Management Dilemma at Manchester United - Term Paper Example

THE PROFESSIONALISATION OF MODERN SPORT – ‘FOR PROFIT OR GLORY’ By The Professionalisation of Modern Sport – ‘For Profit or Glory’ Introduction Manchester United is one of the reputable and most celebrated football clubs in Europe based on the number of trophies it has won over time. However, behind the glamour and enthusiasm, the club has faced or faces a myriad of governance issues that jeopardise its future competitive position. These challenges emanate from the manner in which the executives run the affairs of the club (Giles, 2014). Football clubs were traditionally founded to be a symbol of identity to the local communities and a sign of glory that was deeply rooted in the spirited efforts of the fans that supported the clubs throughout their history. The twenty-first century has been characterised by numerous transformations that have seen football and in particular the English Premier League being commercialised and turned into a multi-billion business investment from which the owners and investors are reaping billions of pounds in revenues (Roster and Shropshire, 2011). For this reason, the last decade saw the three top-flight league clubs Chelsea, Manchester United, and Manchester City being auctioned and sold out to investors – a move that significantly changed the operations and impacted the management of the clubs. However, some opponents argue that the multi-billion takeovers were healthy for the clubs since the investors have vast amounts of disposable incomes to hire and attract world class players from across the globe as well as be able to maintain their huge wages. Although, this has not been the situation because many of these clubs, currently face various challenges that have become threats to their future competitiveness (Ferguson, 2013). The Manchester United faces a number of governance issues that have their roots in the 2005 take over and the recent challenges of corporate governance practices. Key Governance Issues of Manchester United The moment the Glazers announced their planned takeover of Manchester United, the news elicited mixed reactions from the loyal and die-hard supporters of the club. A significant number of them were opposed to the move since they wanted Manchester United to remain a community club with no designated owner because they feared a single investor would take over ownership and impose his will on the management of the organisation, which would be against their wish. For this reason, the supporters organised peaceful demonstrations that were coupled with a number of petitions to the ministry of culture to bare and nullify the deal from being procured. Unfortunately, the contract was sealed, and the Glazers obtained a seventy percent stake in the club (Daft, Kendrick, & Vershinina, 2010). Debt and revenue risks are the other issues facing Manchester United. The Glazers used borrowed money to facilitate the purchase of the club. Thus, this implies that the club remains indebted servicing an unnecessary debt that was uncalled for in the first place. Moreover, this, move caused a lot of dissatisfaction and led to a section of the loyal supporters of the club to create different clubs since they felt their loyalty was being taken for granted because more pertinent issues the club was facing were not being addressed by the organisation adequately (Harris, 2014). Disclosure, transparency and lack of inclusivity of all stakeholders are another challenge that faced the club, especially during the 2005 takeover period. Notably, despite the intense uproar from the supporters of the club opposing the takeover of the club, the deal was sealed in secrecy without any official communication being made to the fans and other supporters. The new owners (Glazers’) only made a casual brief in the club’s official television channel without addressing the stakeholders of the club on the real events that preceded the deal, thus culminating in the takeover decision by the Glazers (Amir, 2014; Ogden, 2014). Lack of communication is a significant issue facing the Manchester United. Since the new owners came on board there have been widespread dissatisfaction from the supporters and other key stakeholders of the club with the new management of the club is engaging followers and other stakeholders on significant issues facing the club. For instance, the supporters only get to know of new unfolding’s at the club through its websites or newspapers without proper communication from the management (Amir, 2014; Ogden, 2014). Undemocratic decision-making and lack of inclusivity are another critical issue facing the club. The supporters’ representatives that used to present issues affecting them to the executive are no longer accommodated in the Glazers’ administration. In essence, since the takeover of the club, democracy ceased to exist and all policies of the club are made in boardroom meetings by the executive only, and decisions are communicated through media to the other stakeholders. Moreover, inclusivity in policy formulation has been abolished since the new administration is not committed to engaging its supporters in matters concerning the management of the club (Amir, 2014; Ogden, 2014). Similarly, there have been corporate problems emerging from the fact that the capital generated from the club’s IPO was channelled to service the huge debts that the Glazers acquired to facilitate their takeover. It was an unfortunate incidence since from practical economics, IPOs are only meant to increase the capital base of an institution and fund its expansion plans. Therefore, despite being the majority shareholders, it was out of order for the Glazers to use the club’s proceeds to service the debts without considering the views of the other thirty percent shareholders. Such incidences only fuel the assumptions that the club has been turned into a commercial entity whose primary objective is to generate wealth for the owners away from catering for the welfare of its stakeholders (Conn, 2014). On the other hand, the fans and supporters of the club are aggrieved by such moves since they end up paying increased ticket prices, even though, they commit a substantial amount of their time and energy to support the club’s operations. The management has demonstrated an opulent arrogance towards the stakeholders who each and every other club cherish since they base their success on their unwavering support (Conn, 2014). Lately, there has been an influx of external capital injection into the English Primer League occasioned by the takeover of various clubs by wealthy owners. For instance, Manchester City was brought by wealthy Arab oil Sheiks while a Russian billionaire bought Chelsea. These events have culminated to irrational competition in the English Premier League given the fact that some clubs are willing to spend substantial amounts of money to attract world-class players to make them more competitive in the league (Crane, and Matten, 2010). For this reason, clubs such as Manchester United often face the dilemma of overspending on world-class player signings, which puts an extra burden on the organisation, in addition to, the massive debts that the club is currently servicing. Case in point, the deal that led to the signing of Robin Van Persie from Arsenal involved a considerable amount of money and even caused ripples in the management and other stakeholders of the club concerning the economic viability of the deal (Cunningham, and Harney, 2012). Therefore, as much as world-class players are associated with success in the clubs, it is prudent that prior financial considerations are done to ensure the signings do not jeopardise the club’s financial position. Moreover, there have been instances in which player transfers costs colossal amounts of money but the club does not leverage from their taunted skills such as the case of Dimitar Berbatov and, currently Angel Di Maria that have not proved worthwhile in their contracts (Capital, 2012). Transparency of corporate affairs has been yet another issue that has faced the club. A significant number of corporate deals that the club enters into are not disclosed to the stakeholders and supporters. Transparency issues can be traced back from the moment the Glazers took ownership of the club when the deal was not made official to the supporters (Soderman, 2012). Recently, when Manchester United signed a contract with Chevrolet as the official sponsor of the club, the deal was marred by a lot of controversy that so the Chief Executive Officer of Chevrolet terminate their services immediately after signing the contract because some of the actual provisions of the contract were kept secret. The details of the real terms and provisions of the contract were made public after a whistle-blower unravelled the entire accounts that saw the manager-in-charge being interdicted. Similarly, the club’s financial statements have never been made public as each time the club presents provisional results that do not reflect the actual financial position of the club (Goddard, and Sloane, 2014). Priorities to Be Considered in Manchester United by the Senior Management Concerning Competing and Often Contradictory Demands Democracy Institutions that are governed under the pretext of openness tend to have less internal wrangles since a majority tend to be satisfied by the decisions or policies implemented by the management. Manchester United management should embrace a democratic form of governance to win back the trust of the stakeholders that have the perception that the administration of the Glazers does not value their participation in the management of the club’s affairs. Relatively, if an issue has competing or rather contradictory demands from different sectors of the organisation, democracy can be the best avenue for solving such a problem or issue. Thus, despite the varied interests that may be in action, allowing each and every stakeholder’s participation in policy formulation will result in significant satisfaction of the concerned parties (Dobson & Goddard, 2006). Stakeholders Any organisation that is in operation, whether profit or non-profit in nature, should consider the interests and views of its stakeholders since they are the people that keeps the entity going. In essence, stakeholders are the engine of any organisation that facilitates and enables the organisation to achieve both its short and long-term goals. Manchester United has various types of stakeholders all of which are crucial to the existence of the club. Therefore, it should be the club’s management policy that any decision or policy that is formulated should be at the interest of the stakeholders (Giles, 2014). The management should not forego the interests of the stakeholders and pursue the selfish interests of the majority shareholders of the club because they have a mandate to protect and safeguard the other stakeholder’s financial or social welfare. Issues such as increased ticketing are against the interest of the supporters of the club, and thus despite the financial turmoil the club is going through, it should seek alternative means to fund its operations or rather engage the fans to find out if they are willing to pay more than the standard charges lieu of imposing increases through boardroom meetings (Masteralexis, Barr, & Hums, 2015). Transparency The management should come out clean on any deal or contract that the club enters to allow public scrutiny of the club’s operations to avoid any doubt of mismanagement or embezzlement of funds. The contradictory demands that often erupt result because the activities of the club are often done in secrecy and thus resulting in competing demands for the different stakeholders as each side suspects the other of pursuing personal interests. Transparency should be prioritised in all management processes so that the parties involved can come to a compromise even before developing contrary demands (Rodríguez, Késenne, & García Villar, 2007). Compliance with Regulations According to a recent survey conducted in the UK, football is the most ungoverned sport in the nation. The body that is mandated to regulate the sport has been infiltrated with club representatives who have jeopardised its ability to streamline the operations of the clubs and thus facilitated the high levels of bad governance witnessed in the clubs. To ensure there is efficient governance of the club, the management should emphasise the need to adhere to the set rules and regulations to ensure all operations of the club are in accordance with the law. In that light, instances of conflicting demands arising from different circles in the club can become something of the past since the management will only be governing the club according to the stipulated rules and regulations of the sport. Similarly, supporters’ trust should be engaged, in management, to come up with governance procedures that will help the club achieve its objectives (Great Britain, 2009). Conclusion It is evident from the analysis that Manchester United faces a couple of management issues, some dating back to the time when the club was sold and commercialised into a profit generating entity rather than a community project. The standard level of governance is poor and requires revamping to secure the club’s going concern and financial position in terms of meeting its obligations to stakeholders. For this reason, there is the need for implementation of the prioritised actions recommended above, such as transparency, democracy, accountability to stakeholders, and compliance with rules and regulations governing football and clubs. Ultimately, with the implementation of these priorities, Manchester United can remain competitive and the most celebrated club globally. References Amir, T., 2014. Malcolm Glazer’s Legacy Is Manchester United’s Debt Burden. 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