IN RACING, when trouble strikes, it’s become fashionable to call in either lawyers or management consultants, both of which can be very expensive to hire. Yet it is hard to see where anyone gets their money’s worth.
When the Productivity Commission started investigating problem gambling a few years ago, it quickly branched out to assess the racing industry in general and betting operators in particular. A stream of consultants came out to explain that corporate bookmakers would suffer a fate worse than death if they were not allowed to pay racefield fees on the basis of a share of their gross profits. Oddly, the PC agreed with them, claiming that they were far more efficient. They were influenced by the fact that the bookies’ costs were smaller than other betting operators due to the low NT tax regime – and produced a formula with lots of Greek symbols to justify that method.
Of course, the PC methodology was badly flawed on a number of counts, including (1) the bookmakers provided a different and more limited service and (2) the PC tried to treat betting as a separate industry rather than being just one of many services provided to racing. The PC recommendations went nowhere but no doubt the consultants got paid.
Then corporate bookmakers must have spent squillons on legal advice when they disputed Racing NSW’s decision to charge racefield fees at the rate of 1.5% of turnover. The bookies wanted to pay a share of their profits instead – no doubt being able to work out that it would be cheaper for them. They went to the High Court and lost there, too. In the event, both Racing NSW and Racing Victoria gained many extra millions by adopting the turnover option.
But it was RNSW alone that initiated that demand. RV had previously decided to go along with the share of profits option, supported by advice from a bigtime consultant which said that was the best way to go. Both were wrong.
The High Court must now have a racing bent because earlier it had rejected the attempt by the WA Racing Minister (allegedly supported by local racing authorities) to ban the use or operation of betting exchanges in that state. Betfair took on the government and won easily. Taxpayers’ money went down the drain.
On much the same subject, the former AJC in Sydney had hired Access Economics (since amalgamated with another consultancy) to show that legalising Betfair would cause terrible damage to its finances and put the entire galloping code at risk. The consultants had no trouble “proving” that but, unfortunately for them, nobody believed it and they all lost again – at some cost to the punters who underwrote AJC expenses. Subsequently, history showed the consultants were wrong anyway.
In all these cases, the respective racing organisations are now much better off than if any of the consultants’ recommendations had been adopted.
During roughly the same period, Queensland’s favourite consultant, KPMG, was at work conducting a study into the industry’s “sustainability” for the previous government. No doubt they reported but nothing was ever published so taxpayers got no return on their investment.
Today, KPMG are temporarily in charge of Queensland racing after the government sacked the existing boards. They have done well by allegedly identifying some sloppy accounting and warning about huge future losses unless drastic action is taken. However, they are now attracting considerable criticism about the way they are running the show. Commentators complain the interim boss knows nothing about the industry. Time will tell whether that is justified.
Meantime, Queensland has set up four or five groups (sorry, I am losing count) to look into various problems from live baiting to poor capital investments and doubtful payouts to departing employees. Those groups embrace KPMG, a judge, some lawyers and policemen in various mixes.
For greyhounds, the outcomes have so far been non-events. Live baiting has been addressed and confirmed as an abuse, which was hardly news. Trainers have been banned, which would have happened anyway. New board proposals have gone to government and are awaiting some tidying up of legislation. However, they amount to not much more than shifting the deck chairs on the Titanic. The betting would be that it will do little to help the cause.
None of the whizz kids have delved into the fact that Queensland greyhound racing has been withering on the vine for many years now, nor have they established why live baiting had been allowed to take place.
KPMG has also been briefed by the NSW government but nothing has been heard yet about its review of governance and the like. Of course, the Special Commission also got a similar brief but has several months to go before it reports. You have to wonder if the two will agree.
Judging by its latest issues paper on supposed “overbreeding” the Special Commission and its lawyers are floundering under the weight of conflicting and error-laden comment and data from different sources. Actually, its operational pattern has quickly moved from a review phase (ie into why live baiting occurred) into one of investigation into what it sees as problem areas, including the alleged but undefined overbreeding.
For its part, Victoria ran two outside reviews which resulted in nothing more practical than the need to boost the number of personnel charged with preventing live baiting activity. That is the standard bureaucratic answer to a problem – add more staff, preferably in a new unit, thereby increasing the size of the empire. However, both of them used the dreaded “overbreeding” word without any comment about what that means and how it contributed to abuses, including excessive euthanasia. No background research was conducted. Everything was based on assumptions and a political need to be seen to “do something”. GRV has since canned all breeding bonuses. However, as with the introduction of those bonuses in the first place, there is no specific outcome nominated as a result. It is all done in hope.
Overall, it is screamingly obvious that the contribution of management consultants must always be taken with a grain of salt. There is a consistent pattern of agreement with whatever their employers are trying to prove, notwithstanding the almost invariable failure to achieve the objective. Readers might also remember the classic case of two highly skilled teams being hired by the miners on the one hand and the government on the other to prove out the government’s plan to charge super-tax on profits. Each came out with conclusive proof that their view was the more desirable. The strange thing was that both those teams came from a single management consultancy firm, separated only by the famous “Chinese wall”. The super tax and that government are gone now but the consultant’s bank accounts are no doubt healthier.
Equally, all the high priced lawyers have been able to do is to verify whatever has already been blindingly obvious. They seem unable to take a broader view of the industry or to look for and identify factors which might warrant change.
Of course, barristers are not in the business of change. Rather, their prime function is to show that their client is right and the opposition is wrong. Wording counts more than progress. Whether the ship sinks or the business fails is someone else’s problem.
Fundamentally, this is why barristers or similar types are the wrong people to review the fortunes of a commercial industry. They may well be terrific at their day jobs, or even at mediating between the parties, but being asked to look at efficiency, productivity and innovation is a bridge too far.
They get the gigs because governments think big and important names will impress the voters. A thick report with lots of tables and pie charts plonked down on the ministerial table must always have a prominent name attached to it.
A better result might come from choosing experienced businessmen for the job. They are more used to assessing risks and rewards, and to making appropriate decisions. By the same token, investigations are the speciality of the police. The conventional practice is for lawyers take over only when that phase is completed.
The Queensland Minister is a former army officer. The NSW Minister is a former police inspector. The Victorian Minister is a lawyer.