Some of you were wondering whether the cost cuts referenced in part one, are really necessary. “One of these Catalan banks would bail us out,” quipped one comrade. And if the management can get the players to oblige to, is it something we should try to make our policy from this point on?
Regardless, what I proposed should be viewed as “trimming the fat.” rather than “diluting the product.” One thing is certain, the sooner ‘we’ start the better.
For one, there is the UEFA Financial Fair Play Regulations initiative. This set of reforms was passed in May 2010, with the task of ensuring clubs’ fiscal prudence and financial parity. The focal point is the ‘break even’ requirement. In short, a club can only spend the revenue it generates (a buffer is included for the initial 3-year period). If there is profit left it should be invested smartly.
Contrary to popular opinion, accounting is not an exact science. If you were to ask “El Presi” about The Club’s finances, you are in for a pleasant conversation and a free lunch. Try asking Senyor Rosell the very same question and you are most likely to end up writing a check, and waving your fist at Laporta’s picture:
(audit conducted by Deloitte)
Those pencil pushers in Nyon are not to be messed with. The need to be within the UEFA’s guidelines ties nicely into what I believe is necessary: A new way of thinking of and evaluating players. It all has to come together — smaller base salaries, smaller expenditure in terms of transfer fees and increased revenue. But it has to be a joint effort on the part of players, management and fans.
Let me be clear, “across the board” cost reductions are almost always unproductive. In the business environment such cuts are almost guaranteed to reduce morale, promote short-sighted choices and encourage accounting gimmicks that send people looking for loopholes instead of creative solutions.
However, at no point in my piece last week did I say that the cuts need to be implemented right away, solely in the base salary of the senior players, and to a drastic degree.
What is important is to allow no exceptions. To drive a truly effective restructuring program, everything must be on the table. There can be no sacred cows — no part of the organization that is exempt from scrutiny. Every unit of the organization may not face a cut but every unit needs to be rethought. The suggestions I made are only a logical step to take. As it often happens, those parts of an organization that might be excepted are often the most costly. Excusing them a priori diminishes the potential value of the whole reinvention program.
The suggestion to reduce the base salary of our senior players has caused quite an uproar. The age of 30 has been given as a loose benchmark. A reader noted that “Puyol ‘almost’ left before his last contract extension and I’m sure he could be making more money elsewhere.”
How close was he to actually leaving we don’t know. What we do know is that it happened some time ago. Right now, Puyol is almost 33. Xavi and Abidal are both 31. The Club should use its stature as a leverage in negotiating with senior players, much as it does when dealing with youth players who are about to sign their first professional contract. Let’s examine the facts in regards to the situation senior players are in:
a. How much is money really important to them. These guys have at least 4-6 years of high salaries. They have earned a comfortable life for their families and then some. As long as the valuation is based on common sense, a million or two is hardly going to mean much to them.
b. If they (he) indeed decide to leave, how many teams out there are as competitive as Barca? How many teams are contenders on as many fronts, year after year?
c. Going to a new team means new system (responsibilities), new teammates, new coach, new fans. There is a lot of risk involved that things might not work out. Should I remind you all that there are few, if any, teams that play the way Barca does? How wise then it would be for a senior player to assume all this risk, at that age?
Also, many believe that Xavi wasn’t so instrumental in the title won in Paris, or that team in general. It was only with arrival of Guardiola that he reached new heights. It’s far from certain that he would enjoy the same status, and be as effective if he goes somewhere else. Hell, don’t take my word for it:
“Let me say one thing: I depend on my team-mates. My football and my passing would be worthless without my team’s help. That’s something which is very clear to me. Sometimes I start thinking and I look at Madrid for example, who have truly great players, but I’d struggle with them. They play through the middle and I need players who open the play down the flanks, who make diagonal runs, who leave space for me in the center and who never stop moving.”
d. Lastly, how much more they can really get? Other big clubs are not dumb. These players spent their whole lives in a different system, and are getting old. Smart managers understand the risk and are likely to use our valuation as a starting point in negotiations. Only teams like Manchester City (a model that is about to falter due to the aforementioned UEFA regulations), and one from Qatar are going to pay huge premiums. And the latter is not exactly a highly competitive place, and the player would be more of a mascot then anything else.
A rational fan comes to the conclusion that those senior players don’t have that much leverage after all. Is “a few dollars more” really worth abandoning a roster spot at The Best Club in the World, trophies, opportunity to work with one of the best coaches of this generation, witness first-hand the growing of potentially The Best Player ever, breaking the bond with fans and genuine camaraderie in the locker room?
Let’s assume for a second that they might get significantly more somewhere else. The likelihood of bonuses at such a place would be smaller than is the case is at Barcelona. Here’s a simple illustration: Lets say we decide to pay them $4m that, with bonuses, can go up to $6.5m. Somewhere else they might be paid $5.5m, but the likelihood of bonuses is smaller. It is hard to assign weight to each category since there are a lot of factors involved, but the probability of winning a trophy at Barca is big enough to offset a potentially larger base salary somewhere else. The monetary gain (by moving elsewhere) is not likely to be a meaningful one. Meanwhile, they stand to lose a lot in sporting terms.
The deteriorating physical condition of aging players is the main reason for the proposed salary reduction. As a counterargument, some pointed to the level of play Xavi is exhibiting. Xavi’s level of play might stay high but the number of appearances is likely to go down, making the cost per appearance go up in the process. Management needs to react, and make a proper adjustment.
Also, we have players like Affelay, Thiago, and possibly Cesc, coming through the ranks and maturing . We don’t really need Xavi for ‘regular’ games, such as the recent Copa del Rey game at Almeria, as long as the newcomers keep the intensity, commitment and preparation for the game at the required level. Xavi’s experience is likely to make a meaningful difference only for the limited number of high-stakes games.
Abidal has been instrumental in the low number of goals that we have allowed. Truth is, he has been better than Puyol this year. I would like readers to answer this question: If Abidal is fine with his salary, and realizes what a roster spot on this team means as well as what his alternatives are, what is stopping Puyol from adopting the same approach? How much sense does it make to keep paying Puyol so much more? Not a lot, says this observer.
Frankly, I am not sure where the idea that the salary is the only way for The Club to express its respect and appreciation toward players is coming from. Far from it. There are bonuses, there is they day-to-day communication, treatment in media and publicity. Do not forget, all the senior players have the best retirement party in the world scheduled, a mic in hand, in front of a full Camp Nou. A retirement party every Canterano and successfully integrated outsider dreams of. Rightfully so.
The money saved by implementing my suggested measures needs to be allocated to help Club’s interests, both short and long term.
1. Long term, the money would serve:
- ‘Higher cause’. This group of players with Pep at the helm, has an historic opportunity to match and surpass what Madrid did in the 1950s and ’60s. Once in a century is how often an opportunity like this one presents itself. Everybody needs to recognize how special the moment is and put the strongest of forces behind the project. It has to be a joint effort, players, management and fans. All three parties need to make concessions in order to make the most out of it.
2. The short term focus should be on the improvement and growth:
- New acquisitions. The money saved by salary cuts would go for smart acquisitions to make this team even better in terms of both quality and depth. The easiest way to look at it is instead of Bojan, Keita, Maxwell and Jeffren on the bench we can have, say, Fabregas, Forlan and Coentrao/Bastos/Van der Wiel next to Mascherano, Affelay and Milito. Better quality and more depth if injuries and suspensions align themselves in unfavorable manner. There can’t be any more mistakes in the scouting process (ex. Zlatan).
- Stadium remodeling. A project put on hold. Not only for the aesthetic value and improvement of the fan experience, but the creation of a certain number of luxury boxes (and accompanying services) to bring new revenue to The Club.
- Social area. Increased media presence, aggressive advertising and marketing campaign trying to better position The Club in developed and emerging markets likewise.
- Fan clubs. More resources should be made available for the most popular ones to help them grow the fan base. Richer press material, exclusive information and seasonal trips to Camp Nou would go a long way in spreading the ‘Mes que un Club’ idea.
The management’s integrity is absolutely essential for this effort. There has to be not a single doubt that the money will go for the proper cause. Nobody is asking the players and staff to comply with austerity measures so that the money saved can be gambled away or used to support an addiction. It will go for a ‘greater cause’.
Finally, a sense of shared sacrifice, a common purpose of reinvention for all members of an organization, is completely lost when some are allowed to opt out. Restructuring, reinvention, transformation — whatever you want to call it — is hard and joyless work, and successfully convincing people to stand by this vision can only be done when there is a shared sense of urgency and commitment.
The Club already has the best players, the style is the most entertaining one and trophies are being won. We now need to become an undisputed champion in managing the club’s finances, to take the last argument out of the hands of the envious, so that we have smart, effective cost management with record-setting revenue, all while winning trophies.
Armed with ‘it’s not all about the money’ attitude and the right improvements, this team has the opportunity to dominate the next decade.
Tom Johnson is studying finance at an US institution.