From Rhys Jaggar :
Myles,
There’s a lot of talk about how ‘recruitment isn’t an exact science’.
Well, on that I will always agree. What can however be discussed is the levels of inexactitude and whether you can plan to minimise that or not in a cost-effective manner.
Over 20 years I both did due diligence on investment decisions and I also evaluated how well various organisations in various industries managed risk within portfolios.
Here is a small list of things I looked at:
1. How pharmaceutical giants managed their ‘product pipeline’ i.e. potential drugs not yet brought to market but going through the preparation of development up to licensing for use.
2. How different UK universities managed their intellectual property portfolios, based on different budgets, different core staff sizes etc.
3. How seed corn VC firms managed their investment decisions in the range £25,000 to £1.5m (mostly below £500k).
4. How different ski resort management companies managed the risk of suboptimal snow conditions.
In all those scenarios, you found people who had optimised a process and were clearly better than their competitors at managing that risk. Even then though, if the ‘rules of the game’ i.e. the drivers for success changed significantly, then if the industry leader didn’t adapt, then they would lose their industry lead.
The key issues are these:
1. Having an effective scanning process to identify as wide an array of potential targets as possible.
2. Having a quick list of ‘deal stoppers’ which allow you to eliminate quickly and cheaply any proposition which is not going to fit your criteria for investment.
3. Having a key set of analytical tools and measurement suites which produce a ‘scorecard’ to inform the investment decision.
4. Being prepared to rely on ‘gut feel’ as a part of the decision-making process at times when uncertainties are greater and precision is simply impossible.
Having done that, you need a decision-making process which allows you to use the data you have collected to make rational decisions.
Of course, at the end of the day, you have to review that decision-making process in the light of experience and modify it where appropriate. But broadly speaking, the more times you go through the process, the better you are at using it and realising how and where it may need tweaking.
In early stage technology investments, we had six criteria to evaluate, all of which had to be satisfactory or manageable for an investment to proceed. The hard data issues had all to be satisfactory, people issues could be manageable by bringing in external expertise or by carefully defining an evolving role for a key initial employee/Director/Founder where appropriate.
What is also the case is that you can usually define clearly what are referred to as ‘tollgates’, at which point future decisions are made dependent upon outcomes not yet known. These might include outcomes of intellectual property filings/disputes, emergence of hitherto unknown competitors, results of specific development programmes etc. It allows you to plan for unclear futures based on particular scenarios coming to pass or not.
In footballing terms these are things like: a player suffers an injury; a player develops very rapidly reaching a much higher plane of achievement; another player key to the success of the player in question either leaves, loses form or gets injured; a player previously unavailable becomes available etc etc.
There is no question that portfolio management strategies can be applied to football clubs, at academy level, at development level and at first team level; either as stand-alone units or as an integrated whole.
However, they are only as good as the club’s overall strategy, since they must be tailored to that strategy, rather than driving it. You don’t have to be Einstein to know you won’t be signing Leo Messi, Gareth Bale or the like if your transfer budget is £25m a season. And if you decide on a ‘no stars’ policy, that will also inform the criteria used in the due diligence process for recruitment.
I find it hard to credit that Arsenal don’t have a system like this already in place. So the question has to be asked as to whether the criteria of evaluation for populating the ‘recruitment pipeline’ are suitable or not.
Or, more damagingly, whether the strategic goals toward which such recruitment pipelines are aligned at Arsenal are simply no longer acceptable to large swathes of fans.
Myles says:
At Highbury, I learned a lot from friends who knew people who worked at the club.
After 1982, when I became a reporter and met Terry Neill and Don Howe, I began to see how the club was run and had been run since WW2.
In 1986, as soon as I met George Graham, I was there for every game, and slowly came to understand things that were not in the public domain and never will be while certain people are still alive.
While the directors considered the punters pretty dim, Arsenal had a saving virtue: they always tried to keep ticket prices down.
After building the Emirates Stadium during the Sky Sports era, the club decided to target a new market: younger people who go into football through watching it on Sky Sports.
The new French manager was a polymath who did brilliant new things, and made profits, so they handed the whole club over to him.
The board who sacked George Graham, and swore never to give another manager that much power, now gave Arsene Wenger more power than Sir Alex Ferguson ever had.
Of course, Ivan Gazidis is very unhappy about the power Wenger has, and, regarding recruitment, has clawed some back.
Ivan’s won some secret battles against the dictator but mostly keeps his head down and his mouth shut.