Wednesday, March 5, 2014

And All the Clocks Wound Down

Time is running short on Arsenal manager Arsène Wenger's contract, and as his current agreement draws to its end, speculation mounts about his and the club's future. 

Not to worry, says CEO Ivan Gazidis. "Arsène will be extending with us, and at the right time, we'll announce it." That was his statement at the unveiling of the club's £150 million new kit deal with Puma on January 27.

Yet every time he's faced questions about the renewal, the manager has demurred. He admitted in October that the club had offered him a new contract, but with supporters, journalists, and his superiors hanging on every word, Wenger has been cagey. Hints that no lawyer or linguist could construe as a commitment are all he's offered.

This drama has played out longer than any of Wenger's previous three contract extensions, intensifying suggestions that he may leave. Some papers report heightened concerns within the club, though their sources are unclear and they could simply be stirring up mischief.

Meanwhile, even such measured supporters as Andrew Mangan of Arseblog and James McNicholas of Gunnerblog have put forward a 30 percent probability that Wenger will decide to walk away. (Listen to the excellent Arsecast Extra from March 3 for their rationale.)  

It's a delicate line

Rather than address the oft-opined-upon question of whether Wenger should be offered or should accept a new contract, I want to point out some implications of how the club's executives, specifically majority owner Stan Kroenke and Gazidis, have handled probably the most pressing issue affecting the club's future.

As Andrew rightly stresses on the Arsecast Extra, the club's executives have no contingency plan in the event Wenger decides not to return. Their near-term succession plan consists of Wenger and Wenger alone. As a result, even a 10 percent chance of his departure represents a major risk to the business.

I've written before that the club has often erred in elevating personnel risk, in the form of transfer fees and related player salaries, to the level of strategic business risk. In the current situation with Wenger, the personnel risk is significantly higher than it is for any other person on the payroll; it's as close to a strategic business risk as you'll see connected to any one employee's status.

Not only has the Arsenal brand become closely linked with Wenger's approach to  management and playing style, his skills have adapted to the club's environment. He has had a substantial role in shaping that environment, perhaps even the self-sustaining business model, which makes him particularly suited to shaping decisions there. Studies in the management field have drawn a strong correlation between employees with specific knowledge of their firms and those firms' successful performance. (Anyone interested in the nerdy details can read this analysis from The Journal of Applied Psychology.)

Kroenke and Gazidis may recognize this relationship between experienced staff and organizational achievement, which would make their current deference to Wenger in his deliberations somewhat understandable. Still, their stewardship of the club requires a backup plan.

And the names were all erased

The club has also recently publicized staffing decisions that Wenger either made or endorsed. It hired a new Academy director in Andries Jonker to oversee youth player development, brought on Ian Broomfield as a scout, and finalized contract extensions with midfielder Tomas Rosicky and center half Per Mertesacker. All accounts suggest that record signing Mesut Özil agreed last summer to join Arsenal to play for Wenger.

If Wenger leaves and a new manager arrives, player morale could be a major issue. The replacement will have to build trust among the players he favors and work within the bounds of some long-term commitments that he may not like. Either that or the club will have to buy out the deals. Football performance might suffer, along with the finances. Just look at Manchester United's league position and market value under David Moyes.

Arsenal's costs likely start at £15 million in the near term. That's a figure based on a Center for American Progress review which indicates that losing highly skilled and highly compensated executives can cost organizations more than twice that person's salary.

Again, these factors could partly explain why Kroenke and Gazidis have given Wenger so much leeway as he considers his future.

In standing off so much, though, and in leaving themselves no Plan B, they have worsened the potential effects of a Wenger departure. Gazidis would find himself in an untenable position due to his clear public statement about Wenger's return, and the club will likely be searching for a new chief executive with all the financial and operational consequences that entails.

One good minute could last me a whole year

Even with the best intentions of managing the valuable asset the club has in Wenger, Kroenke, Gazidis, and the rest of the Board have lost control of the situation and the discourse. The question has moved away from whether Wenger is the right person to carry the Arsenal football management forward. It's now a matter of how the club's executives could cope if Wenger decides of his own accord to move on. Allowing that shift to happen seems like negligence on their part.

I'm hopeful in spite of that mismanagement. Part of the reason is that organizations have ways of enduring, especially organizations as rooted to history and the community as is The Arsenal. The club has also combined sound financial management and expanded commercial relationships to amass funds that Kroenke and the Board could bestow on a new manager in the form of his own salary and incentives and a historically large transfer budget.

Or Wenger could stay on and make maximum advantage of his intimate knowledge of the club and its expanded resources. My guess is he will indeed re-sign. I say that because Wenger strikes me as a person of integrity, and I have trouble believing he would mislead Özil and especially Rosicky, who, after all, could have enjoyed a more lucrative career sendoff in MLS or elsewhere. 

So maybe, like many organizations, The Arsenal will find itself in a reasonably advantageous position despite what appear to be some odd choices on the part of its executives. 

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