From Fiddling Farcically to Forward
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As I said before the blog is not seeking to demean or dismiss anyone, it's purpose is to solely look at factors impacting on AFC. Factors which improve or impede its success as a business and a football team. I hope it will show a different perspective on the issues and help people debate and understand the place where AFC is currently at.
In the last episode I explained and explored Arsenal's corporate culture and how "The Arsenal Way", a corporate management style born in Victorian times, impacted on the Club. That theme continues in this episode.
I portrayed, how, I believe board culture led to a lack of insight and understanding, which led AFC's board to drop the ball at a critical moment in the game.
Much like the team at times, the board were on the attack, men over committed in the funding of the stadium, and when everyone was in the opposition's half, someone dropped the ball of commercial revenue. The opposition grabbed possession and broke away to score a decade of success at AFC's expense.
Let me make it clear that , this isn't a case of being smart after the events, or having the benefit of hindsight. All of the issues discussed in the first and this episode were foreseeable.
With the appropriate advice, procedures, normal business culture and expertise, all were perfectly able to have been identified and turned in to great opportunities, yielding great strength and advantage to the club. Close analysis of the business strategy would have shown this, would have flagged this up to the board. That is if one existed.
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| Analysis |
Once you are armed with all the facts, opportunities, strengths and weaknesses, you can turn opportunities to reality and strength . Weaknesses once identified can be turned in to opportunities and strengths. That is the first step in creating a vibrant strategy for success and creating the strategy and then executing it.
A major part of changing an organisation is preparing it for the execution of the new strategy. This means ensuring the framework, rules, procedures and tools are prepared and are in place to allow the plan to proceed.
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| Don't mention the C word |
Yes I mentioned the terrible C word, change. Arsenal as a business before the Dein era was a family heirloom business. One not equipped to succeed in the new cut throat market of modern football.
David Dein and Danny Fiszman in their ways started to change the business, but the culture and organisation within the club didn't evolve to what was needed to allow it to do battle proper.
The club now needs to change to propel itself back to the top of English football and push further up the ranks in European football.
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| The Management |
For this reason I am going to look at the management of the business and its employees. How the culture of the board impacts on its operations as a business and over use of its funds.
It means mentoring , motivating , ensuring you protect their performance levels from stress. It means looking after their welfare, protecting them from their own enthusiasm and dedication. It also means ensuring they keep focused and do only what they do best. No demarcation disputes , no getting involved in areas which deflate your performance in your specialised, key valuable zones.
It means as a company ensuring proper corporate governance , control, checks and balances and oversight of all major decisions.
Again to be sure readers are crystal clear, management of senior executives doesn't mean interfering in on pitch matters.
It means mentoring , motivating , ensuring you protect their performance levels from stress. It means looking after their welfare, protecting them from their own enthusiasm and dedication. It also means ensuring they keep focused and do only what they do best. No demarcation disputes , no getting involved in areas which deflate your performance in your specialised, key valuable zones.
It means as a company ensuring proper corporate governance , control, checks and balances and oversight of all major decisions.
As well as understanding how this impacts on marketing, pricing and the wages budget and the results of those on the business and the manager and team. As well looking at how board culture affects relationships between shareholders and impacts on senior executives.
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| Managing performance and people |
Managing people especially senior experienced executives isn't easy but it is essential. Even geniuses need guidance, help to manage stress loads and maintain a clear focus.
Executives need mentoring, and motivation to achieve and perform at the highest order. No matter how senior, how driven they maybe, stress can impact on performance and health. When this happens their value to the company is reduced, when that happens in football results suffer.
Unclear parameters of operation reduce performance and achievement. Bad management who overload senior executives aren't incentivising them or helping to increase or maintain their high delivery of performance. Executives who are at the height of their specialised profession, suffer when they are overloaded with duties not connected with their speciality.
The company has to see the value they are losing by reducing the ability to perform by allowing a senior executive to wander off course or be overloaded with non core activity responsibilities. Whether that executive chooses to overload or is overloaded, the key is you are reducing his effectiveness and the value to the company.
When I say mentoring, I am not saying coaching or someone who is a moral booster, I am talking about a partner.
Someone who the executive can springboard ideas off, someone they can confide in, trust to listen to their darkest thoughts, innermost fears and desires. Someone they respect, are very close with and identify closely with. Someone they accept as an equal, who isn't afraid to ask those seeking questions. Someone who will query a weakness and then show it as an opportunity waiting to be taken.
Someone when things start to go wrong provides a comfort blanket and a willing ear, and who pushes the executive to think through decisions he is proposing which may well not be for the benefit of the business or himself.
Someone who can run a rule over the executive's work and ideas, and raise issues or ask awkward questions without barriers rising or fear of being fobbed off. A listener who also is listened to , respected and whose ideas are considered properly.
Of course Arsene Wenger still has a private close relationship with his friend David Dein, but David is no longer at the club. The club have been remiss in not finding Arsene , another such figure. A person who would help Arsene stay on track, not be diverted by non football duties. A person who would suggest some of the decisions made recently were in fact ridiculous gambles. Decisions harming the club and the executive himself. Harming the team's performance and harming the stress levels of the executive.
Someone who would be an ally at board meetings, and at the same time an ally preventing mistakes.
Instead of thinking of the welfare of the club's most important executive, and putting personal feuds or dislikes from the past aside, Dein was fired.
Dein to the last, advising Arsene Wenger to not resign ,as it wasn't in the interest of the club they both loved.
The board did zero to find Arsene a new confidant, did nothing to dig in Arsene's past to find another figure who could be his mentor. Neither did they explore how they could utilise Dein and Wenger's relationship in another way to benefit the club, with Dein outside of Arsenal but in house with Arsene.
No doubt there were some thoughts of good riddance from certain quarters, however this feud which became personal would come to haunt the Arsenal board in years to come. (I have covered why in the next blog episode)
When David Dein was fired by Danny Fiszman, a vacuum in the club formed. Despite Edelman's presence as MD, Danny Fiszman, and the board concentrated on the stadium build, this caused this vacuum of power to grow. Edelman wasn't a football man, more a City chap brought in to raise money for the stadium. Danny was completely devoted to the building of the Emirates. The vacuum became worse when in 2008 Edelman left the club.
In the time it took the club to recruit Ivan Gazidis, a year practically (he commenced employment in Jan 2009) the vacumn got worse as Danny Fiszman became ill .
The board, comprised solely of the traditional characters of aristocratic banking backgrounds , Edelman a finance man and Ken Friar, lacked expertise in non finance areas.
History as ever has a habit of repeating itself . Instead of bringing in people with the expertise in building a training ground, dealing with the catering, or hiring a top management executive as a fill in until they recruited a permanent CEO, they heaped all this and more on Arsene Wenger.
Whilst Arsene may have urbanely smiled and accepted gratefully these extra duties, even relished control over more of the club he worked for, it was a bad decision by the board.
It diverted a specialised executive from his core duties, it heaped extra hours, and pressure. It increased his stress levels and wasted his valuable time, and was an unwise investment of his salaried time.
Stress piled on, increasing his workload, increasing his isolation. Stress and responsibility which impaired his view and opinions, thanks to the isolation he now felt. Isolated with no mentor, listener, adviser or confidant.
This was to prove devastating when Wenger lost his parents in the future, and according to Alex Fynn, moved house and retreated in to a closed environment. An action isolating himself from the world even his closest friends, and away from David Dein who was his neighbour.
Again its seems the board didn't help or even if they offerred and it was refused, no intervention to help the executive and the business he was so vital to, was made.
We can see the level of waste of the manager's time and Arsenal's resources in one small snippet.
According to board minutes Arsene spent 4 hours discussing catering in club level.
For sure a catering expert could have been hired for half that money, and less of the manager's valuable time wasted. More to the point, less stress and less diversion from focusing on his key subject. The core activity of Arsenal- football.
Moreover the vacuum put Arsene in charge solely of wages, contracts, and buying and selling players . He didn't have Dein's access to the boardrooms of world football or Dein's contacts. Most critically he didn't have Dein , advising, posing questions and suggestions.
Not having Dein also meant , he had to worry about money, he wasn't the deal maker Dein is either. This heaped on a new level of stress, hours, worry and diversion. This signaled the entrance of Dein's contact Dick Clark. An American lawyer who had worked with Arsenal in South America.
But with one person virtually overseeing the whole process, dithering over deals which inevitably collapsed occurred. Without Dein, ridiculous valuations of targets, and often insulting bids to the owning club were made. Consequentially many targets went on to play elsewhere and become stars.
Critically it meant a quoted PLC company on Plus markets had put 61% of turnover in the hands of one executive.
An act guaranteed to bring a feverish sweat out in any risk management consultancy office anywhere. It isn't questioning anyone's ability or honesty. It is a simple fact businesses need to protect themselves and the board need also to protect themselves from potential claims in the future. Plus it is exceedingly unfair to lump more work on to an increasingly beleaguered and under pressure manager.
Critically, it is important for reader to understand, this level of control by one person unfettered, unquestioned over the spending and committal of such a huge proportion of company budgets isn't tolerated in any other PLC anywhere in the world.
The reason being, it represents such a clear and present danger to the business, and the shareholders investments , if things went awry. It actually could spell the death of the company if it went horribly wrong. Or just paralyse the companies operations for 5-8 years, limiting its achievements, preventing growth.
Something no board of directors should tolerate, or allow to happen, or abrogate their responsibility to the shareholders in allowing it to come about.
Again The Arsenal Way prevailed, failure by board entrenched in their culture to see Arsenal was no longer a medium sized family business. Failure to see (perhaps blinded by the daunting exercise of building and funding the Emirates stadium) that The Arsenal had become a huge mega club and public limited company.
That meant the old ways, structures, and old boys network, were not only insufficient to carry out the running of the business, they didn't give the level of corporate governance the market, and shareholders expected.
Part of that maybe borne of out the arrogance "The Arsenal Way" assumes and the people involved. Part of it also was ignorance and it must be said that advisers either gave advice and it was ignored or it wasn't given, which is unlikely.
Governance is procedures , rules , structures set up to ensure a smooth running of the company with chains of approval , set as checks and balances . A system to protect executives, shareholders from making errors, a system overseen by auditors, and all risk managed and discussed.
Structures like a committee which oversees Executive and Director's pay, an independent committee, not one like the current Director's pay committee with two ex directors on it. The usual composition of such an organ would comprise Chairman, Finance director, Shareholder, non executive director, auditors and minority shareholders representative.
Another structure of similar composition adding the manager and football director to oversee player's wages and contracts would also be good. Even if it has to meet via video and act quickly to approve deals during windows.
PLC's can't function saying "Thanks for your interest in our business" because the fact it is a PLC means it isn't their business, but the shareholders. Even more irksome is that message coming from those not owning shares.
So to summarise this section, The Arsenal Way, the culture of the board ,had diverted, distracted and overloaded, over stressed, and given massive responsibility to an already beleagured executive.
The personal feud, possibly also emanating from "not being one of us" alongside a feeling of believing they had been cheated over share sales, reinforced by the "Kroenke issue" led to that stressed overloaded executive losing his confidant and mentor.
The lack of corporate governance is testament to how The Arsenal Way prevailed. No change, no paying to hire experts to advise and help, just hoping the chaps would do their bit a little harder and longer, whilst keeping a stiff upper lip no doubt.
So this leads us to how the board now totally dependent on Arsene Wenger, despite an American sports magnate on the board by now, allowed him to decide who his boss would be.
Again unheard of in business especially at PLC level. Crucial because it meant the incoming CEO would be to some extent neutered by this process. The new boss wasn't quite the boss if he had to be approved of by another executive junior to his status.
A new CEO had to join a company where control of 61% of turnover was outside his control, as were many other non football areas. Control of which, as ever, is always difficult if not impossible to wrench back control of, when the incumbent controller has enjoyed that control for so long.
This means the new CEO was undermined, his authority busted before he even put his bottom in his new seat. It means he isn't the boss of that executive.
Please again remind yourself, I am writing about Arsenal, as a business. Arsenal has to conform to rules, regulations, and logically it would be safe and reasonable to presume to conform to industry and business norms.
One can't imagine any other company or football club allowing the manager to choose his boss, or wield authority and power over him.
Likewise it is inconceivable that any other PLC would allow one person to control the whole process of buying selling of players, their salaries and contracts with little oversight or checks and balances. Not to mention other companies may consider his personal close interaction to the employees concerned to breach his impartiality in the matter.
You can't blame executives for taking responsibility in matters to facilitate their duties, you can however blame directors for abdicating responsibility for guarding the company and their executives welfare, stress levels, and focus.
Had all this not been abrogated and dumped on Arsene, had a way been found to keep him his confidant. How much more effective could he have been on the pitch, how much better could Arsenal have done. How many more trophies could he and Arsenal have won.
We have to look at this question of the wages bill and the effect this no checks and balances had on the club, as a business and on the pitch. We can see wages have soared due to Oligarch/Petrodollar clubs inflation,and new TV deals. However poor investment and management of 61% of turnover, has cost Arsenal dearly.
This act is commensurate to dropping the ball on commercial revenue, another hindrance and penalty from within, which wasn't needed.
Firstly lets look at the wage structure , which was clearly set up to ensure parity and equality, somewhat of a contradiction in terms given the highly competitive nature of Arsenal's business.
That sort of utopian system, doesn't reward advancement, or ability or achievement. This sort of system allows two people so differentiated in ability like a tuneless busker and Stevie Wonder to earn very similar amounts.
It's the sort of system which allows one public official to work his butt off and dedicate himself, whilst the person at the next desk does the minimum, working his ticket, slacking and being absent all the time. The slacker actually does better as it doesn't matter how crap he is, he still get the same pay as the star.
In other words , this sort of system although admirable from a philanthropic manner doesn't work in business or sport. Star performers need incentivising. They need to see the more they achieve, the more they improve, the better they do financially.
It is insane to pay high basic wages to those who have proved or achieved zero. Likewise it is insane to pay below market basic wages to superstars without massive bonuses to keep them performing and hungry.
All football clubs have a Winston Bogarde, or a slacker, a journeyman and a sicknote. Clubs also have failure of youth to produce the promise shown or seen in them.
However it is clear to see we have more earning their ticket than most, more sicknotes, more slackers and more never gonna be's
If we look at the level of structures and personnel in place at other clubs and businesses to minimalise these factors and compare it to where one person at Arsenal does it all we can see how it occurred.
It is pointless to look at how the level of investment affects the probability of a teams success, before that we need to look at the level on internal penalties Arsenal placed on itself.
These being the number of deadwood players, who can't be sold because of the high level of their wages compared to their ability, the number of youth overpaid despite being unproven, even never played at first team level. The number of players with serious injuries whose 4 year extension on their contracts cost 37.4 million pounds. (Rosicky, Diaby and Djorou)
The fact one person was allowed with no check or balance to carry out all of this, is solely the responsibility of the board. If errors or costly mistakes are made, its because no one checked or questioned or balanced out possible decisions. No one sat looking at balancing what's best for the club , the team and the player. No one who wasn't emotionally too close to the subject.
We can understand the concept of protecting value of assets ie the player's contracts, however one has to question the value to the club in extending a perma crock's contract.
The board should have an independent commission to adjudicate whether the player can play for a whole season in the EPL. A commission to advise whether that extension should be granted. Indeed even if a player should be retired and insurance claimed.
Many will be sat saying oh yes its easy to criticise in hindsight. Is it too much to ask that the spending of 141 million pounds, 61% of AFC turnover is thoroughly vetted and safeguarded ?
We are analysing the issue to see what went wrong and how and why. We are doing this to make sense of the current situation and how these decisions got Arsenal to where it is now.
A situation where the board claim self sufficiency is the way forward, where funds are restricted to earnings. Yet where their errors led to a 230 million pound revenue stream being neglected and thrown away.
Where it seems from the outside without digging, that investment of the wages budget (141m pound in 2011) was uncontrolled since 2007, and errors may have been made. Errors which have led to Arsenal being unable to retain elite players, and having to sell those players to develop income to make profit. Selling players to cover up the lack of commercial revenue the board neglected to chase.
The year 2007 of course is a key date, as its when Dein left, Wenger's mentor and confidant. It is, when the only other football deal brain in the club left, the only person who would or could question Wenger.
The board in "The Arsenal Way" love profit, by all of their measures and knowledge, making a profit is the exhibition of success. To them to have done so by selling "greedy players" and still retaining top 4 status is a kudos. Indeed a stroke of genius , a feather in the cap , even a job well done. They will console themselves it isn't their or the manager's fault , rather Abramovitch's and Manchester City's.
However the situation as we are going to see was made by them following the Arsenal way.
Going back through historical squads (thanks to http://www.transfermarkt.co.uk) I have with great conservatism on wage calculation, constructed a waste of wages factor for the years 2004-2012. AFC wage bills from @SwissRamble.
The factor has been calculated to try and be as fair as possible to Arsenal. Players were grouped in to youth overpaid and who didn't/won't make it , deadwood, and permacrocks. Players on verge or cusp of a group were excluded, to ensure maximum conservative levels were measured across the data span.
No player has been counted in any of the above groups for the duration of his first contract, to allow the benefit of the doubt of future development or a miraculous health recovery.
I have also added in each year a small addition for players parked abroad to "earn visas" . I have also left out completely loan fees. The reason for that is that Arsenal pay these wages to the players, and then the loan club pays Arsenal , the loan fee. This was the best way to ensure continuity of data throughout the whole period.
For simplicity's sake I have calculated the data to a total cost per week and year and as a percentage of the yearly budget.
So we can see clearly when Wenger was left on his own, ie when Dein departed the percentage of waste increased. It's obvious all clubs have a waste factor they seek to minimalise. 3 to 7% maybe deemed tolerable.
Some players contracts, badly constructed based on the philanthropic system will have ensured extensions happened at pre-determined rates adding to the mess.
The board in allowing this to happen ensured several things :-
Lordhillwood
Feel free to comment and follow me on twitter @Lordhillwood
When I say mentoring, I am not saying coaching or someone who is a moral booster, I am talking about a partner.
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| Sparring partners and close friends |
Someone who the executive can springboard ideas off, someone they can confide in, trust to listen to their darkest thoughts, innermost fears and desires. Someone they respect, are very close with and identify closely with. Someone they accept as an equal, who isn't afraid to ask those seeking questions. Someone who will query a weakness and then show it as an opportunity waiting to be taken.
Someone when things start to go wrong provides a comfort blanket and a willing ear, and who pushes the executive to think through decisions he is proposing which may well not be for the benefit of the business or himself.
Someone who can run a rule over the executive's work and ideas, and raise issues or ask awkward questions without barriers rising or fear of being fobbed off. A listener who also is listened to , respected and whose ideas are considered properly.
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| Arsene what do you think about buying ............ |
Of course Arsene Wenger still has a private close relationship with his friend David Dein, but David is no longer at the club. The club have been remiss in not finding Arsene , another such figure. A person who would help Arsene stay on track, not be diverted by non football duties. A person who would suggest some of the decisions made recently were in fact ridiculous gambles. Decisions harming the club and the executive himself. Harming the team's performance and harming the stress levels of the executive.
Someone who would be an ally at board meetings, and at the same time an ally preventing mistakes.
Instead of thinking of the welfare of the club's most important executive, and putting personal feuds or dislikes from the past aside, Dein was fired.
Dein to the last, advising Arsene Wenger to not resign ,as it wasn't in the interest of the club they both loved.
The board did zero to find Arsene a new confidant, did nothing to dig in Arsene's past to find another figure who could be his mentor. Neither did they explore how they could utilise Dein and Wenger's relationship in another way to benefit the club, with Dein outside of Arsenal but in house with Arsene.
No doubt there were some thoughts of good riddance from certain quarters, however this feud which became personal would come to haunt the Arsenal board in years to come. (I have covered why in the next blog episode)
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| Whatever David You are so fired now give me your phone+keys |
When David Dein was fired by Danny Fiszman, a vacuum in the club formed. Despite Edelman's presence as MD, Danny Fiszman, and the board concentrated on the stadium build, this caused this vacuum of power to grow. Edelman wasn't a football man, more a City chap brought in to raise money for the stadium. Danny was completely devoted to the building of the Emirates. The vacuum became worse when in 2008 Edelman left the club.
In the time it took the club to recruit Ivan Gazidis, a year practically (he commenced employment in Jan 2009) the vacumn got worse as Danny Fiszman became ill .
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| The Arsenal Vacuum |
The board, comprised solely of the traditional characters of aristocratic banking backgrounds , Edelman a finance man and Ken Friar, lacked expertise in non finance areas.
History as ever has a habit of repeating itself . Instead of bringing in people with the expertise in building a training ground, dealing with the catering, or hiring a top management executive as a fill in until they recruited a permanent CEO, they heaped all this and more on Arsene Wenger.
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| Yes of course I want a 4 hour meeting about catering Mr Hillwood |
Whilst Arsene may have urbanely smiled and accepted gratefully these extra duties, even relished control over more of the club he worked for, it was a bad decision by the board.
It diverted a specialised executive from his core duties, it heaped extra hours, and pressure. It increased his stress levels and wasted his valuable time, and was an unwise investment of his salaried time.
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| Stress overloads executives leading to frustration |
Stress piled on, increasing his workload, increasing his isolation. Stress and responsibility which impaired his view and opinions, thanks to the isolation he now felt. Isolated with no mentor, listener, adviser or confidant.
This was to prove devastating when Wenger lost his parents in the future, and according to Alex Fynn, moved house and retreated in to a closed environment. An action isolating himself from the world even his closest friends, and away from David Dein who was his neighbour.
Again its seems the board didn't help or even if they offerred and it was refused, no intervention to help the executive and the business he was so vital to, was made.
We can see the level of waste of the manager's time and Arsenal's resources in one small snippet.
According to board minutes Arsene spent 4 hours discussing catering in club level.
A four hour meeting cost AFC 11250 pounds at his salary rate.
For sure a catering expert could have been hired for half that money, and less of the manager's valuable time wasted. More to the point, less stress and less diversion from focusing on his key subject. The core activity of Arsenal- football.
Moreover the vacuum put Arsene in charge solely of wages, contracts, and buying and selling players . He didn't have Dein's access to the boardrooms of world football or Dein's contacts. Most critically he didn't have Dein , advising, posing questions and suggestions.
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| Life is no longer a walk in the park |
Not having Dein also meant , he had to worry about money, he wasn't the deal maker Dein is either. This heaped on a new level of stress, hours, worry and diversion. This signaled the entrance of Dein's contact Dick Clark. An American lawyer who had worked with Arsenal in South America.
But with one person virtually overseeing the whole process, dithering over deals which inevitably collapsed occurred. Without Dein, ridiculous valuations of targets, and often insulting bids to the owning club were made. Consequentially many targets went on to play elsewhere and become stars.
Critically it meant a quoted PLC company on Plus markets had put 61% of turnover in the hands of one executive.
An act guaranteed to bring a feverish sweat out in any risk management consultancy office anywhere. It isn't questioning anyone's ability or honesty. It is a simple fact businesses need to protect themselves and the board need also to protect themselves from potential claims in the future. Plus it is exceedingly unfair to lump more work on to an increasingly beleaguered and under pressure manager.
 |
| Mentoring provides an outlet for that stress |
Critically, it is important for reader to understand, this level of control by one person unfettered, unquestioned over the spending and committal of such a huge proportion of company budgets isn't tolerated in any other PLC anywhere in the world.
The reason being, it represents such a clear and present danger to the business, and the shareholders investments , if things went awry. It actually could spell the death of the company if it went horribly wrong. Or just paralyse the companies operations for 5-8 years, limiting its achievements, preventing growth.
Something no board of directors should tolerate, or allow to happen, or abrogate their responsibility to the shareholders in allowing it to come about.
Again The Arsenal Way prevailed, failure by board entrenched in their culture to see Arsenal was no longer a medium sized family business. Failure to see (perhaps blinded by the daunting exercise of building and funding the Emirates stadium) that The Arsenal had become a huge mega club and public limited company.
That meant the old ways, structures, and old boys network, were not only insufficient to carry out the running of the business, they didn't give the level of corporate governance the market, and shareholders expected.
Part of that maybe borne of out the arrogance "The Arsenal Way" assumes and the people involved. Part of it also was ignorance and it must be said that advisers either gave advice and it was ignored or it wasn't given, which is unlikely.
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| Checks balances oversight means a healthy risk managed business |
Governance is procedures , rules , structures set up to ensure a smooth running of the company with chains of approval , set as checks and balances . A system to protect executives, shareholders from making errors, a system overseen by auditors, and all risk managed and discussed.
Structures like a committee which oversees Executive and Director's pay, an independent committee, not one like the current Director's pay committee with two ex directors on it. The usual composition of such an organ would comprise Chairman, Finance director, Shareholder, non executive director, auditors and minority shareholders representative.
Another structure of similar composition adding the manager and football director to oversee player's wages and contracts would also be good. Even if it has to meet via video and act quickly to approve deals during windows.
PLC's can't function saying "Thanks for your interest in our business" because the fact it is a PLC means it isn't their business, but the shareholders. Even more irksome is that message coming from those not owning shares.
So to summarise this section, The Arsenal Way, the culture of the board ,had diverted, distracted and overloaded, over stressed, and given massive responsibility to an already beleagured executive.
The personal feud, possibly also emanating from "not being one of us" alongside a feeling of believing they had been cheated over share sales, reinforced by the "Kroenke issue" led to that stressed overloaded executive losing his confidant and mentor.
The lack of corporate governance is testament to how The Arsenal Way prevailed. No change, no paying to hire experts to advise and help, just hoping the chaps would do their bit a little harder and longer, whilst keeping a stiff upper lip no doubt.
So this leads us to how the board now totally dependent on Arsene Wenger, despite an American sports magnate on the board by now, allowed him to decide who his boss would be.
Again unheard of in business especially at PLC level. Crucial because it meant the incoming CEO would be to some extent neutered by this process. The new boss wasn't quite the boss if he had to be approved of by another executive junior to his status.
A new CEO had to join a company where control of 61% of turnover was outside his control, as were many other non football areas. Control of which, as ever, is always difficult if not impossible to wrench back control of, when the incumbent controller has enjoyed that control for so long.
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| You are part of The Matrix - The Arsenal Way |
This means the new CEO was undermined, his authority busted before he even put his bottom in his new seat. It means he isn't the boss of that executive.
Please again remind yourself, I am writing about Arsenal, as a business. Arsenal has to conform to rules, regulations, and logically it would be safe and reasonable to presume to conform to industry and business norms.
One can't imagine any other company or football club allowing the manager to choose his boss, or wield authority and power over him.
Likewise it is inconceivable that any other PLC would allow one person to control the whole process of buying selling of players, their salaries and contracts with little oversight or checks and balances. Not to mention other companies may consider his personal close interaction to the employees concerned to breach his impartiality in the matter.
You can't blame executives for taking responsibility in matters to facilitate their duties, you can however blame directors for abdicating responsibility for guarding the company and their executives welfare, stress levels, and focus.
Had all this not been abrogated and dumped on Arsene, had a way been found to keep him his confidant. How much more effective could he have been on the pitch, how much better could Arsenal have done. How many more trophies could he and Arsenal have won.
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| Piling on the pressure till the tread wears out |
We have to look at this question of the wages bill and the effect this no checks and balances had on the club, as a business and on the pitch. We can see wages have soared due to Oligarch/Petrodollar clubs inflation,and new TV deals. However poor investment and management of 61% of turnover, has cost Arsenal dearly.
This act is commensurate to dropping the ball on commercial revenue, another hindrance and penalty from within, which wasn't needed.
Self deficiency punishing the club and affecting its performance. A punishment we will see was nearly as severe as 230 million pounds worth of commercial revenue not being chased down.
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| How much ! |
Firstly lets look at the wage structure , which was clearly set up to ensure parity and equality, somewhat of a contradiction in terms given the highly competitive nature of Arsenal's business.
That sort of utopian system, doesn't reward advancement, or ability or achievement. This sort of system allows two people so differentiated in ability like a tuneless busker and Stevie Wonder to earn very similar amounts.
It's the sort of system which allows one public official to work his butt off and dedicate himself, whilst the person at the next desk does the minimum, working his ticket, slacking and being absent all the time. The slacker actually does better as it doesn't matter how crap he is, he still get the same pay as the star.
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| Alright in theory in practise rewards mediocrity |
In other words , this sort of system although admirable from a philanthropic manner doesn't work in business or sport. Star performers need incentivising. They need to see the more they achieve, the more they improve, the better they do financially.
It is insane to pay high basic wages to those who have proved or achieved zero. Likewise it is insane to pay below market basic wages to superstars without massive bonuses to keep them performing and hungry.
All football clubs have a Winston Bogarde, or a slacker, a journeyman and a sicknote. Clubs also have failure of youth to produce the promise shown or seen in them.
However it is clear to see we have more earning their ticket than most, more sicknotes, more slackers and more never gonna be's
If we look at the level of structures and personnel in place at other clubs and businesses to minimalise these factors and compare it to where one person at Arsenal does it all we can see how it occurred.
It is pointless to look at how the level of investment affects the probability of a teams success, before that we need to look at the level on internal penalties Arsenal placed on itself.
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| Red card, penalty in more ways than one ! |
These being the number of deadwood players, who can't be sold because of the high level of their wages compared to their ability, the number of youth overpaid despite being unproven, even never played at first team level. The number of players with serious injuries whose 4 year extension on their contracts cost 37.4 million pounds. (Rosicky, Diaby and Djorou)
The fact one person was allowed with no check or balance to carry out all of this, is solely the responsibility of the board. If errors or costly mistakes are made, its because no one checked or questioned or balanced out possible decisions. No one sat looking at balancing what's best for the club , the team and the player. No one who wasn't emotionally too close to the subject.
We can understand the concept of protecting value of assets ie the player's contracts, however one has to question the value to the club in extending a perma crock's contract.
The board should have an independent commission to adjudicate whether the player can play for a whole season in the EPL. A commission to advise whether that extension should be granted. Indeed even if a player should be retired and insurance claimed.
Many will be sat saying oh yes its easy to criticise in hindsight. Is it too much to ask that the spending of 141 million pounds, 61% of AFC turnover is thoroughly vetted and safeguarded ?
We are analysing the issue to see what went wrong and how and why. We are doing this to make sense of the current situation and how these decisions got Arsenal to where it is now.
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| With added penalties |
A situation where the board claim self sufficiency is the way forward, where funds are restricted to earnings. Yet where their errors led to a 230 million pound revenue stream being neglected and thrown away.
Where it seems from the outside without digging, that investment of the wages budget (141m pound in 2011) was uncontrolled since 2007, and errors may have been made. Errors which have led to Arsenal being unable to retain elite players, and having to sell those players to develop income to make profit. Selling players to cover up the lack of commercial revenue the board neglected to chase.
The year 2007 of course is a key date, as its when Dein left, Wenger's mentor and confidant. It is, when the only other football deal brain in the club left, the only person who would or could question Wenger.
The board in "The Arsenal Way" love profit, by all of their measures and knowledge, making a profit is the exhibition of success. To them to have done so by selling "greedy players" and still retaining top 4 status is a kudos. Indeed a stroke of genius , a feather in the cap , even a job well done. They will console themselves it isn't their or the manager's fault , rather Abramovitch's and Manchester City's.
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| The profit is blinding, sadly from the problems |
However the situation as we are going to see was made by them following the Arsenal way.
Going back through historical squads (thanks to http://www.transfermarkt.co.uk) I have with great conservatism on wage calculation, constructed a waste of wages factor for the years 2004-2012. AFC wage bills from @SwissRamble.
The factor has been calculated to try and be as fair as possible to Arsenal. Players were grouped in to youth overpaid and who didn't/won't make it , deadwood, and permacrocks. Players on verge or cusp of a group were excluded, to ensure maximum conservative levels were measured across the data span.
No player has been counted in any of the above groups for the duration of his first contract, to allow the benefit of the doubt of future development or a miraculous health recovery.
I have also added in each year a small addition for players parked abroad to "earn visas" . I have also left out completely loan fees. The reason for that is that Arsenal pay these wages to the players, and then the loan club pays Arsenal , the loan fee. This was the best way to ensure continuity of data throughout the whole period.
For simplicity's sake I have calculated the data to a total cost per week and year and as a percentage of the yearly budget.
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| Grim reading indeed |
So we can see clearly when Wenger was left on his own, ie when Dein departed the percentage of waste increased. It's obvious all clubs have a waste factor they seek to minimalise. 3 to 7% maybe deemed tolerable.
Some players contracts, badly constructed based on the philanthropic system will have ensured extensions happened at pre-determined rates adding to the mess.
The board in allowing this to happen ensured several things :-
1. Lack of funds to retain top performing players
2. Waste of wages negated transfer savings
3 System rewarded mediocrity ensuring slackers can't\wont leave
4.Allowing bad investment penalised+held the club back.
5. Reduced the transfer fund for new players
5. Reduced the transfer fund for new players
In short, the Arsenal way, has allowed 140 million pounds at the most conservative generous estimate to be lost, wasted on players whose transfer fees on sale (if one is achieved) will lose the business even mmore money.
The Arsenal way, so out of touch with modern business has cost the club, it's manager's focus, 230 million pounds of commercial revenue, and wasted 140 million pounds of wages, plus spent 55 million on agents fees which may have been way less.
The Arsenal Way has cost at conservative estimates 230m commercial revenue in a decade and wasted 140m in wages totalling 370 million pounds.
Any board managing to achieve such appalling depths of performance would be hung drawn and quartered by shareholders, if that is shareholders were aware of it. Perhaps now people can see why Red and White want access to the management accounts.
In "The Return of The Son of the F word 2" we look at the consequences of this ,the feud which is now haunting Arsenal's board.
The Son of the F word 2 looks at how the Arsenal way and the errors and losses combined with tragedy allowed Arsenal to fall in to the hands of the very sort of person Hillwood referred to when he said "We don't want his sort here"
He is here and he owns the club and we will look at how Kroenke runs Arsenal and why, and his possible motives.
The Son of the F word 2 looks at how the Arsenal way and the errors and losses combined with tragedy allowed Arsenal to fall in to the hands of the very sort of person Hillwood referred to when he said "We don't want his sort here"
He is here and he owns the club and we will look at how Kroenke runs Arsenal and why, and his possible motives.
Feel free to comment and follow me on twitter @Lordhillwood
