Getting the “right” person to fill a job is one of the most important things any leader can do. They can add to your culture and enable your business to be more successful than it was when they joined irrespective of how you measure success. Getting the “wrong” person can have dire consequences. There are a range of theories as to how much wrong hires cost ranging from 20% of the annual salary through to 300% of the annual salary. Whatever the real cost, it is bloody expensive – just ask the Glazer family, the major shareholders of Manchester United.
Now, in the spirit of transparency, let me declare that I am a Liverpool football fan. Manchester United is our greatest rival. Until this year, they have dominated Liverpool over the past two decades and have rubbed it in at every possible juncture. This year, however, LFC sit on top of the table and United have fallen from first to seventh. Their demise started about 12 months ago today…..
United were a club famous for their stability. They had a manager in Sir Alex Ferguson who, like him or loathe him, was a larger than life figure whose power transcended the club. He was God-like and ruled with a level of control rarely seen in sport, let alone business. His will was unchallenged and when people spoke up against him, they were quickly pointed to the exit longue. It was Sir Alex’s way or the highway. However, he led the club to a period of unmitigated success and they were unchallenged as the largest sporting brand in the world. It all served to add to the mystique of the great Sir Alex Ferguson.
However, his legacy has been tarnished somewhat with the events of the past 12 months. Arguably the most important role that Ferguson was bequeathed with was to appoint and anoint his successor. The process (if you could call it that) was his and his alone to manage. In his infinite wisdom, Ferguson ignored all conventional selection wisdom and chose David Moyes, a well performed manager of a consistent top ten club in England who had never won a trophy of note. It was a shock but was not challenged at the time as Ferguson’s wisdom was never challenged.
Was Moyes the best available talent at the time? Most certainly not. There was a certain Portugese manager who had won silverware in the three leading global competitions who was desperate to manage United.
Was the culture and personality aligned to was required at United? Definitely not. Ferguson cast a massive shadow and it was imperative that he was replaced with another significant figure who could control the dressing room and gain respect instantly.
Finally, was a transition plan designed and implemented to continue with a successful team strategy? Once again, no. Moyes dismantled the coaching structure of Ferguson and replaced all coaches with his own men. He then led a transfer period which could only be described as shambolic and they missed out on nearly all of their targets. This meant that they already started the season behind the 8-ball; they were defeated before a single ball was kicked.
So what were the real, tangible costs of getting this appointment so wrong? I will list some of them to highlight how damaging it can be:
- Termination clause – the easiest to measure because it is contractual. Moyes was signed on a six year contract and he was terminated only ten months into this contract. This means that they will have a five year pay-out which cannot be cheap. I assume that this will also apply to some of his key staff as well.
- On-field performance – United were premiers last year and also made the quarter finals of the Champions league. Next year, they will most likely not qualify for any European football and this will cost a rumoured 40 million pounds of lost revenue.
- Merchandise and sponsorship – the brand has been severely damaged and merchandise and sponsorship will surely suffer. A club like United makes untold money through its merchandise arrangements as children around the world wear the shirts of their favourite stars. It is even more pronounced in Manchester where their next door neighbour Manchester City is capturing so much of their market.
- Future brand damage – so much of the United brand has been damaged this year. They will take a great deal of time to recover their position as the most powerful club in the world; if they ever do. They will now have to spend massively on a new manager and players to re-invigorate the club. In colloquial terms, they will pay massive “overs” as the name United will not alone be enough to attract players. The aura of Sir Alex will also be damaged; how could he get a decision so badly wrong? Finally, as a publicly listed company, there will be shareholder discontent and this will cause financial instability for sure.
So, will these costs exceed 300% of the annual salary? Well it may even exceed 3000%. The damage is massive and it will take time to recover. Putting on my human resources hat, it is hard for me not to believe that so much of this was avoidable. They needed to put more thought into the process of replacing a figure such as Ferguson. They needed to take the time to assess the available talent. They needed to ensure that their culture and personality aligned. They needed to select the best person, not the person who made the past manager look even greater than he obviously was.
When done well, recruitment can add so much to any business. When done poorly, it can damage it to an unthinkable extent. I feel so sorry for David Moyes today. He did not deserve to be in this position at all. As they say, it is nearly impossible to “bat after Bradman”. Fingers crossed that United get their next appointment right – or not!
Brad McMahon – Managing Director