A nice read from the WSJ
Source : WSJ.com - BY CATHERINE BOLGAR
Chelsea pays €21 million ($31 million) for midfielder Yuri Zhirkov from CSKA Moscow. Manchester City shells out €29 million to get forward Emmanuel Adebaor from Arsenal. Aston Villa pays €14 million to lure midfielder Stewart Downing from Middlesbrough.
You could buy a company for that kind of money.
Actually, acquisitions in football aren’t so different from acquisitions in business. You want to make a move to realize your strategic vision. You are looking for an addition that will complement your portfolio. You are willing to pay the price for the right target. Acquiring talent can mean exactly what it does in football — getting that special person on your team. But it also can be taken in a larger sense, where the talent is in the form of a company or another investment.
“Business professionals can learn from sport at the highest level,” says Hans Westerbeek, professor of sports management at La Trobe University in Melbourne and co-author of “Business Leadership and Lessons from Sport.” He adds that “there’s the focus, the determination, the overriding desire to obtain the 0.001% advantage over your competitor, because the competition is so fierce.”
So what are the rules of the talent-search game?
1. Focus
“First is the focus, the sheer desire to win, and everything else comes second in support of that,” says Dr. Westerbeek. “Wanting to win in a business sense is to be the market leader, to create the highest returns on investment and highest profit margins.” The coach and executive must consider how any acquisition will aid the No. 1 goal of winning.
Everybody wants to win — and nobody likes, or intends, to lose. What separates the winners from everybody else is a strategic vision, a roadmap of how to succeed. The ability to come up with such a vision is also what separates leaders from managers. Managers may be very competent and get things done efficiently. But leaders can bring their teams/corporations to ever-greater achievements.
Leaders have a vision for the game or business that is so innovative or creative that no one else can touch it or believe that such level of performance is possible, says Dr. Westerbeek. “That’s because the others don’t understand what is required in terms of system change to achieve such goals. A leader, a great coach, can change a team from mediocre to one that plays in a style and at a level nobody thought possible.”
2. Resources
Namely money. When Real Madrid paid €45 million to bring David Beckham from Manchester United in 2003, the figure was scandalously huge. At the end of his four-year contract, Real Madrid estimated Beckham-related merchandising profits at €560 million during the same period. The team has used the megamoney strategy to snap up other high-profile players — dubbed “galacticos” — including, last June, Kaka, for €65 million, and Cristiano Ronaldo, for a record €96 million.
“To get the best, you need that kind of money floating around,” Dr. Westerbeek says. To win big in gambling, you need either long odds or big bets. Real Madrid bet big, and so far the returns have been pouring in.
But money isn’t enough. Superstars don’t go to losing teams. For them to attain new heights of success, they need to join the right environment, with the right supporting cast, the right coaches to bring out excellence. “The analogy is true in business,” Dr. Westerbeek says. “If you’re the best in your business, you’re very unlikely to move just for the money.” While that rule might not apply to a corporate acquisition, in which shareholder value is the ultimate deciding factor, it is certainly valid for the top echelons of business talent — the company seeking a new chief executive, for example.
3. Team spirit
In the business world, it’s called a corporate culture. Team spirit is an extension of the strategic vision — when all the members understand and are committed to that vision.
The legendary manager Sir Alex Ferguson is renowned for his team-building skills, says Rory Miller, program director for the MBA in football industries at the University of Liverpool Management School in the U.K. Sir Alex has made Manchester United one of the top teams in the English Premier League since its founding in 1992, with 11 championships. A man who cultivated players into some of the sport’s biggest names, he also manages to direct some understandably big egos.
“The best teams stand out because they are teams, because the individual members have been so truly integrated that the team functions with a single spirit,” writes Sir Alex in his autobiography, “Managing My Life.” “There is a constant flow of mutual support among the players, enabling them to feed off strengths and compensate for weaknesses.”
Newcomers must be prepared to adapt to the existing culture, says Dr. Miller. “There are plenty of examples of high-value international transfers that have failed.”
In the business world, the lesson is not just for the chief executive officer brought in from outside, but for any corporate acquisition. A company may have an ingrained culture, but if it’s bought by a bigger firm or even a near-equal rival, its members will suffer if they don’t learn to adapt to the new reality.
4. Don’t get starstruck
A dream team isn’t necessarily a winning team. Between 2004 and 2006, Real Madrid went through a three-year dry spell despite big spending on galacticos, notes Chris Brady, dean of BPP Business School in London and author of “The 90-Minute Manager: Lessons From the Sharp End of Management.” The stars brought in plenty of merchandising revenue, but no silverware, he says. “From the money side, it was good, but from the football side it wasn’t.”
Eventually, a new manager, Fabio Capello, replaced some of the stars with team-oriented players. “Once they started winning, they had both revenue streams — the merchandising as well as the ticket sales,” Dr. Brady says. “Individual performance isn’t what you’re paying for. You want individuals to enhance the team performance.”
Likewise, a business risks overpaying for a high-profile acquisition that ends up not contributing to the bottom line. For talent-driven industries, such as investment banking, the analogy is even sharper. Dr. Brady has seen companies hire top salesmen, only to see the individual’s results soar while overall sales slump. One role of the star, he notes, should be to mentor the younger players.
5. Talent assessment
The flip side of spending on stars is to discover them before they shine. That can mean scouting, especially in not-so-obvious places. “The catchment area, where you have to look for talent, is much wider than it used to be,” says Andy Adcroft, senior lecturer in corporate strategy at the University of Surrey School of Management in Guildford, U.K. “The benefit is teams have much wider access to resources. Scouts used to drive around to watch local teams. Now they fly around the world.”
Teams also nurture new talent from the very beginning, with academies and youth leagues. Finding talent can mean finding the right person who is in the wrong environment, says Dr. Brady of BPP. “You need managers who can spot talented individuals who may not be doing that well in the organization they are in, but you know that in our culture they’ll blossom. You get high value at a lower price.”
The business equivalent of good scouting would be looking for investment opportunities everywhere, including new industries and emerging countries that may not have previously been on the radar screen. For nurturing, it can mean working with innovation clusters around universities to help start-ups that can eventually provide a crop of acquisition targets. And for finding the diamond in the rough, managers can look at business lines that other companies want to dispose of, which their business could turn profitable.
6. Long horizon
Over the history of the Barclays Premier League, two teams have been able to sustain success: Manchester United and Arsenal. They also have the longest-serving managers, Sir Alex Ferguson and Arsene Wenger, respectively, who have been given the time and space to build their clubs over the long term, says Dr. Adcroft of the University of Surrey. Both took over when their teams were somewhat troubled and have evolved from their early firefighter roles into the very souls of their teams.
“If you look at clubs that have spent a lot on player acquisitions and have not been successful, like Newcastle, there’s lots of turnover in management,” he says. “Without that manager, in essence a CEO, you have players bought and sold at an alarming rate. It’s hard to sustain any kind of success on the pitch with that.”
Even Sir Alex and Mr. Wenger have had difficult moments when their futures have been called into doubt. What sets them apart, Dr. Adcroft says, is the long view. They have a solid structure in place and are able to take advantage of it. They can envision from events that are just happening what the results will be, and they can turn things to their favor.
Companies face short-term shareholder demands for quarterly results; teams face fans’ demands for victories at each game. The urge is to make fast decisions, adapt quickly. But there’s a difference between being nimble and being haphazard. The business lesson, he says, is that any company that is changing its business, its vision or its strategy is going to find itself unmoored. The winners, he says, always have a plan.
