Real Madrid: A contingency theory explanation of how to fail

David Bruce Allen

Florentino Pérez has had a good deal say about strategic management since he became President of Real Madrid. He coined the phrase "Zidanes y Pavones" to describe the admixture of international superstars and home-grown soldiers designed to enchant the fans, secure world markets, and win football titles. He instituted a policy of a yearly signing of a "galáctico" and wooed and won Figo, Zidane, Ronaldo and Beckham. The strategy was simple. Hire the best offensive players in the world, build the marketing machine, become rich, hire more great players … The defense (and Iker Casillas) will take care of itself. And by the way, coaches don’t really matter.

During the first three years of the Pérez Presidency, the strategy worked. Real Madrid was the best, and richest, football team in the world. The club was flush with itself, and then the world fell apart. The next three years passed without a title in sight, and now Pérez has resigned. As part of his public penance, he gave his explanation as to why things had gone sour:

"Maybe it was the excess of triumphs or an incorrect assimilation of my messages. Some players are confused, and I haven't been able to revert that situation in addition to spoiling them. Maybe we will improve if I accept my share of responsibility. We have designed a squad which combines the world's best players. Maybe I have spoiled them and that lies at the root of their confusion. I want them to understand that the only thing that is important is Real Madrid." (Club Website)

Pérez’s analysis dovetails with those who believe that Real Madrid’s collapse comes from a lack of motivation and commitment. That … and six coaches in six years; washed up superstars; fighting in the locker room; signing the wrong players. Of course, this is all true. But these are artefacts of the failure, not the causes. As strategists, we need to admit that the other top clubs have better sides than Real Madrid. Real Madrid simply loses to better teams – even when the Club and its galácticos play hard. Real Madrid fields a highly motivated, but unfortunately very slow bunch of great middle-aged football players. The result is a porous defense, a mid-field that struggles to move the ball upfield, and nearly constant frustration at watching faster, young clubs literally run circles around them.

As strategists, our job is to explain how this came to pass and come up with a plan to become winners again. Here, perhaps contingency theory can help. Contingency theory, proposed 40 years ago by Lawrency and Lorsch in Organization and Environment, makes the rather straight-forward claim that organizational success depends on adapting organizational structures to the competitive environment. Quite simply, there is no one best way to do anything. The right way depends on the situational factors that are in play at the time. For example, as football has globalized and clubs can attract players from all over the world, speed and power have become increasingly important. Building clubs from back to front, with mid-fielders and defenders who can close down the explosive talents of a Henry or Ronaldinho is an absolutely necessity. Our job is to understand such contingencies and forge teams accordingly. Globalization has also made it necessary to build strong marketing organizations. Pérez understood this better than anyone, but he failed to see that shareholder value in football is measured in terms of titles won. Thus, he did not understand that only the coach can mediate between the different salient intermediate objectives of global football clubs and the only objective that ought to matter to the players – winning. Leadership in sports in the job of the coach, not the owner.

Here contingency theory also may come in handy. The theory has been applied with great aplomb in leadership. Leslie Fiedler in the 1970s sought to match a leader’s personality characters (i.e., "leadership style") with three environmental variables: group acceptance of the leader, the structural complexity of the task, the power of the leader. Translated into the language that the average coach of a world class football club can understand, Fiedler’s contingency theory of leadership asks the question: What kind of leader do you need to be in order to coach a group of elite, multimillionaire athletes who face a difficult yet clear task when it’s not obvious that you’ll be the boss tomorrow?

When Pérez became President of Real Madrid in July 2000, the Club had a successful coach, Vicente Del Bosque, who in November 1999 took over from John Toshack and had just led the club to its 8th European Cup. Del Bosque would win two domestic league titles, another European Cup, a European Super Cup and a World Club Cup in four seasons.

But Del Bosque was finally let go because Pérez, invoking contingency theory, felt that the globalization of football demanded a coach who could speak English and did not look as if he fallen out of bed straight into a Keystone cops movie

"Del Bosque's profile is a traditional one,"

Real president Florentino Perez told a news conference explaining firing a coach who had just won the Spanish League Championship. Then, as if he recognized that there ought to be a more technical justification tied to the firing, he added. "We're looking for someone with more emphasis on tactics, strategy and physical preparation," before returning once again to contingency theory,

"We believe that the squad we are building would be more powerful with a coach with a different character."

Jorge Valdano, the club’s general manager, added: "It is necessary to make changes from time to time, even in times of success." (The idea that change should be initiated during success is a new shibboleth of strategic management theory.)

This was spin-doctoring at its best, as the Club sought to explain to angry club members and fans why they were getting rid of Del Bosque. Of course, if Real Madrid had continued to win, we would all have forgotten rather quickly about Del Bosque.

Unfortunately, Pérez and Valdano were both wrong on both contingency and strategic grounds. Del Bosque was the right coach for the competitive environment because he understood that superstars are best motivated by allowing the intrinsic motivation that allowed them to become stars to do its work. Contingency theory also tells us Florentino Pérez undermined each of the succeeding coaches because he did not understand that once the players perceive that the coach is not the boss, the coach will neither have group acceptance nor power.

Strategically, Florentino Pérez believed that football teams are built from the front to back not from back to front. He should have re-read to Von Clausewitz's book On War (1832) and learned why defense matters. The new President ought to keep this in mind when he hires a General Manager who decides on player selection and a head coach that is capable of leading in the Real Madrid environment. Fortunately, there are a fair number of GMs and coaches who can do this. That … and money, ought to be enough to get the Club back among the contenders. You won’t hear me screaming for Real Madrid to bring back Vicente Del Bosque. That was another time, and another set of contingencies.

Comments

[LTMadison]

A fascinating exhange on sports management strategy (among other topics) can be found in ESPN's Bill Simmon's extensive conversation with Malcolm Gladwell: http://sports.espn.go.com/espn/page2/story?page=simmons/060302

[Carlos Alvarez]

so, by hiring good-looking players and coachs Real Madrid moved from a 'Zidanes y Pavones' strategy to a 'Zidanes y pibones' one ;-)
You could consider to write about Atletico de Madrid strategy (or lack of), it would be interesting