Essendon Football Club - Issues and Findings - Case Study Example

CASE STUDY: ASSENDON FOOTBALL CLUB Name: Institution: Date: EXECUTIVE SUMMARY Running a sports club in an effective way requires that the management apply certain governance strategies and principles. Establishing a good, functional structure is crucial to the health of a club. Assendon Football Club participates in one of the metropolitan leagues in Australia. In these metropolitan leagues, football is essentially a non-professional or semi-professional pursuit. Such clubs as Assendon and others are in commerce or trade; therefore, they must adhere to certain Acts such as the Corporations Act, the Australian Company Law, and the Commonwealth Trade Practices Act 1974. They also operate under sports’ governing bodies such as the Australian Sports Anti-Doping Authority (ASADA). All these bodies are meant to prevent any anti-competitive conduct among the sports clubs. Therefore, clubs are highly scrutinized. As such, clubs must ensure good sports governance is maintained. In 2012/2013 leagues season, Assendon’s governance structure failed to live up to the expectations and requirements of these governing bodies. The conduct of Assendon’s governance structure brought some legal consequences to the club. This report is going to examine the conduct of Assendon management body and the consequences it brought on the club. Overview of the company Essendon Football Club is one of the professional football clubs taking part in the Australian Football League (AFL). Having been formed in 1871, Essendon represents one of the oldest football clubs playing in the AFL. The club is associated with Essendon suburb in Melbourne, Australia. The club’s headquarters are located at the True Value Solar Centre, Melbourne Airport. The club’s home games are hosted at the Melbourne Cricket ground or at Docklands Stadium. However, previously, the club hosted its home games in their home ground at Windy Hill, Essendon and its headquarters were also located at the same venue. Essendon represents one of the most popular football clubs in Australia since the Australia Football League was a national rules competition was incepted. The year 2013 marked the year when the club was subjected to investigations by the Australian Football League and the Australia Sports Anti-Doping Authority (ASADA) due to the allegation that the players were using supplements, specifically, the use of peptide supplements (AFL 2014). Issues and findings of the case study (without specific details) First, there was ignorance on the part of the management as to the condoning of the administration of the supplements. The problem in this case study is that there was little or no responsibility by the directors of Essendon Football Club a situation that led the coach to take full responsibility of the problems in the club. Secondly, the Australian Crime Commission report dubbed Organized Crime and Drug in Sport alleged that there was a links between organized crime and doping in sport (Evans 2013). It was only after, ASADA and AFL announced their intended aim to investigate the supplement program in the club did the board of directors come to know about the supplements program. It is assumed that the coach carried out the program without the knowledge of the board. This action and the Coach’s announcement to take full responsibility of what was happening reveals that the board was not doing enough oversight of what was happening in the club. It is also assumed that, unaware of the supplement program, the board agreed to the ASADA and AFL intention to conduct an investigation. The event that shows that the directors were not aware of the problems surrounding the supplement program was the internal investigations that were conducted after the announcement by ASADA and AFL. The investigation found out that none of the members of the board could fully take full responsibility of what was happening. Another problem is that the club had informally employed a huge number of people across all its functions, including some part time employees. Despite having such a large number of employees, the club did not have any formal structures and delegated powers, processes and control. Hird indicated that the large number of employees limited his close oversight of the matters in the club (Evans 2013). The two events (drugs and hiring) exposed inadequate corporate governance or lack of cooperation between different members. There was lack of oversight in the supplement program administered to its players. The issues at Essendon may be summarized as a lack of whistle-blowing mechanism, decision makers ignoring red flags, concentration of decision making power in few people, circumventing of normal process checks to achieve short-term goals. Lack of adequate reporting to the board about potential risks, and lack of appropriate HR processes and reference checks in hiring people to take up critical safety positions. Theory There are various theories that discuss the ways in which the governance function is legislated within sports agencies and clubs, including stewardship theory, agency theory, network theory, managerial hegemony theory, and stakeholder theory among others (Hoye and Cuskelly 2013). The stewardship theory and agency theory play a big role when exploring governance issues to do with internal monitoring. Agency theory postulates that the interests of shareholders should prevail in every decision made concerning the organization’s operations. Managers act as agents of the organization. These agents are subject to broad checks and balances by the directors and this helps in reducing the potential for agent’s misconduct and mismanagement that may threaten the interests of the shareholders. At Essendon, the conduct of the coach not only threatened shareholders’ interests but also the welfare and reputation of the club and its players. Essendon failure was not the failure of the head coach but the failure of the directors. Agency theory explains the best ways in which the board of directors can maximize control of managerial actions. For clubs such as Essendon with a large number of individuals, agency theory helps in explaining how governance systems work. Table 1 displays different governance theories, interests, board members, and their roles. This table will help in establishing whether Essendon FC’s directors fulfilled their role or not, where they failed, and thus recommend what should have been done or what should be done to rectify these problems and prevent other problems that might occur in future. Theory Interests Board Members Role of the Board Agency theory The interests of the owners are different from those of the managers Owner’s representatives Conformance and compliance Stakeholder theory Stakeholders have diverse interests Representatives of the stakeholder Balancing the needs of all stakeholder Managerial hegemony theory There is a difference between the interests of owners and those of managers Representatives of owner Symbolic Institutional theory Stakeholders’ interests are different from those of the organisation Influenced by external organisations Conformance and compliance Table 1 Theoretical perspective on organisational governance (Cornforth and Chambers 2003). FINDINGS OECD (1998) defines corporate governance as the relationship between the management, the board of directors appointed by the owners of the corporation, and the shareholders. The application of the term ‘governance’ tends to focus on board’s role in oversight as it conducts a more practical function in ensuring that the organisation performs according to the expectations of the owners. The directors of Assendon Football Club and the coach failed to live up to these expectations. Furthermore, there was very little if any, responsibility being accepted by the coach and the club directors. The interests of the club owners, the club, and the players were not better served by the club’s management body. The management attempted to solve the problems that were facing them; however, each of them was acting individually implying that there was no cooperation between different directors and between the management and the coach. After the AFL’s chairperson informed EFC about the doping scandal in the club, the Senior Coach, James Hird offered to take full responsibility for what was happening in the club (Evans 2013). This move made the role of the club’s board to fall under sharp scrutiny with many oversight agencies questioning the role of the board in preventing and containing risks. Coach James Hird was very confident that what he had done was the right thing and he the club had carried every activity in a right way and in accordance with the WADA drugs code. Hird made various legal moves and this shows clearly that he was not putting the reputation of the club before his own reputation. Hird displayed a defiant attitude asserting his own innocence and that of his players. However, in all his moves, it is clear that his aim was to guard his own reputation and the position he held in the club as a head coach. The problems facing Essendon are characteristic of many sporting clubs. Most of these clubs have weak corporate governance standards because they have evolved large community organisations to multi-million dollar businesses and their governance structures have not developed with the same pace. This has made these clubs very complex making the board and the directors become exposed to many risks that are difficult to manage. After internal investigations, Essendon’s Head Coach, Hird admitted that the body of the employees was too large for him to manage. CONCLUSION In conclusion, Essendon is a large football club currently dealing with a major drug crisis. Therefore, the club must seek a solution to minimize further damages to its reputation. The club needs to act fast and engage its stakeholders to address negative perceptions in the minds of the people. Therefore, the club should also implement a community relations strategy with a special focus on club’s welfare. DISCUSSION One of the major problems at Essendon was the lack of structured hiring and recruitment process and policy. Hird failed to recruit the best people available for the club which made it an uphill struggle to manage them day-to-day. Furthermore, the board paid little attention to the recruitment and selection process and rarely became actively involved. They failed in their role of overseeing the recruitment process. The club did not have a structured recruitment process and depended on the head coach’s approach to recruitment. Hird’s job description did not include hiring and managing the fitness and conditioning staff. His only role was to call the staffs out (Le Grand 2015). Evans (2013) stated that the two staffs hired by Hird (Stephen Dank and Dean Robinson) brought harder-edged, high performance culture to Essendon FC. The role given to Robinson was overrated and this may have contributed to the usage of drugs at Essendon. Hird went to an extent of delegating the hiring and recruiting employees at will. Not only did he assume the responsibility of hiring and recruiting employees but he also assumed responsibility for a substantial budget. It is assumed that this was the starting point of Essendon’s problems. First, he diversified medications and treatments into exotic supplements, injections, unfamiliar medications’ suppliers, and alternative medicine clinics without the knowledge of the board. The door to the possibility of use of drugs by players was opened wide without consideration of rules and regulations. Solutions One of the ways solutions that can help solve this problem not only at Essendon but in all the other football clubs across Australia is the formulation of an effective hiring and recruitment policy. The recruitment and selection policy will help in communicating the club’s approach to recruitment and selection. In addition to the recruitment and selection policy, Essendon should also formulate a recruitment and selection process. This process should be followed and adhered to by every member of the management. This process helps an organisation to hire the most suitable candidates for all the posts in the organisation. It is assumed that Robinson was taken through the appropriate recruitment process because it does not exist at Essendon and if there is, it was not applied. The recruitment and selection process has eight important stages which have to be adhered to, including advertising the vacancy, job analysis, contacting candidates, screening of candidates, interviewing them, selection and appointment, induction and training, and evaluation of employees. It is assumed that Robinson was taken through none of these stages. Each of these stages is crucial if an organisation is to hire the most suitable candidates. Therefore, none of these stages should be ignored. It should have been the role of the board to recruit and select staffs. This report also recommends that Essendon should recruit and hire a Compliance Manager to overlook all the integrity issues at the club. It is assumed that Robinson took the role of the middle managers in both the commercial arm and the football operations arm a task in which he failed. It the role of the commercial arm manager and the football operations arm manager within the football clubs to report to the CEO who in turn reports to the BOD. This report recommends that Essendon should recruit two individuals to take up the role of managing these arms and report to the CEO. Each of these solutions has its own advantages and disadvantages. However, in all the solutions, the advantages outweigh the disadvantages. The major advantage of hiring a Compliance Manager is that when other organisational members, including owners, managers, and directors are focusing their attention on something else, it is within the job description of a Compliance Manager to oversee integrity matters. However, this solution might have a disadvantage. This might be highly problematic because the other organisational members might feel less responsible for integrity (Harvey and Light 2013). Regarding, the recruitment and selection process, it is wholly advantageous to have this process and policy in an organisation because many risks associated with the recruitment and selection will be prevented. It is advantageous too to recruit two middle managers to oversee the management and reporting the issues in both arms. RECOMMENDATIONS Hiring a Compliance Manager Essendon FC operates in the Australian Football League; therefore, it has a wide range of government and institutional shareholders. Institutional theory postulates that the organisations adopt governance frameworks as a result of external pressures. On the part of Essendon, the managers and directors did not consider the external environments during their operations in the club. As a result, they did not conform to ethical and responsible business practice, including legal requirement for incorporation. Failure to conform to the requirements of these external agencies led to imposition of fines and reputational damage. To rise to the position it used to hold in the Australian Football League, Essendon FC has to initiate a more robust internal compliance function. This report recommends that Essendon should hire a Compliance Manager. The Compliance Manager will be the organization’s integrity actor. The role of ‘an integrity actor’ will be to stimulate integrity. He will be responsible for core integrity instruments such as the ethics code, integrity training, communication about integrity, and oversight on all the issues related to integrity. Compliance Manager will help coordinate all the efforts related to integrity in the club. This is important at Essendon where line managers and staff in supporting functions need to cooperate, often under the coordination of an integrity actor, to ensure synergies. Appropriate Hiring Process One of the problems at Essendon resulted from the tendency of the Head Coach to hire employees without enough or no consultation from the board members. It is important to hire the right individual at the right time. Essendon failed to hire the right people at the right time. To reduce the high financial resources being paid to employees, this report recommends that Essendon should ensure that it cuts down the number of its employees and recruits individuals who have the potential to make the greatest contribution. Hird adopted and continued to use unstructured approach to recruitment and this challenged the club in terms of costs. Essendon should have in place a recruitment and selection policy under the watch of the Compliance Manager (integrity actor). Justification of the solutions The four recommended solutions will go a long way into helping solve the problems at Essendon. As has been discussed earlier in this report, most of the problems at Essendon started when Hird hired Robinson without consulting using any structured process. This problem was also intensified by the fact that the club did not have in place a recruitment and selection policy. Therefore, the introduction of a recruitment and selection process and policy can help in solving these problems. Furthermore, a Compliance Manager will also be overlooking the recruitment and selection process to ensure that the right and most ethical process are adhered to. Stakeholder’s theory discusses the relationships existing between organisations and their shareholders. The governance framework of an organisation must account for these relationships and responsibilities. Organisations are responsible to their owners, shareholders, and their wider society (Hung 1998; Connelly and Slyke 2012). Essendon failed to consider the welfare of its wider societal groups including players. The Compliance Manager will ensure that the welfare of every stakeholder. The implementation of these solutions should start immediately and should incorporate the owners, all the directors of the club, the Compliance Manager, the coaches, and the middle managers. The first move should be to hire a Compliance Manager. Secondly, a policy and a recruitment and selection process should be formulated in consideration of all the internal and the external requirements. At this stage, various theories discussed earlier in the paper will find application. First, the stakeholder theory must be applied because the formulated policies and decisions made must be in consideration of all the stakeholders. REFERENCES Australian Football League (2014). The turbulent months: How the Essendon supplements saga unfolded, Australian Football League. Available at http://www.afl.com.au/news/2014-04-09/essendon-supplements-saga-timeline> Connelly, B. and Slyke, E. (2012). The power and peril of board interlocks. Organizational Performance, Vol. 55, pp. 403-408. Cornforth, C. and Chambers, N. (2010). The role of corporate governance and boards in organisational performance. In: Walsh, Kieran; Harvey, Gill and Jas, Pauline eds. Connecting Knowledge and Performance in Public Services: From Knowing to Doing. Cambridge: Cambridge University Press, pp. 99–127. Evans, R. (2013). Hird press conference, Essendon TV. Failte Ireland (2013). Recruitment and Selection. Available at http://www.failteireland.ie/FailteIreland/media/WebsiteStructure/Documents/2_Develop_Your_Business/1_StartGrow_Your_Business/Recruitment-and-Selection.pdf Harvey, S. and Light, R. (2013).Ethics in Youth Sport: Policy and Pedagogical Applications. London: Routledge. Hoye, R. and Cuskelly, G. (2013). Sport Governance. London: Routledge. Hung, H. (1998). A typology of the theories of the roles of governing boards. Corporate governance, Vol. 6, No. 2, pp. 101-111. Le Grand, C. (2015) “The Straight Dope”. Available at http://mupublishing.tumblr.com/post/123525151983/read-the-first-chapter-of-the-straight-dope. OECD (2004). OECD Principles of Corporate Governance. Available at http://www.oecd.org/corporate/ca/corporategovernanceprinciples/31557724.pdf Read More