Florentino, a Spanish businessman, civil engineer, and former politician, is CEO of Grupo ACS, the largest engineering and construction company in the world.
The fact that Carlos was neither a soccer aficionado nor a Real Madrid fan was precisely why Florentino wanted Carlos to join the executive team. Florentino wanted someone who wouldn’t be swayed by biases or swept up in the glamor or intimidated by the star power of the players. He wanted someone he knew and could trust to apply and execute their knowledge of what was needed to successfully run a global corporation.
When I interviewed people, I discovered many of their opinions are based on experience or gut feeling or simply what they have read or heard in the media, rather than facts or data. I am not sure they realize it, but some of their opinions have both strong and subtle biases, sympathies, and prejudices, and sometimes motivations.
Real Madrid has a powerhouse balance sheet, probably one of the strongest in all of sports, while Atletico had such serious debt problems 3 years prior that they fell behind in their tax payments.
Buyers of soccer teams are wrong if they assume that if they can get their teams to win trophies, profits will inevitably follow. The authors discovered that even the best teams seldom generate profits. They also detailed how unprofitable the overall industry is. In addition, they showed that there was little correlation between success on the field and making money. Most team didn’t care about profits. They were spending what they believed it took to win games.
To add to Real Madrid lore, the team won the game utilizing one of its core values: never giving up, which means competing until the final whistle.
Real Madrid is worth $3.44B in July 2015. They are the most valuable sport team.
European pro soccer teams generated a combined $23.7B in revenues. This compares with the NFL’s $9B, MLB’s $7.2B, and the NBA’s $4.1B in 2011.
Real Madrid has the most revenues, $675M in 2014, of any sports team in the world.
The business conditions for a small-market team in MLB are similar to a “socialist” economic system, while European soccer is much more of a “free-market” economic system. The “socialist” economic system prevalent in NA has the leagues, rather than the teams, playing the dominant role in many marketing functions, especially internationally.
RM’s management team believes that the community does not exist to serve the business or management; rather the club exists to serve the RM community.
With this approach, RM was able to bring together a passionate global community by creating a sense of belonging and shared values felt so deeply by fans around the world that they are synonymous with one’s identity and much more.
Winning is not enough for the RM community. This is in direct contrast to the idea of “win at all costs” or “the end justifies the means,” or selecting players based on data analytics first, or “taking a calculated risk” in signing a troubled talented player that can “help the team win now.” The RM community has a different standard and demands more. They want the team on the field to reflect the values and expectations of the community, which is winning with a team philosophy, class, style, and elegance. The RM community wants the club to be “champions and gentlemen.” If the team loses, the community wants at least to see effort until the end, courage, and dignity.
Baseball is very different from basketball and soccer because baseball requires less team collaboration — for example, the too-much-talent effect doesn’t negatively impact baseball teams.
Star players like CR and Messi can significantly impact a game, as can NBA stars, but a soccer star’s scoring is much more dependent on the player receiving passes from teammates at exactly the right time and place. Ronaldo and Messi touch the ball for around 60 seconds per game, around 1% of the game time. Quality shot opportunities in soccer are very scarce, so making the most of them is critical.
Because of the interdependence required in soccer, Ronaldo has to work on different goal scoring scenarios every day with his teammates. They know he has “1 second, 2 seconds — and bang.” Both the passer and Ronaldo have to almost instinctively know what the other is likely to do and when. Within seconds, they both have to analyze the situation and take action or the scarce opportunity is missed.
Although today RM is closely associated with championships and was named “FIFA Club of the 20th century,” they were not a dominant team in the early years. RM won their first La Liga title almost 30 years after their founding.
Even with Bernabeu’s charisma, once he became president, success on the field and in business did not come immediately. At first, Bernabeu began to implement organizational changes, which took years to complete and produce results. He restructured the club at all levels, in what would become the normal operating structure of professional soccer teams in the future, giving every section and level of the club independent technical teams and recruiting people on merit who were ambitious and visionary in their own right.
In 1947, Bernabeu wanted to get the best players for RM. To pay for them, he did something innovative at the time. He took a huge financial risk and built the biggest soccer stadium to increase ticket revenues, predicting that the best-playing stars would not only win there but would also draw large crowds to the stadium to see them do it. To finance the stadium, he sold bonds to the club members and fans. At the time, many thought it was “too much stadium for so little a club.”
It took Bernabeu 10 years to win his first La Liga championship as president.
The constraints of poverty promoted creativity, imagination, and invention. Also, their passion for and artistry in music and dance expressed in the natural rhythm and movements of tango, samba, and salsa seemed to transcend to their soccer. Latin American teams played an open, free-flowing, and attacking style of soccer. The players were artists and, in many ways, created with technical showmanship, flair, and a freedom of expression.
In contrast, at the time, European teams utilized discipline and order, denied the opposition space to move, encouraged direct passing, and emphasized a clinical and cautious approach. Their focus was simply on winning, and in some cases, not losing.
The world-class players followed Di Stefano’s lead because he was the undisputed leader, and also because these highly skilled players learned that 11 men, when given paint (the ball), could go on to a canvas (the field) and paint a 90-minute picture of imagination and beauty that expressed them. Anything less than 90 minutes of full effort and beautiful, exciting, and attacking soccer with elegance, style, and class — whether the players were winning by several goals or losing — was considered an “unfinished painting” or disrespectful to the art and viewers.
Perhaps the freedom of expression conveyed by their style of play at a time of a dictatorship added to the appreciation of the team.
Bernabeu’s strategy seemed simple: sign the best players from around the world that captured the imagination of fans and attracted new ones. It wasn’t only the players people wanted to see but also their beautifully elegant attacking style of play.
His strategies on the field (get the best players in the world to play an attacking style), in the organization (have the best staff members focus on functional areas, investments in infrastructure and people), and in business (build a large stadium to fund the players, build a global brand) were highly innovative and unproven at the time.
Born in 1947, Florentino is a self-made man, the son of a hardware store owner. Forbes estimated his net worth at over $2B. He is almost always seen in a conservative suit and tie and wearing glasses. As much as he is disciplined, meticulous, persistent, and driven, he is friendly, jovial, and self-effacing. Florentino has been a club member of RM since he was 14 and has attended most home games since childhood. He lives and breathes RM. It is his only passion — one could say obsession. He dedicates any leisure time to watching, supporting, and talking about RM.
This was incomprehensible for someone who has been a socio since 1961 and who was born and bred in Madrid. To Florentino and most socios, RM belonged to the members, who were the only ones who decide the future of the club. They couldn’t even imagine a scenario where a corporation, a TV broadcaster, or a billionaire would own the club.
- What values do we want to serve as the foundation for our club?
- What attitudes and beliefs about competition and team do you hold?
- What are the goals that you want to pursue?
Similar to sports organizations, McKinsey is in the “attract, retain, and manage the best talent we can find and afford” business. Also similar to a sports team, it needs to get the best talent to work together to outperform the competition.
They all had a romantic notion of soccer but realized that their ideas would only work if they were grounded in reality. The reality was that soccer was becoming part of international commerce. Even in this age of international growth, they could only conquer the market through the strength of their own authentic community identity and values.
Remarkably, Raul wasn’t particularly quick or strong and didn’t have a booming shot. What he did have was an incredible will to both score and win, and a talent for always being in the right place at the right time. To RM fans, Raul personified the traditional values of RM. As a testament to his values and how he played and led, Raul holds the distinction of never having received a red card.
At the beginning, especially with the financial turnaround, saving money was always a consideration, and economic responsibility is in the values statement. However, one of the first things RM did with the process of the real estate deal was to invest in and upgrade the academy. Florentino believed that — just like a world-class company investing in training and facilities for its people to bond, learn, and improve — RM should be a world-class leader in investing in its players, training, and facilities.
RM’s players’ contracts are standardized, each including the same provisions and codes of conduct. The only real difference between one contract and another is the euro amount. RM management found that sticking to this policy removes any unfair disadvantage or treatment when negotiating contracts with different players, reducing negotiating time and confrontation because “it is what it is.”
RM’s management team is extremely sensitive to ensuring that the mentality is respectful, in keeping with the values. For example, although there is a big buildup of the RM-Barcelona rivalry, both clubs’ executives show good relations and respect. By tradition, the RM and Barcelona directors eat together before their clubs play against each other in their regular season games.
Beckham responded with “Joining RM is a dream come true. Hala Madrid!” The exchange was a reminder that RM, unlike every other team in the world of soccer, is not a stepping-stone in the professional path of a soccer player or an investment opportunity for a billionaire or investment group. RM is unique in that it is the pinnacle of any player’s career.
One goal difference in the quarterfinal of the CL for RM and people may have a different narrative. Later, I discuss more nuances on the collapse, including the leadership, the too-much-talent effect, the too-tired-and-old effect, the impact of age, and other issues, which will challenge the theory that the primary cause was Makelele.
Something that Florentino also learned is that he needs to consider the right coach at the right time. For example, he believes that Ancelotti may not have been the perfect coach in 2010 when Florentino felt the team needed more formalized and disciplined practices, and maybe RM would not have been set up for its run now without then-coach Jose Mourinho — we can only speculate.
Most management books, and even most sports management books, implicitly assume the management and motivation of average or good personnel; very few books (and analysis) focus on managing and motivating the elite talent, let alone famous, rich, and young stars.
Benitez had the RM connection and the training discipline. However, he did not have the star player credentials, nor did he have an attacking game plan, the lack of which really upsets the community.
A soccer team is a complex, dynamic, living organization that really has to be nurtured on a daily basis. It takes a special coach to be flexible enough to adapt to an ever-changing group. If the coach can’t adapt, it is easier to replace the coach than to replace the team.
CR practices in 3 key areas: tactical (awareness, understanding, decision making, and goal-scoring scenarios), physical (speed, strength, stamina, and agility), and technical (the basics, passing, shooting, moves, turns, and other skills to dominate one on one). He is constantly working on one-touch and two-touch plays (with many repetitions at a time), plus the moves to become unpredictable and therefore very hard to defend against. He spends time in the video room studying the tendency of other players. The coaches add that CR has the “personality,” winning mentality, and attitude.
It is difficult for a coach to constantly tell star players what to do and to push them. Ronaldo sets the example for the hard work so the coach doesn’t have to motivate stars to work hard in practice. Similar to the extremely competitive champions like Michael Jordan and Walter Payton, he doesn’t need a coach to tell him to work hard. He shows up for practice and training ready to compete with the same intensity as he would for a game. He is self-motivated and driven, and he doesn’t want to be outworked or beaten in anything. This intensity and work ethic drives the other star players in a way the coach can’t.
He could assess the data analytics provided by the technical team, but because of soccer’s complexity, the interpretation of the data can be highly subjective depending on competition level, system used, and even the definition used in describing actions. Also, data needs context. Florentino provides the mission and values and then relies heavily on the expertise and execution of the people he hires.
Also, he has learned that day-to-day factors (moods, opinions, favorites) quickly change in sports. He now takes things more in stride and has learned to block out the overwhelming intensity of the opinions, second-guessing, and criticism of media, current and former players and coaches, agents, and so on. He has realized that at the beginning of the season it can take some time for players to click, and therefore patience is needed and one cannot quickly jump to judgments; and the same is true when the team is doing well in the middle of the season, because injuries and other unforeseen occurrences can happen. That is why typically it is best to wait until the end of the season to review the data and information carefully and thoughtfully together as a team and come to a consensus in making judgments.
A statistical average over long seasons, which includes playing weaker teams in less-important games, may lead to certain beliefs about a player. However, upon closer examination of only high-profile, pressure games, where trophies are on the line or the competition is very high quality, the statistics may lead to another belief and the willingness, deservedly, to pay more.
Once the managers and technical experts (including statistical data experts) know which positions they want to improve, they typically identify 2 or 3 candidates that they believe would be better “fits” than the incumbents in those positions. Before making recommendations, they will make repeated calls to people who know the player and his character. They really dive deeply into a player’s personality and values to see if he’s a match with RM.
The RM players say that he’s inspirational and doesn’t have any sign of the arrogance that sometimes prevents great players from being able to improve those with less skills or instinct. The staff praises his tactical brain and say his obsessive character makes him unique. There is also something else about Zidane; there’s a quiet authority about him, a presence. As a player he did not talk much, but he led by example. When he did talk, others listened. However, Zidane has had to adapt to being a coach. “If you’re soft with the boys, it doesn’t work. I discovered that, for the common good, you have to know how to tell players things they’re not ready to hear. I do it rarely, because I think I have a natural authority, which means I don’t have to resort to bawling out players. If I yelled the whole time, I wouldn’t be myself.” Zidane is very serious about his work. When he was the coach of the B team, he was at the practice facility every morning at 8:30am. He was there until late in the evening.
Soccer has a low scoring rate, which means that the entire result can be influenced by a single goal. In this sense, soccer is one of the most unfair sports in terms that the probability of the weaker team winning (or not losing) to the better team is quite large.
They make another argument that relates to the importance of defense. They argue that conceding fewer goals is more important than scoring goals.
Absolute skill in soccer has never been higher, but relative skill has never been narrower. Players today are grinding to a physiological limit and performance is getting clustered.
In the good times, when things to a player’s way and the player wins a lot of trophies and receives all kind of awards, then the player becomes susceptible to thinking he is the best and no longer needs to improve; often, this is the first step toward failure. As for complacency or lack of motivation, it mostly likely comes down to the leadership of the coach, the captains, the “first among equals,” and academy players.
What is the greatest competitive advantage? RM’s executives believe that, in the end, it is a team’s values and culture that have the greatest impact on performance on and off the field. To them, culture means everyone working around a common mission in a selfless way, and everyone knowing the goals and how to achieve them in a collaborative way.
RM management has instilled trust through radical transparency. RM creates trust with actions such as standard contracts and treating players fairly and equally. There is an air of transparency when dealing with RM; the people that I encountered were straightforward and professional.