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In which ways can scenario planning contribute to the management of Dutch professional football clubs in case of relegation? : Managing football clubs and relegation; how scenario planning can help

Wigbold, Niels (2013) In which ways can scenario planning contribute to the management of Dutch professional football clubs in case of relegation? : Managing football clubs and relegation; how scenario planning can help.

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Abstract:Background and research question This research is conducted at KNVB Expertise, the knowledge and research centre for the Dutch professional football clubs. Many of these clubs find it difficult to manage the club before and after relegation, because of the uncertainty and short response time involved. Relegation has an enormous impact on the club, both emotional and financial. This thesis is especially focused on the financial component, because of the financial impact and challenges relegation implies. This thesis explores the options scenario planning as a management tool offers clubs coping with this problem to better handle it. The main research question to be answered is; “In which ways can scenario planning contribute to the management of Dutch professional football clubs in the specific case of a possible relegation?” Literature study A formal framework is found to display the challenges of managers in the field of football. The business value model of Grundy (1998) is used, where match performance is the central factor that affects all the value that is being created in a football club, such as sponsorship or merchandising. In this model, relegation can be seen as a result of a series of bad sportive performance or match performance. Relegation thus implies managerial challenges and according to the model of Grundy (1998) it has an effect on the value being created in a club. Data from KNVB Expertise shows an average decline of 25,4% in revenues after relegation, but only a 14,1% decline in costs. Adjusting costs to the new reality of lower revenues after relegation is found to be difficult and therefore implies managerial challenges. There are reasons to believe that scenario planning as a tool from the ‘normal’ business world could be useful in preparing for relegation. Scenario planning establishes future thinking and enables better preparation, by having considered the circumstances and consequences in advance. The scenario development model of Mahmoud et al. (2008) is used to check activities of football clubs on scenario planning with a formal framework. Research method In this explorative research, data has been gathered by interviewing five managers from five different clubs who have experience with (preparing for) relegation. In a semi-structured interview, introductory questions were asked on general experiences on relegation and more specific questions were asked on consistency with the models found in the literature study. These models are used to monitor the current activities of clubs on scenario planning and to see were improvements or recommendations are possible. Results Clubs find it difficult to estimate the declines in revenues and costs after relegation. Estimating is difficult, because of the many factors involved. These are among others commitment of stakeholders, match performance and communication of the club. Clubs feel more confident in estimating declines by using data from other clubs and KNVB Expertise, own research and experience with earlier relegation. Because of the financial component being the most important, clubs make scenarios in the form of budget plans. Clubs make a Eredivisie budget plan and a Jupiler League plan. It differs from club to club to which extent these plans are elaborated. Making budget plans have showed and learned clubs that they need to take precautions to handle the consequences of a possible relegation. The interviews showed that these precautions can be clauses in player contracts, dismissing personnel in case of relegation, making costs more variable and income more stable. The budget plans also give a clear vision of how future will look like in case of relegation and in staying in the Eredivisie, so any internal or external confusion can to a certain extent be ruled out. Conclusions and discussion The interview results have led to an answer on the research question. Experience with (preparing for) relegation is found to be useful in predicting the decline more accurate and to reduce the uncertainty to a minimum. Scenario planning teaches management of clubs what the effects of a certain situation will be and it can learn from experiences of other clubs. Scenario planning in the form of budget plans shows the management the expected decline in income and the challenge to adjust the costs to the declining income or weaken the decline. By knowing or having learned what the consequences will be, clubs implement risk management strategies or precautions to handle the effects of relegation if it would occur. Using scenario planning will help clubs giving clarity about the consequences of relegation to the internal organization. Having considered the consequences of relegation before and communicating these with personnel within the club will help the management of clubs explaining the effects of relegation to the organization. The management of the club can also plan or prepare the communication to the different stakeholders upfront to handle the intense emotional feelings involved. One might ask the question why not all clubs are well prepared for a possible relegation. The answer may lie in the model of Grundy (1998). We found that management of clubs succeeding in playing a few consecutive years in Eredivisie tend to make extra value creating activities to expand the business (investments and long-term contracts). The focus is here on the long-term growth of the business, instead of a focus to be variable and reducing risks to potential relegation. Not only scenario planning could reduce the problems occurring during relegation. Also the KNVB can play an important role, without using scenario planning. The KNVB could make adjustments to lower the gap between both divisions and obligate clubs to prepare for relegation in terms of making budget plans or save funds. Also clubs can do more than solely using scenario planning. Commitment of stakeholders should always be at the highest point. KNVB Expertise could facilitate the demand for more knowledge on obligations of the different divisions and facilitate knowledge sharing between clubs. Recommendations The most important recommendations for clubs are - Ensure a process in the organization that is continuing over years that considers the possibility of relegation. - One of the important aspects in that continues process is making realistic budget plans for two scenarios, which includes relegation, in which assumptions of trends in revenues and costs are based on earlier experience with relegation, experience of other clubs and data and research. Clauses in for example sponsorships and player contracts may help to come to better assumptions. - Continuous try to make costs variable and revenues stable. - Be always aware of the impact of relegation on the internal and external organization. Try to keep the commitment of stakeholders at the highest possible level, to prevent or weaken declines. Clear and true communication is at all time a useful instrument in maintaining commitment. Not only clubs itself, but also the KNVB and KNVB Expertise can help the football business with the uncertainties and problems that surround relegation. KNVB could implement strategies to decline the enormous (financial) gap between the two divisions. KNVB Expertise needs to facilitate in the demand for accurate and detailed information on the contractual obligations that arise in the different divisions. Also, facilitating the knowledge sharing of the effects on relegation on clubs would be a task for KNVB Expertise
Item Type:Essay (Master)
Faculty:BMS: Behavioural, Management and Social Sciences
Subject:85 business administration, organizational science
Programme:Business Administration MSc (60644)
Link to this item:http://purl.utwente.nl/essays/64665
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