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GOOD GOVERNANCE (5)

September 29, 2009

Dr John Beech, in his excellent blog, posts yet another tale of caution relating to football club ownership.

With his permission, we reproduce the posting in its entirety below.

To read all John’s fantastic prose, click on the following link – http://footballmanagement.wordpress.com/

The self-schadenfreude of following pointless Pompey on my laptop wasn’t really working for me this lunchtime, so I was diverted by an interesting piece in the FT by Simon Kuper (1) entitled “Football abandons the fantasy that it is a business” (although it crosses my mind that the sub-editors had had a hand in this headline).

Simon concludes:
“Only two financing models now remain. The first works for about six clubs, chiefly Manchester United and Barcelona: Have such a big global brand that you can generate money to pay great players. The second and rising model is the sugar daddy. Find an Arab sheikh to buy your club as a toy.

“All this means the end of football as a pretend business. The executives in Zurich are finally realising that they do not run Shell or even Lehman. At best, their clubs will one day be like local museums: community institutions whose sole financial ambition is solvency.“

There is little I would quarrel with in that, except perhaps the last sentence, but some of the arguments he puts in reaching that conclusion I don’t really subscribe to.  He makes much of the sustainability of clubs over the long term, suggesting that we have only lost Aldershot since 1992, and even they reappeared.  At the same time he acknowledges the number of insolvencies in that period.

So, clubs are sustainable, even if the companies which run them are nothing like as sustainable.

That does not make football not business.  Are clubs a bit like the dry rot specialists who constantly reinvent themselves to avoid their liabilities on the thirty year guarantees they have happily given out perhaps?  In other words, they operate continuously from the same premises under slightly different guises, hoping that no-one spots the difference.  Probably not, but they have done a good job in copying that business model!

What needs to be recognised is that football is business but a most unusual business, where profit maximising is almost invariably not the norm in terms of outcome, and is rarely so even in terms of intent.

To run a club which is financially healthy is not rocket science.  I suggest in the Finance chapter of a new book ‘Managing Football‘ edited by Simon Chadwick and Sean Hamil (and, no, I’m not on any commission or royalties!) that a club needs to follow the following guidelines:

  • Maintain a steady position in the centre of the table of a league that is appropriate for their potential fan base, avoiding relegation, and, to some extent, promotion.
  • Develop a committed local fan base.
  • Develop a long-term relationship with a sponsor that is itself financially stable.
  • Avoid the longer-term uncertainty of benefactor dependency.
  • Own its own stadium, one that has been built since the Taylor report and that has appropriate facilities for matchday hospitality and nonmatchday activities that generate revenue streams.
  • Have performance-related contracts with its players.
  • Maintain a squad that reflects its current league position in terms of performance and wages.
  • Employ a manager who is successful on the pitch and appreciative of financial constraints.

If, however, as Simon Kuper suggests, the majority of clubs will be run on the ’sugar daddy model’, and my own research suggest that for a surprising number this is already the new reality, then there are simply not enough sugar daddys to go round.

Of course football will survive, but not as we know it Jim.  Will all the clubs?  No doubt the Harlemisation (as in ‘Globetrotters’) of Simon Kuper’s Big About 6 will ensure their survival.  And all the others?  As there was a shake-out of clubs in the decades immediately following professionalisation, I suspect that we are about to see a shake-out in the early decades of the post-commercialisation era.  That is, unless clubs get to grips with sustainable business models rather than ‘abandon the fantasy that football is a business’.

(And as for Pompey, well, best not thought about!)

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One Comment leave one →
  1. sonsdiary permalink
    October 2, 2009 9:05 pm

    The big problem is that fans are generally not interested in the governance of their club until it is at crisis pointThen we will get “why did the trust not warn us”

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