Monday, 24 August 2009

Talent Management, Football Teams and Metaphors

Following up on the last blog on investment in human capital and social capital, and the example of football teams, I was taken with a little article in this week's edition of the Economist (August 22nd, 2009, p. 32) on the economics of Real Madrid's strategy for re-gaining their competitive position in world football by recruiting a new clutch of gallaticos - a metaphor for what many companies have done in the past and, apparently, one that finds support in the Harvard Business School study by Jose Luis Nueno of the soccer industry in emerging markets such as the USA, Japan and China.

For those people less engaged by football (soccer) than I am, Real Madrid have spent many millions this summer in re-applying a strategy first tried nearly ten years ago by their then president, Florentino Perez. He has has just been re-employed to help the club regain their former pre-eminent status in Spanish and world soccer from their arch-rivals Barcelona, who, interestingly, have followed much more of a 'grow your own', social capital approach to world domination of soccer.

The Real Madrid strategy is not just based on the ability of the new gallaticos to turn their considerable individual talents into results but to generate merchandising revenue in the way David Beckham did during the first wave of this strategy. It is also based on the ability of Perez to convince banks in Spain to supply sufficient credit to a club operating in one of the worst hit countries in Europe in terms of GDP growth and decline. Finally, much lower levels of income tax on players coming to Spain than in other European countries helps explain that the real costs to Real Madrid in paying wages is lower.

The point of the article is to contrast 'cheque book power' with Barcelona's largely 'home grown' strategy as a route to success. Metaphors, however, such as make or buy strategies are partial - they hide as much as they reveal. What the article fails to mention in Barcelona's strategy of building social capital not only through its attempts to create 'bonds' among the team by its development strategy but by its building of 'bridges' in the community it serves and the wider world through its ethical approach to promotion. So, like all, rather lazy, single factor theories of strategic success, of which sports team metaphors are among the most popular, are likely to be found wanting. Perhaps the secret lies in complementarity among different forms of capital investment. It certainly lies in developing better mid-range theories of success in industries like soccer; otherwise we will end up repeating this make or buy argument in football, which has a long history going back a century or so but has generated little light in what makes for sustainable success.


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Anonymous said...

Hi Graeme,

It would be interesting to know where my team Manchester United sit on the 'cheque book' versus 'home grown' scale. I'm guessing that the answer depends on where the real power lies at Old Trafford. If it is with Sir Alex, then the minimal (in comparison to their peer group of richest football clubs in Europe) expenditure outlayed during the summer transfer window may signal a new philosophy on value for money and perhaps a return to the Academy source of future talent. However, and probably more likely, is that the Glazers were delighted to recoup £80m to help pay off a fraction of their huge debts and keep the cheque book firmly shut.
In contrast, it was heartening to see this story on the BBC Sport website
Perhaps some of the big clubs to add to their global appeal by thinking more locally and more philanthropically.

Graeme's HR Blog said...


Sounds possible in principle but would need to have a look at what you are proposing

Graeme's HR Blog said...


That's an interesting question, though Man Utd owed much of their success to their grow your own policies as far back as I can remember (the 1958 team). The money flooding into the game through television and its impact on the globalisation of the game has changed the economics, but probably only for a period. Like all industries and 'winning' companies, success is a rather temporary phenonemon - there is usually a return to the mean. Being sustainable through growing your own and being socially responsible/ legitimate may be the only strategy that has any hope of bucking the market, as some banks I've done some work for are finding out.

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ahmed said...
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