House of Cards

As we awake to the news this morning confirming that Portsmouth FC have gone into Administration there will no doubt be much picking over the detail of what went wrong. I am sure that many things in the risk management and governance of the Club have gone wrong, but the bottom line is while the perception is that the Premiership is richest in the world due to vast revenues, this ignores the truth that its Clubs are also the most indebted. The vast majority of the Clubs on the other side of their balance sheets log eye watering debt. They are not rich at all.

One of the key causes of these massive debts in my view is the apparent complete lack of wage restraint.

Think of the reasons why business has a Remuneration Strategy and most people will say it is there to attract and retain the best talent. Right? Well yes, but it’s not the only objective. Remuneration Strategy should have a number of objectives.

Remuneration is critical in attracting the right talent. It tells candidates about Market position, attitude to competitiveness, management style, culture and critically their value to the business.

But it goes further than this;

Remuneration strategy should also be used to communicate in a rather more subtle way, key corporate messages that capture the other business priorities, the need for cost control and affordability of the wage bill in comparison with income and other expenditure that will ensure the future sustainability of the business for example.

The strategy is also a tool for communicating different messages to different groups of staff; it tells them of their position, importance and use to the business;

• The new upcoming talent that the business wants to motivate, encourage and support by providing them with access to potential higher earnings for improving or outstanding performance – the future of the business.
• Maintain differentials in role and position, there maybe groups whom the company value but they are already paid at the market rate, there is no justification for upward wage pressure in this group – they are effectively Red Circled. These are the work horses, they keep the business going.
• Then there are the stars, the people who will attract and win business and reputation, who grow the business. These are the people who have access to higher spot rates, market rate plus, performance bonuses and so on. There are just a few of these in each business, they are obvious, they are the real stars and everyone can reel off their names on one hand.

Whilst Football does appear to adopt these principles in general, the apparent belief in their own publicity of the greatness of the market that they have created and the subsequent labour market for supposed top flight footballers has allowed them to fail to put an affordability ceiling in place – a reality check if you like. With no objective evaluation of the wage market value of a player to one or any club, no cost control at the top and the continuing belief that “if we don’t pay this rate, we won’t attract or retain the best players” the cost of the wage bill can continue to spiral unchecked. The remuneration structure becomes nothing but a house of cards, balancing precariously on a pile of debt.

Jane Pound, MCIPD

The views expressed in this article are solely those of the author and do not necessarily represent the views of the CIPD.