What I’m about to describe is probably a bridge too far as the club looks to piece itself back together in, but if I was given the task of rebuilding the joint, and didn’t have to take into account any of the club’s baggage, I’d focus on building up the Eels Group as a sports and entertainment conglomerate to leverage scale and improve efficiencies.
In many ways, it’s an about face for me, given I’ve long advocated structural separation between the NRL and Leagues Club. However, that’s been largely as a consequence of the constitutional issues surrounding the Leagues club and being able to address those issues within the limitations of the Registered Clubs act. I think a well-executed Group model could shape the Eels as Australia's number one sporting brand and as part of that I'd pull more of the current football operation within the group structure while splitting the performance and commercial divisions into distinct businesses.
EELS GROUP
With the Parramatta Leagues Club development in train, we have a club that will be turning over more than a $100 million each year and capable of sustaining $10m+ profits annually. Across most of the large Registered Clubs, diversification has been the predominant strategy with gaming profits being re-invested in adjunctive businesses like hotel and recreation facilities and offerings, online gaming and property developments. As such, the Eels Group can essentially be run as a venture organisation, balancing member’s financial interests with its community responsibilities, as well as providing shared services to the group’s subsidiary businesses. The shared services model allows the Group to employ higher-level executives to run cross-group functions like finance, HR, procurement, inventory, IT, Legal, marketing and communications. As the most senior executive in the Group, the Group CEO would be responsible for stakeholder management, which would encompass the NRL relationship, as well as subsuming other management responsibilities currently performed by the Eels CEO.
EELS PERFORMANCE
Traditionally, sporting clubs have been run as a single entity encompassing both the performance side of the business with the commercial, with a CEO overseeing both of these units. However, it raises a vexing issue of cross-purpose goals. A CEO is required to balance the desire to spend money to excel on the field, while at the same time, delivering a bottom-line objective back to the parent business.
I would run Eels Performance as a non-commercial entity within the Group Structure. Essentially, the Football Manager role is elevated to CEO level, with responsibility and accountability for all elements of athletic performance from junior football to the NRL operation. The Eels Group would fund Eels Performance based on its needs and objectives and that would not necessarily be tied to the performance of a commercial arm I’ll call Eels Experience. This allows Eels Performance to be funded on its own merits; ie it may need a greater cash injection when it is underperforming, whereas the traditional model would tend to lead to less investment given lower performance leads to lower income, propagating a downward spiral. In this way, the ability to invest in the Performance business can be judged on the overall financial health of the group and the costs to the group are clear and transparent. Its only income is the grants that it receives from the NRL and the group.
EELS EXPERIENCE
Eels Experience would be tasked with generating revenue from the Eels brand, whether that be through memberships, commercial sponsorship & marketing, merchandise, game day revenue, or digital media. This would allow the commercial arm of the Eels to be run by a CEO with a very different and far more commercial skillset, with a sole focus and accountability on generating revenue.
NRL clubs generally have a lack of high-level commercial experience. CEOs tend to have sporting administration backgrounds, while NRL commercial managers tend to mid-level executives on relatively modest compensation compared to competing marketing services sectors like media. By axing the Eels CEO position and essentially redirecting those resources into a higher-level commercial leaders you're going to do a far better job of generating better returns from the Eels brand and membership base.
EELS BOARD
If you had confidence in your Group board, an Eels board may actually be redundant, and you could possibly get better input with less-formal advisory boards. However, given the volatility of the Parramatta Leagues Club board, I’d still tend towards a single, Eels board overseeing the Experience and Performance businesses whose charter would include ensuring the two business units worked well together.
ADDITIONAL UNITS
You’d have to make additional decisions as to whether you split the club’s business up by revenue stream, or facilities, but that’s beyond the scope of this article. I’d also split out Eels Community as an entity tasked with doing more with Clubs Grants and other charitable initiatives. Any new entrepreneurial ventures, which might include, as an example, an Eels branded health & fitness business, could all be run as subsidiary business in the future, fitting in seamlessly with the group model yet leveraging the Eels brand and the group’s shared services, all with the benefits of cross-branding and cross-selling.
Replies
With the increased in NRL grants, NRL clubs should be able to run without making a loss if they're well managed. Of course, how much you can spend on an NRL operation is like how long is a piece of string. You compare the professionalism and money spent on NRL and EPL teams and our operation are rank amateur.
At first look this seems like a good option to me. Shared services is pretty common these days among most large businesses for HR and finance and works reasonably well at reducing costs. Also agree with Poppa regarding the practice of doing business with themselves. I have seen this happen first hand and it can and often does go pear shaped.
I really like the idea of "Eels Experience" I believe that this is one of the least performing areas of the NRL. I think that this is where the AFL have a good lead over the NRL. Outside of club level the NRL are also failing in this area. Dave Smith was brought in to fix the Commercial problems of the game but unfortuneately he did not understand the Rugby League culture and did not get there.
I particularly like this bit:
If you have a brand that is losing market share, you basically have 2 options: cut costs to account for financial losses, or inject innovation and marketing creativity to build greater market share. I suspect that over the years the Eels have tried to either cut costs (which has lead us to the bottom of the ladder), or the money they have spent has not been properly targeted. I think the Eels are a bit like your favourite household product - we keep buying it and it has great market share, but there has been no innovation to attract new consumers. For the Eels, market share should be viewed as getting people to the games and merchandise sales. This pits us against our competitors which are other NRL clubs as well as AFL, football etc and the multitude of other entertainment activities. Let the NRL worry about television viewers - the Eels don't really see the benefits of this anyway as the money is pooled and shared amongst our competitors.
The only thing is isn't the NRL going to implement a salary cap on spending of the football club ? So Eels Performance would have a cap on the money they spend.
I don't think they can ever do that. You imagine how hard it is to monitor players, never mind any other spending.
However, if they did do that, this model is well-suited, because you remove a lot of back-office expenses out of the "football" business and put it into the Group.
Yeah it is laughable when you think about it, they can only ever find cap cheats when they have a whistle blower and now they want to monitor football clubs spending.
I only brought this up as under your Parra Performance you encompassed junior footy and any salary cap they would put in place I would imagine would be NRL side and under 20's.
I don't see a benefit of adding another code or team to the group. Core to this model is about building a super-brand and you dilute your brand equity when you add another team brand into it. And I don't believe there are nearly as many efficiencies as people might think. Most Australian sporting teams lose money, and we want to focus all of our investment in the Eels.
While there are efficiencies, I'm always more interested in the ability to generate more revenue and I believe the passion that people have for their sport of choice is largely under-monetised. You just don't get people in football clubs who know how to grow revenue and new business opportunities. You get sporting administrators in charge with a sales person reporting to them. This is about ripping out costs from your administration and investing it into essentially entrepreneurship.
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