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English Football: Vincent Tan, Power Distance and the Capricious Hand of the Entrepreneurs

January 3, 2014

What do Roman Abramovich, Vincent Tan and Assem Alam have in common – apart from owning English football clubs of course?

The obvious answer is that each is a successful entrepreneur from beyond these shores, and none is inclined to do what used to be expected of football chairmen: keep ladling out the money, enjoy being a local celebrity and let the managers get on with managing. With one or two exceptions, this was the prevailing ethos in the days when managerial greats like Jock Stein, Bill Shankly and Matt Busby were kicking lumps out of each other on the football field.

Today most of the senior clubs in English football are in the hands of owners who are as different from the shoe shop owners and toffs of yesteryear as Bambi is from Godzilla. Many of them are foreign.

I was inspired to write this piece by Mr Tan, the Malaysian owner of Cardiff City, who has just fired his manager Malky Mackay and appointed Ole Gunnar Solskjaer to succeed him. More on the formidable Mr Tan later, and the less obvious connection with Messrs Abramovich and Alam.

But first, a thought about an Englishman. Ron Noades, the owner at various times of Crystal Palace, Brentford and Wimbledon, died a few days ago. Noades achieved what many subsequent investors in football crave. He made money out of the game. He pulled of this remarkable feat by selling Crystal Palace to a wealthy fan by the name of Mark Goldberg. Goldberg, who bought the club from Noades but not the ground, bet his entire fortune on the club and lost it. A few bad decisions on the playing side, and Palace went into administration.

Noades came out of the deal with a handsome profit. He was a hands-on owner – so much so that he actually had a spell as manager of his next club, Brentford. In that respect he was unusual, in that you would be unlikely to see the likes of Roman Abramovich or Vincent Tan in the dugouts of their respective clubs. But the fact that he had coaching qualifications is evidence that he may have been a businessman first, but his love of the game was never in doubt, and his knowledge far greater than that of the average modern club owner.

The thing about Noades was that he was one of the first high-profile owners to successfully apply a conventional business principle to football: invest, develop, enhance value and exit. Was he lucky that a buyer came along whose enthusiasm trumped his common sense? Probably. Nonetheless Noades played the game and won, which is more than can be said of most subsequent investors in all but a few elite clubs.

What of today’s owners?

They are many and varied. Some, like Stan Kroenke at Arsenal, Randy Lerner at Aston Villa and John Henry at Liverpool, appear to be in the game for the long term. As owners of other “franchises” in the United States, they understand the importance of tradition and the need to keep the supporters onside. Sure, they are in football as business investors with an eye on an ultimate exit, but whatever their individual foibles, their personalities do not obviously intrude on the corporate structures they have put in place to manage their investments.

To this group you can add the Glaser family, owners of Manchester United. But their stock with the supporters is less than high as the result of the financial engineering that has left the club with a huge debt that didn’t exist when they entered the arena. Is there a slight tinge of anti-semitism that drives the opponents of the Glasers? Perhaps. But probably no more than anti-Arab sentiment caused the British establishment to look askance at Mohamed Al Fayed’s acquisition of Harrods, another hallowed national institution.

Fayed, who owned Fulham for a number of years, was the forerunner of a wave of Arab investors. In his footsteps have followed an Abu Dhabi sheikh’s acquisition of Manchester City and a Bahraini consortium’s takeover of Leeds United.  Lower down the pecking order, you have Fawaz Al Hasawi, a Kuwaiti businessman taking over Nottingham Forest, and a member of the Saudi royal family buying a 50% interest in Sheffield United. Assem Allam, who owns Hull City, is atypical, in that he made his fortune in the UK after leaving Egypt in 1968.

Then we have the Russian investors. Roman Abramovich is the quintessential oligarch who is notable for having managed to hold on to his fortune while staying on the right side of Vladimir Putin. His investment in Chelsea will have been viewed by many of their fans as a golden age, even if he gets through managers at an alarming rate. Other clubs that ended up as oligarchic chattels have not been so lucky. Heart of Midlothian in Scotland ended up in administration after a spell under the control of Vladimir Romanov. Portsmouth, having been tossed around between Arab, Hong Kong and Russian investors over the past ten years, went bust twice – the second time under the stewardship of Vladimir Antonov, a London-based Russian banker. Then there’s Alisher Usmanov, a heavyweight with resources that rival those of Abramovich, who sits on a minority stake in Arsenal. His influence is relatively limited, though that might change if Kroenke should seek an exit.

Which brings us back to Vincent Tan. The most hated man in Wales, according to one media report. Yet this is a man who has poured millions into Cardiff, the result of which the club have reached the top flight for the first time in 60 years. Not only that, but Tan has pledged to donate £1 million to local charities every year they stay there. He is, according to another report, revered by his 30,000 employees in Malaysia. A saviour, surely?

He must be outraged at the reaction to his firing of a manager who appeared to question his spending policy. He is probably mystified at the outrage that greeted his decision to change the club’s colours from blue to red – a lucky colour in Chinese culture – and substitute the bluebird in the clubs logo with the Welsh dragon – also a symbol that will be deeply significant to him.

After all, it’s his club and he can do what he wants with it. Which of course he can. But he is fast discovering that ownership has more than one dimension. While he may have physical ownership of the club’s assets, you could argue that the supporters have emotional ownership. And therein lies the conflict. No fans, no club. No money, no club, or at least no success.

Leaving aside for a moment the origins of Britains’s foreign owners, let’s slice and dice them according to the motives behind their acquisitions.

Broadly speaking, you could divide the owners into corporates and entrepreneurs. The former view football clubs as just another asset in their chosen sectors. Emotion plays no part in their decision to invest. Think of the Glasers, Kroenke and Henry.

For many of the entrepreneurs, I suspect the motivation may be more complex. Yes, they would like to turn a profit, but other strong drivers come into play. Among them are influence, reputation and ego. In some cases there must also be an element of fun, at least at the time of the initial investment.

What’s in it for Roman Abramovich? Surely a man who values his privacy as much as he does could have chosen a more low-key and profitable investment than Chelsea? A gold mine or two, or maybe a couple of casinos.

But ownership of Chelsea serves as something of a reputation laundering vehicle. No longer the ruthless oligarch who rose from nothing in the wild and woolly days of Yeltsin’s reforms. Now the billionaire owner of one of the world’s leading football clubs – a man whose enigmatic smile in the director’s box can be seen on TV by Premier League fanatics in Bangkok, Lagos, Riyadh and Sydney.

Few entrepreneurs succeed without a high-octane ego. And what beats sitting in the posh seats like an emperor in front of fifty thousand adoring fans? Provided they are adoring, of course. Wherein lies one of Vincent Tan’s problems.

Many owners like to think that sometimes they know better than the managers they appoint. So, like Noades, Romanov and, it’s rumoured, Cardiff’s owner, they will try and influence team selection. And undoubtedly some play a major part in determining what players the club buys, even if their choice doesn’t chime with the manager’s preference. Take Andriy Shevechenko at Chelsea, for example. A personal favourite of Abramovich, yet a player whom Jose Mourino, in his first spell at the club, didn’t want, and used as little as he could get away with.

They also know better than the fans. The mindset that leads Hull City’s owner to comment about those protesting the club’s name change to Hull Tigers – “I don’t mind ‘City till we die’. They can die as soon as they want, as long as they leave the club for the majority who just want to watch good football.” – suggests a man who does not like being contradicted.

One person who would look at such activities with a knowing eye is Geert Hofstede. A social scientist who has spent much of his life observing cultural differences between different countries and regions, Hofstede popularised a number of dimensions that he believes apply to cultures and organisations that operate within those cultures. Much of his work was done with IBM, who had a vested interest in optimising their many operations around the world while maintaining an overarching corporate culture.

One of Hofstede’s dimensions is power distance, which essentially is the extent to which people in a culture defer to others because of rank, age, position in a hierarchy and professional standing.

Though you will always find individual exceptions, a number of surveys run by Hofstede and his colleagues place different countries at various positions across a scale from large to small power distance.

And this leads me to the less obvious answer to the question I posed at the beginning of this post. Why is power distance relevant to Vincent Tan, Roman Abramovich, Assem Allam and all the other self-made football club owners?

Because out of 76 countries surveyed, Malaysia, Tan’s homeland, comes out at the very top of the scale as the country with the largest power distance. Russia is sixth, and the Arab countries are collectively ranked twelfth. In other words, the cultures from which almost all foreign owners apart from the Americans have emerged are in the top quartile of countries where society places great value upon respect for power and deference to authority. In Tan’s case, Confucian values underpin the large power distance among Chinese communities.

In contrast, down in the bottom quartile you will find Britain, the United States, the Nordic countries and, as the sole representative of the Middle East, Israel. Countries full of awkward, stubborn, individualistic egalitarians.

So is it any wonder that a Malaysian businessman finds it hard to deal with a traditional British manager and thousands of grouchy fans? And is it surprising that American owners seem to deal with the traditions and sentiments around our football clubs with a defter and less confrontational hand?

Not every person conforms to his or her home cultural stereotype, of course. But employees of clubs acquired by owners from countries where large power distance prevails should prepare themselves to deal with autocrats who don’t expect to be argued with, and are used to having an active hand in everything that goes on in a company they control. That includes appointments to the management team, branding, marketing and even, as we have seen, team selection.

As I write this, Solskjaer, the former Manchester United star and hitherto a successful manager in Norway, is getting used to his new office in the bowels of Cardiff’s stadium. But given the power distance gap between Norway (small) and Malaysia (large), I fear that his appointment will lead to a marriage made in hell. He says that he’s going into the job with his eyes wide open. I wonder.

Another destabilising aspect of entrepreneur owners is a tendency to seek an exit within fairly short order, especially if the ownership experience is not a happy one. Two Premier League clubs, Newcastle United and Tottenham Hotspur, have owners who are unlikely to be adverse to an exit if the price is right. Regular changes of ownership can create uncertainty, which in turn discourages the best players and managers from joining them. Though Liverpool seem to have settled down under John Henry and Fenway, the previous owners, George Gillett and Tom Hicks, hardly helped the cause by failing to raise finance for a new stadium, arguing amongst themselves and thereby earning the contempt of supporters as they witnessed the decline of a great club.

In the case of Portsmouth, the frequent changes in ownership were disastrous. From being FA Cup winners and a Premier League team on 2008, the club are now in League One – the third tier, after two spells of bankruptcy and five owners in ten years.

So is British football better off with low-key corporate and sovereign wealth fund investors, and without colourful and sometimes capricious owners like Vincent Tan and Roman Abramovich?

To the disinterested observer the game would be less interesting without the antics of the maverick egotists who seem to be attracted to it. But for a Portsmouth fan, the past few years will have been extremely painful. And maybe the Cardiff faithful are in for a rough ride in the coming months and years, especially if Mr Tan tires of his image as a James Bond villain and decides to head for the hills.

The relative ease with which owners like Vincent Tan can dispose of clubs like used cars that no longer suit them is, in my view, one of the major flaws in the modern game.

There are regulations designed to prevent the wrong people getting involved in the business end of football, but they don’t go far enough.

The senior British leagues have a “fit and proper person” test designed to prevent the wrong people investing in clubs. Unfortunately it’s hard to anticipate when a proper person becomes an improper person –  for example when the owner, after investing, is revealed to be involved in corruption, faces bankruptcy or is charged with criminal offences.

Europe-wide, UEFA has introduced a set of financial fair play regulations designed to ensure that wealthy investors cannot buy success with massive investment and ongoing loss-making. These rules theoretically encourage long-term financial planning and make it harder for investors to splurge the cash without regard to how they will deliver sustained success.

Whether UEFA will be able to recreate the kind of level playing field in which teams like Nottingham Forest, Derby County and Aston Villa capture the top prizes remains to be seen. The three Midlands clubs have a number of European Cups and English championships to their name, but haven’t won a sausage since the Eighties. At present, the level playing field consists of about eight top clubs. The rest gorge themselves on TV money, and do little to fulfil the dreams of their long-suffering supporters beyond improving the quality of their meat pies.

I believe that there’s another measure that UEFA and the leagues could introduce in order to stabilise club ownership and ensure that the investors have the long-term interests of the club at heart. UEFA should to set a condition that an owner will remain in place for a minimum period – five years at least, but maybe even ten years. If the owner breaks the rule by selling out before the minimum period, the club is automatically relegated two divisions.

This would effectively stymie the sale because nobody would want to buy a club like Manchester United if it thereby ended up in League One. It would also ensure that the buyer took a long-term view of the investment, and was sufficiently capitalised to weather the inevitable storms that hit even the best clubs from time to time.

Whether or not my idea is feasible, I’m growing tired of seeing preening autocrats strutting in and out of director’s boxes.

I also think it’s sad that the vast majority of football fans have two choices: be content with their clubs fighting over scraps from the plutocrats’ table, or transfer their allegiance to the handful of teams that have a realistic chance of sustained success, and in the process weakening the lesser clubs.

And I think it’s a shame that owners like Messrs Tan and Allem feel able to run roughshod over the sentiments of supporters and traditions that have evolved over many decades.

If more owners took the view that – to paraphrase that toe-curling luxury watch ad – “you never actually own a football club, you merely look after it for the next generation”, perhaps our national game might be in a better place.

Fat chance of that, unfortunately. Greed conquers all.

From → Business, Social, Sport, UK, USA

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