”Perhaps the most astonishing thing in the history of international football” – that’s how soccer analysts at Zonal Marking describe the Greek victory at Euro 2004. A victory which was not based on the individual strength of the players, but on great tactical work, brought to life by legendary coach Otto Rehhagel.
Rehhagel is a coach with unusual views. His approach to play the traditional way with a “sweeper” at Euro 2004 was extremely outdated, but got the job done. His believe that there are no young or old players, just good and bad ones made him start some of the oldest teams around, in a time when the trend was to have younger and faster squads anywhere else. And when his teams were playing against one of the big ones, he never surrendered before kickoff, but told his players another Rehhagel fundamental: “Money doesn’t score goals”!
What he means is that in times of exploding transfer fees and salaries, fielding the most expensive players doesn’t guarantee victory. And winning the Euro with Greek nobodies against the big guns of European soccer can be seen as prove of his point.
Yet, some guys dig a bit deeper than an old school soccer coach. Every year, Deloitte U.K.’s Sports Business Group publishes their “Football Money League” analysis of the financial structures of the 20 leading soccer clubs. In this year’s version as in previous years, they found that “there is a strong correlation between a club’s wage bill and on-pitch success, particularly within domestic competition”. In brief: “Money does score goals”!
So who is right? My feeling is that Rehhagel may be right on the short run. For single games or even short tournaments, any team can be successful by means of good team work, great tactics and strong individual efforts. Thousands of cup matches have shown this. However, when it comes to a complete season, or even multiple seasons (Deloitte also analyzes the teams’ development over many years), the average quality of the players probably has a correlation to the team’s performance. That doesn’t mean that the best players always form the best team or that the most expensive players are always the best ones, but a correlation is there.
Now if that’s true for soccer teams, what does it mean for companies?
There’s a difference we have to consider: Personnel management in soccer teams is performed much faster than in companies. Momentum plays a role. If a striker hits the goal in a couple of games in a row, he will continue starting, if he doesn’t score for a couple of games in a row, he will be placed on the bench or maybe even sold off at the end of the season. Your HR department probably won’t act like this. That creates an issue: Inconsistent results by some individuals may lead to lock-in effects: If someone performs well in the job interview or in the first weeks in the job and your company creates a tie with her, she may disappoint later and you’re in trouble. So if a Rehhagel type of HR manager was in your company, he might end up with a bunch of mediocre performers he can’t get rid of.
That’s where the scientific approach kicks in. We could spend ages discussing how to best identify talented individuals and this question has been keeping HR practitioners and economists busy for ages, but if we want to learn one thing from soccer and the Deloitte analysis, it is that if you want to be successful on the long run, being afraid to spend money for good people is probably the wrong approach.
And looking at successful soccer clubs, those topping the list are usually those with the highest paid employees. The only exceptions come either from those that develop young talent better than others or, if we then get back to Rehhagel’s approach, those that bring in a selection of talented people who won’t be accepted anywhere else for strategic or political reasons. In Rehhagel’s case that may be older players, in the business world, car maker BMW’s factory in which only workers above the age of 50 are accepted might be an example.
For the latter two alternatives, namely developing young talent or recruiting where others don’t recruit, both soccer teams and companies face the risk that the quality you end up with is less foreseeable. For the first option, recruiting highly talented personnel and paying high wages, the risk is to spend more money than the club or company can afford or to recruit personnel that won’t live up to the high expectations. It seems like the first trap (too high wages) is one that many soccer clubs fall in, while the second one (performance below expectations) is probably more dangerous for companies due to the lock-in described above.
Maybe that trade-off is the reason why most highly successful soccer teams build on a combination: They put an emphasis on development of young talent and recruiting of highly talented personnel.
And Rehhagel? He is currently rumored to take over as coach at F.C. Schalke 04 – a team in financial troubles after paying too much for players over the past few years. Seems like they would have needed a guy who believes that money doesn’t score goals a few years earlier. However, in Deloitte’s Money League they came in 16th last season, ahead of clubs of high reputation like Atlético de Madrid or AS Roma, so they are pretty well positioned.
Seems to be like a rather complicated topic. So what’s your view? Does money score goals? Would you rather pay high or what’s the perfect strategy in your opinion?