenkel said.

    Deighton then began installing at LOCOG some elements of the corporate culture he had left behind at Goldman Sachs. Like the investment bank, he wanted LOCOG to rely on teamwork, provide effective internal communication, and thrive on the shared passion and enthusiasm employees had for delivering a once-in-a-lifetime event.

    Charlie Wijeratna, the former director of commercial negotiations at LOCOG who is now the executive director of the English Premier League’s Tottenham Hotspur, said the LOCOG staff bought into Deighton’s team vision because he didn’t make organizational changes too quickly or bring in too many of his own people. Instead, he earned their trust and favor by meeting with each member of LOCOG’s staff for half an hour.

    “It was brilliantly done,” Wijeratna said. “That transitional phase was handled very skillfully, and I don’t think he lost anybody emotionally or relationship-wise along the way.”

    He maintained the support of his top executives by empowering them to make key decisions, Wijeratna added. For example, the commercial department recommended that LOCOG award the domestic Paralympic broadcast rights to Channel 4 rather than the BBC because the former was a more favorable financial deal. Doing so meant that LOCOG, which relies heavily on government support, would be awarding something to a private company, Channel 4, rather than a public one, the BBC. But Deighton didn’t waver, and he took the commercial department’s recommendation.

    “The Goldman Sachs ethos is that we work as a team, so that it’s not about me but what we do together,” said Terry Miller, LOCOG’s general counsel and the former international general counsel at Goldman Sachs. “He brought that skill with him, and it’s something that’s worked in a way that everyone has seen the benefits of [at LOCOG].”

    He didn’t just build that type of trust among his internal team. He also built it with LOCOG’s most important external partners, the Olympic Delivery Authority, which is responsible for constructing all of the permanent venues for the Games. In some previous Olympics, like the Sydney Games, the local bodies have been plagued by infighting. But Deighton formed a strong friendship with former ODA Chief Executive Officer David Higgins by meeting weekly to “chew the fat.”

    “No agenda. Just the two of us,” said Higgins, who resigned last year to run Network Rail. “We had a very open relationship. I would tell Paul everything that was going on even if it was commercially against our interest and Paul would do the same. We kept those confidences.”

    Beating the crash

    Deighton made a number of shrewd business decisions early that kept the organizing committee on sound footing. Prior to his arrival, the committee had already launched a public lottery and begun raising some of the $3.2 billion it needed to operate, but Deighton pushed the committee to accelerate its plans for selling sponsorships.

    He had the commercial division hire McKinsey & Co., the management consultancy, to assist it with determining when to go to market, what categories to sell first and how much to ask for sponsorships.

    The first tender process in the financial services category, an area later ravaged by the global recession, began months earlier than envisioned in October 2006. In early 2007, Lloyds signed on as the official financial services partner in a deal valued at $125 million. It was the first of a series of tier one deals with Adidas, BP, British Airways and Nortel that LOCOG closed before the financial markets collapsed in the fall of 2008.

    GETTY IMAGES
    Venues are on schedule and some, such as the handball arena (above), have already played host to test events to work out operational kinks.
    Those early deals put the organization in a position where it didn’t have to panic after the recession. It also gave the organization enough momentum to sign 10 more deals in 2009 after the recession. Today, it has sold 95 percent of its sponsorship inventory and generated more than $1.4 billion of its operating budget, which puts it slightly ahead of schedule for hosting the Olympics.

    “There were several deals that if we had done after the crash wouldn’t have happened,” Wijeratna said. “Getting going early was very important, and Paul definitely put energy into that.”

    Deighton didn’t just have the foresight to help LOCOG beat the recession. He also protected its rights in several categories. When the IOC made a push to sign Cadbury as a sponsor of The Olympic Partner (TOP) program, Deighton pushed the organization not to do it. After the IOC backed away, LOCOG went on to sign a deal with the confectionary company worth more than $30 million.

    Similarly, he worked to persuade the IOC to let LOCOG sell an official grocer sponsorship. The IOC pushed back because it worried competitors of its global partner, Coca-Cola, might be able to get too close to the Olympic marks. Ultimately, the parties compromised and LOCOG sold Sainsbury, a U.K. grocery chain, an official sponsorship of the Paralympic Games.

    “He is an aggressive leader who aggressively and vigorously advocates for his position, but he does it in a proper way,” said Davis Butler, the president of Encompass, who was with the IOC’s marketing department at the time.

    The sponsors who signed with LOCOG found Deighton to be incredibly supportive. Though he didn’t attend many of LOCOG’s public events, he made a point of getting to sponsors’ public events. He spoke at a retailers’ conference two weeks ago for Adidas and appeared for the opening of every one of Adidas’ AdiZones, a series of multisport outdoor venues the company developed in each of London’s host boroughs.

    “His schedule must be so complex but he’s been very accessible, more so than any chief executive at an Olympic Games in the past,” said Erica Kerner, the head of Adidas’ Olympic efforts in London.

    Facing the finish

    Taped to the glass wall behind Deighton’s desk are a series of 8.5-by-11-inch color-coded calendars. They form a halo behind his head when he sits down to talk about the monumental task facing the bid over the next year.

    There are 55 Thursdays left until the opening ceremony. That’s the way Deighton likes to put it when he talks about the Games. It condenses the 300-plus days remaining to a smaller number that injects a sense of urgency into the task at hand.

    “We are 83 percent of the way through the time we get to stage the event, because we started on the 6 of July 2005, that inauspicious day for us in Singapore,” said Deighton, who’s dressed in a tailored pair of khakis and a blue, spread collar button-down shirt open at the neck. “We’re pleased with where the project has gone to so far, yet fully conscious of the fact that the final year and a bit has very significant challenges both because you have to pull together so much, particularly around the operational preparations and because at this point, the whole world is focused on every move and every step you make.”

    GETTY IMAGES
    Deighton joined Paul Bush (right), chief operating officer of EventScotland, in May in Edinburgh to announce the first confirmed locations on the Olympic torch relay route.
    Deighton is especially sensitive to that scrutiny. The organizing committee was facing sharp criticism for its ticket process, a ballot system that received more than 20 million requests for 5 million tickets. That led the press to question how the event could be the “people’s Games” if the people couldn’t attend, and to question where tickets not sold publicly were going. The issue has required consistent management from LOCOG’s communication team, but Deighton couldn’t be more relaxed.

    “There are always huge pressures around ticketing,” he said. “It doesn’t always take the same form. The form it’s taking here in some ways is a high quality challenge because so many people want to come. There just aren’t enough tickets to keep them all happy. You don’t want to disappoint anybody, but the reason we’re disappointing people is because so many people want to come.”

    The issue is only the first of many challenges that LOCOG will have to address during the last year. It will need to build its temporary venues, retrofit completed facilities it takes over from the ODA, host a series of trial competitions designed to test the new facilities, manage the addition of nearly 5,000 staffers, train a volunteer staff of 60,000 people, and deal with a host of unforeseen issues that arise.

    As a result, Jet Set Sports CEO Mark Lewis, who worked on the Atlanta and Salt Lake City Games, said that it would be premature to say whether or not Deighton has done a good job as LOCOG’s chief executive.

    “It would be like saying a cake tastes great right after you put it in the oven,” Lewis said. “He may have baked the best cake ever, but we just don’t know yet. It’s a big job and they have attacked it well. We’ll see how it turns out. Everyone hopes they succeed.”

    To date, few criticisms have been leveled at Deighton’s management of LOCOG. The one thing some questioned is his reliance on data and information before he makes a final decision on something. It’s the Goldman way, but some observers wonder if that will prevent him from making snap judgments as the sand runs out of the hourglass on the Games.

    Those who know Deighton best, like Wijeratna and Miller, say it won’t be an issue. Gilbert Felli, the IOC’s executive director for the Olympic Games, believes it will be an asset.

    “That’s what I like about Paul Deighton,” Felli said. “A lot of studies have been made and can demonstrate the best thing to do. It’s proper management when you want to bring a solution forward.”

    Members of his leadership team, sponsorship executives and broadcast officials who have worked with Deighton are confident he can deliver on all the promise the Games have shown. They say the culture he has created is strong enough to integrate the addition of so many new staff and volunteers, and point to his ability to control costs to date as proof he will be able to manage the unforeseen expenses that pop up in the final stages of preparing to host the Olympics.

    “They have faced stronger headwinds than any organizing committee I can recall for a summer Games and at every instant, they’ve risen above the challenge and succeeded,” Seibel said. “I have to believe they will continue to do that.”

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