High Expectations Are The Key To Everything

By the Provocative H

I have the pleasure of reporting into a Chief Executive in a company that (and I do not intend to be Billy Big Time here) considerably dwarves the size of Celtic plc in terms of turnover, profit and employees. The company also has a strong UK and international profile. Based on this experience, I see that the job of the CEO is demanding and requires a strong character to lead on the various operational and political priorities that have to be tackled. The financial rewards available for these top jobs are substantial and are inevitably linked to the requirement to be successful and deliver results in line with the objectives set by the Board. The objectives are of course aligned to ensure the ongoing performance and resultant success of the company. In short, the CEO is “het” and will be rewarded or held accountable for their success, or failure.

A recent article by your erstwhile and over caffeinated correspondent on the performance of Ronny Delia provoked some debate on the performance and remuneration package of our Chief Executive Officer/Sharp Suited Man/Former Sharp Suited Man (depending on your view point). I had closed the article with an observation that, in the event that a decision was made at Board level to part company with Ronny, I would expect the Board to begin the recruitment process for a new CEO. Now, admittedly this expectation is linked only to potential future events, and indeed whilst it is perhaps too early to say they are robust green and white shoots of recovery in terms of the teams performances and results, dare I say things do look slightly brighter? However, if (being the operative word here) things start to head south again and a decision is made to terminate the employment of Ronny, the consequences of what can only be regarded as a failure require accountability with the buck stopping at the door of the CEO.

My reasoning for this is very simple. Peter Lawwell is extremely well remunerated to oversee the successful operation of Celtic in all matters. It is a financial package comparable with those headline attracting bankers and their bonuses. He will be judged on an annual basis against the objectives the Board have set him, ultimately with the key objective (and in terms of operating a football club) of delivering and maintaining a successful football team on the pitch (if he is not, then therein lies a fundamental problem). He will of course have specific performance indicators that will be linked not just to football matters, but those required of a plc company and the ancillary legal, operational and financial metrics that in my experience are required to deliver success.

The appointment of a football manager is a critical path decision to that key objective with respect to the football team. It is in many respects the most important decision to be made and it is right that the CEO makes this decision. In so doing, the diligence, skill and judgement that supporters and shareholders, never mind Board members, can expect to be used should be commensurate with an individual who is deemed to be worth their weight in salary. If the exercise of this judgement is flawed, or is made for reasons not solely to give the football team every possible chance of success, and it turns out that the wrong football manager appointment has been made, then it follows that further decisions and actions are required.

Those decisions will be made not only against the objective of the successful football team, but I would imagine against other relevant indicators that may be impacted, such as finance. Fans voting with their feet will impact on revenue streams, ranging from season tickets, corporate hospitality, sponsorship deals and so on. Unhappy fans are likely to be found spending money in a shopping mall on any given Saturday rather than Celtic Park or club merchandise. The appointment of the wrong man and consequential football failure is therefore expensive and costly on a number of fronts, and is exacerbated with the inflated prize money that participation in competitions such as the Champions League bring. The (twice) avoided income for this very competition in 2014, and any resultant/inevitable drop in turnover will be significant. This should be treated very differently from the success of having clear visibility and control over expenditure, and the mechanisms of the company avoiding/reducing cost and waste, when evaluating the success criteria of the CEO and his latest set of financial results.

Am I being overly simplistic in my analysis? After all, no business exists in an economic vacuum and the condition of the entity that you are inherit needs to be taken into consideration when evaluating what success or failure looks like. Its inevitably easier when the tide is with you, but equally its a skill to navigate and stay afloat in choppy waters. The prevailing economic conditions since 2008 I am certain will have had an impact on attendances and the amount that supporters can spend on the club. I don’t pretend to have any science behind that suggestion, but base it on the fact that going to the football is not cheap, and the price of a full Celtic kit seems ridiculously over the odds. Equally, I am sure that a lot of supporters are staying away because of their perception of the quality of the football on display. There are few genuine heroes in the team these days, and the draw of attending many league games with the seeming inevitability of the league being in the bag may not be an attractive proposition for many (regardless in fact of the recent team performances and results paradoxically). I actually think that in terms of maintaining season ticket levels as to where they are has been a reasonably impressive achievement, but I temper that against the faithful nature of the support. In terms of revenue, again the CEO does strike me as someone willing to explore all possibilities and not continuing to pick the pockets (metaphorically speaking of course) of the supporters for all they are worth, but even on this I query the success. Initiatives such as stadium Wi-Fi and even Celtic TV are standard items for football clubs in the 21^st century. What other vision does the CEO have then? Buying players from untapped markets and glamour friendlies in far flung parts of the world just before critical Champions League qualifiers or is this in fact the reality and the only realistic additional revenue streams available? My conclusion on this is that the CEO has delivered as much as is possible within the present league confines, but I do think is guilty of following football trends of other clubs instead of defining and implementing his own vision.

It’s also clear that Peter Lawwell has been successful in managing costs, the reduction in net debt is inescapable proof of that. You would expect that of an experienced accountant, in particular an ex financial controller. He has also presided over the club through some interesting, unique and emotional times which range from the passing of Tommy Burns, refereeing skulduggery, the threats to Neil Lennon and the passing of Rangers FC. Some of these are highly charged political issues and it remains to be seen in the case of the later example whether or not his stewardship will result in the footballing authorities in Scotland enforcing their own rules and tackling the corporate and football malfeasance that has spiralled out of control in Govan over recent times. The loudest voice on this issue seems to be one of the fans and not the club, albeit some supporters seem to be satisfied that matters are being progressed behind the scenes. On this landmine of a subject, perhaps that is the best way but there does need to be an end result and this cannot simply wither on the vine or be subject to whispered rhetoric and reassurances to a chosen few by the CEO.

Football is a unique business which draws upon allegiance and emotion of its supporters (I am loathe ever to call us customers or clients, even in this day and age) to convert it into cash. The strategy of managing the short term, medium term and long term financial health and football success are often concertinaed and the lines between each can become blurred, in particular in times of poor results and performances and the resultant dwindling crowds. My take on the appointment of Ronny Delia is that the CEO knew it was a risk, and I think he knew it was a reasonably substantial risk given that the investment in the team was hedged in the shape of loan signings.

This approach may seem sensible to some, but my take on it is that loan signings neither provide surety in the long to medium term (those players may only be around for a few months and inhibit the managers ability to form a team mentality) and in this day and age of mercenary footballers, do not give any short term conclusions other than you either dodged a bullet or have provided a platform for someone to perform and move back to their club for first team place or, as in the case of Celtic, inflate the transfer fee or wages of said player as the fans demand the player be signed. Loan signings need to be thought about carefully as the “here today, gone tomorrow” nature of them will impact team ethos and spirit – in particular if the going gets tough. Ronny’s inability to appoint his own management team with genuine freedom instead of picking from the beauty parade provided for his “benefit” is strongly suggestive to me of coercive leadership from the CEO (hence the often used term “de facto football director” to describe Peter Lawwell), and is widely regarded as being a negative in terms of impact on environment and indeed motivation. It looks like every form of assistance short of actual help from the CEO, who I am sure would not tolerate his finance director or management team being either shortlisted or cherry picked for him.

It’s open to speculation if the decision to appoint Ronny was not taken exclusively for football reasons. No one should have a difficulty in other factors being taken into consideration, but should have a problem with the weight and influence those other factors may have, in particular if the other priorities are born of personal agendas which conflict or threaten with the success of the football team. Few people, of which the CEO is one, will ever know the reality, but if that is a risk they have taken and it ultimately fails, then that is all the more reason that a change of CEO should be actioned by the Board.

Ultimately I consider that our CEO has delivered sporadically but not consistently. Perhaps this is inevitable given his length of tenure at the club (even the greatest manager in our history, Jock Stein (did I even have to write his name?) did have his off days in his numerous years at the helm). Success is never guaranteed and you could allow for these if your track record of delivery is more on the upwards trajectory than not. In the event that Ronny is not the man for the club, then you need to factor in previous decisions and appointments – Tony Mowbray being the one at the front of my mind. This, when coupled with the scale of the salary and bonuses that have been paid to our CEO in recent years, has me questioning the ultimate accountability for any bad decisions made. It does not seem rational on the risk/reward spectrum that a CEO on such a substantial salary who fails to achieve objectives would face no other consequences other than a non-entitlement to a substantial bonus. This brings me full circle to the start of this article, and is why in my view Peter Lawwells future at Celtic is forged with the fate of Ronny Delia. If one goes, so must the other.

Of course, Ronny could have us Champions of Europe next year so like any fickle football fan and analyst of business I’ll be prepared to eat humble pie on clearly the greatest decision made by our clubs leadership since Robert Kelly in 1965. It will taste just fine!