When the manager has to go

Compare and contrast. Luxury German car-maker Porsche was driven by three chief executives within 12 months back in 2010. Now ensnared in the ‘Dieselgate’ investigation of its parent group Volkswagen, it has arguably never recovered from the reputational damage wreaked by the image those rapid hirings and firings created of a business at war with itself.

In football, however, Swansea City is on its third manager in four months but seems on the up under latest boss Paul Clement. Even Leicester City appears to be benefiting from football’s short memories after winning the two matches following the decision of chairman and owner Vichai Srivaddhanaprabha to oust manager Claudio Ranieri nine months after he led the club to the first topflight championship in its 132-year history.

Chelsea owner Roman Abramovich has sacked ten managers since buying the club in 2003 but that is seldom mentioned currently with the team topping the Premier League.

Of course, corporates are prone to relegation-inspired firings too. Only this month outsourcing group Capita’s ejection from the FTSE100 index was followed by news of the departure of chief executive Andy Parker.

Yet Parker had been at Capita since 2011 and admitted there had been some ‘own goals’ contributing to the company’s profits dropping by one-third last year. Capita needs to be careful. Multiple firings in the City tend to be viewed like profit warnings. One is unfortunate, two is becoming a habit and three is totally untenable.

So why do football clubs not suffer the reputational damage that corporates incur when they act like Swansea and Leicester in firing successful managers seemingly on a whim with no apparent succession plan?

Despite the amount of television money now in the game, clubs and corporates still occupy very different worlds. ‘Football provides swift and regular opportunities for redemption that companies can only dream of,’ comments James Murgatroyd, partner at financial PR agency Finsbury.

‘If Leicester City was a FTSE100 company that had sacked its CEO without any credible succession plan, its reputation would be severely damaged. But a fan’s love for his or her own club is unconditional, like that for a child, so a club’s reputation can survive not only relegation and defeat but also scandal and chronic mismanagement.

‘All the success belongs to the club, all the failures to the managers and owners, so when Leicester sacked Claudio Ranieri, it was the owner’s reputation on the line, not the club’s. And by the time the final whistle blew at the end of the Liverpool game that followed Ranieri’s firing, the owner had gone a long way towards clawing back that reputation.’

David Bick, who represented the Premier League’s Southampton when he worked for City PR agency Financial Dynamics and is now chairman of sports and finance PR agency Square1 Consulting, agrees that football and corporates are like chalk and cheese.

‘When corporates have a problem there is normally the very easy focus on the board and specific executives such as the CEO,’ he says. ‘The blame is usually easy to apportion, albeit at times wrongly. Football clubs do suffer reputational damage, but what is more complicated is the relationship between the customer –  the fan – and the company – the club.

The fan often won’t care what the owner, the CEO or the football manager does, as long as the club wins matches. The only reputation that matters is reflected by your position in the table and you will be forgiven almost anything by your main stakeholders as long as you win matches and trophies.’

Bobby Morse, senior partner at financial PR agency Buchanan, meanwhile believes that the difference is mainly one of time horizons. ‘Football clubs tend not to suffer the same as listed companies for sudden management changes because the time horizons for fans and investors of the respective management teams are different,’ he states.

‘PLC management are effectively temporary custodians of businesses which make returns to shareholders over the medium to long-term, whilst football is even more short-term with the next result key. Also, football fans are more emotive and therefore have less realistic expectations of their teams than perhaps most shareholders do of their investments, which are run on a portfolio basis.

‘Putting in a growth strategy which will deliver long-term and sustainable returns to shareholders requires a management team which can deliver on a three to five year plan. In football, success can be based on only one or two seasons and success is usually gauged by winning trophies or avoiding relegation, both of which happen in a period of just nine months.

‘It’s no coincidence that many of the football clubs that were listed on the London market have de-listed, partly because of these differing time horizons.’

Time in the Premier League is certainly money. Accountants Deloitte reckon that Leicester will have achieved revenues of about £125 million in the club’s Premier League-winning 2016 financial year, putting the club just outside the 20 most prosperous clubs in Europe.

Deloitte sees revenues of at least £155 million in Leicester’s current financial year – five times the £31 million earned in 2014.

Much of it comes from television, with broadcasters paying Premier League clubs £5.3 billion for the right to screen their matches under the latest deal – a 70 per cent improvement on the previous one.

The financial rewards from participation in the European Champions League have also risen by 30 per cent from the previous arrangement. Then there are increasing earnings from merchandising, sponsorship, pre-season tournaments and potential stadium naming rights deals.

Simon Eaton, the former corporate communications head for corporate and investment banking at Barclays, which sponsored the Premier League between 2001 and 2016, now runs PR agency Crofton Communications and has done further sums, reckoning that more than 85 per cent of the top clubs’ revenues come from TV sponsorship and other revenue streams, with only 15 per cent being derived from match day tickets.

He calculates that each of the 20 English Premier League clubs earns around £10.5 million from television revenue per televised match, compared to a total TV revenue stream of £15 million for all First Division clubs in 1992.

‘The drop-off in revenue if a side is relegated is now so material that football fans and boards are prepared to take rapid decisions and sack managers. Fans hope changing a manager will improve their clubs fortunes and generally continue to support the club hoping for a win in the next match, explains Eaton.

‘Contrast this with a corporate that sacks its senior management because the business is not performing or there has been a significant issue questioning the competence of the management. The chances are that the business will have been under-performing for a while versus its competitors and will have already lost levels of trust, respect and admiration for its products from its customers and staff. The corporate reputation is already damaged.

‘But football club reputation is the emotional connection between fans, players and their clubs and is measured by the levels of trust, admiration, respect and good feeling. Companies with strong reputations also have an emotional connection but football clubs’ emotional connections are often stronger and can therefore withstand short-term drops in performance.’

This emotional connection is the subject of many academic theses and is one of the reasons for corporate sports sponsorships and other engagement initiatives.

Murgatroyd notes that, while the digital age with its direct communication channels has seen a much greater emphasis on achieving this emotional connection with customers, particularly millennials, few corporations have achieved anything close to the relationship that football clubs enjoy with supporters.

Apple perhaps comes closest to being an exception as the recent adverse coverage of its tax affairs and treatment of Chinese workers has done little to dent its reputation.

However, Adrian Beeby, associate director of strategic communications consultancy Luther Pendragon, sees a much stronger alignment between a corporate and its management team than that in a football club.

‘At some basic level, a corporate is its management, but a football club is not,’ he says. ‘A club has its own identity which is separate to its management. Football management teams come and go, but the clubs, which have existed for many years, will go on. Fans also feel that they have a relationship with the club, not the management team, while investors in corporates have a stronger connection to the management.’

Beeby contends that these differences are also evident in the way protests against football clubs and corporations are covered in the media.

Protests against clubs, such as fan demonstrations, boycotts of games or the occasional pitch invasion tend to be reported on at local rather than national level, he observes, whereas mass demonstrations outside corporate headquarters appeal more to national photo editors and the City pages.

In contrast, when star players or managers are involved in public scandals, such as former Sunderland winger Adam Johnson’s conviction for sexual activity with a minor or the malpractice allegations against former England manager Sam Allardyce, they are exposed to the full blast of media scrutiny.

‘They are the captains of their own ships, so if they make a bad move, they have no one else to blame,’ says Beeby. ‘Fans have emotional equity in their club, but not necessarily in the individuals working for it.’

Some experts, however, feel that the stated differences between football clubs and capitalist companies have been overblown.

‘I’m not sure I agree that corporates suffer more when their CEOs are ousted,’ says Rupert Younger, director of the Oxford University Centre for Corporate Reputation. ‘Corporates and football clubs survive replacements of CEOs or managers – even star ones. In Ranieri’s case, it made news because he had created a fairy tale success story of plucky winners, but equally he had clearly not managed to sustain that success this season. Corporate CEOs who don’t perform are equally vulnerable but normally have more than one season to demonstrate that they can do so.’

Where Younger does see a contrast is in ownership and governance. He explains: ‘Football clubs are ultimately the play things of rich individuals, while corporates, especially listed ones, have multiple owners. So there is a fundamental governance difference between the two. Reputationally, football clubs are expected to be run at the whim of whoever owns the club at that moment and the history of rapid sackings is a feature of the sector.

‘When expectations are that managers are disposable, the sacking of a manager gets seen reputationally as business as usual.’

This chimes, points out Younger, with research by the Oxford Centre showing that capability reputations have more serious and lasting implications than character reputations.

‘Ranieri was sacked because he did not perform – a capability issue,’ he concludes.

True, chief executives who don’t perform get the red card too. But they will never achieve the place in the hearts of Foxes fans that the Italian will now occupy for decades.