Football & outsourcing; Jorge Mendes at Valencia

Much has been said and written about Jorge Mendes. And much is being said and written about his involvement at Valencia. Most of them portray Mendes as «the Devil» and Valencia as his playground to run as he sees fit. The same can be said about his business with Monaco, Porto, PSG, Benfica, Braga, Sporting Lisbon, Atletico Madrid, Zenit, Fenerbahce, Besiktas, Deportivo Coruña and his strong relations with British clubs Manchester United, Manchester City and Chelsea. From a footballing view, it breaks every rule we know (or think we know). But how does it look from a pure business perspective?

To explain this perspective, I need to explain with what I work. My responsibilities the last few years has been in ensuring a strong framework for delivering internal services. Through that role I have participated in some of the biggest outsourcing deals in the Nordics. Our role in the company is ensuring the business gets the best possible services to the right cost and the right quality. In that role I have learnt to know some of the biggest players in the outsourcing space, I have seen the strengths and the weaknesses of such a model. I have learnt to divide ideal models from reality. Now, let’s apply that knowledge to the business of football.

We need to start the story in the early 2000s. Valencia have just lost the second of two consecutive Champions League finals. It’s team is highly regarded, with some of the players regarded superstars in the world of football. From a business view, they had a lottery ticket in their hands. It was the right time to be successful. Barcelona knew. Manchester United knew. And Real Madrid knew. These were the first clubs realizing that the way to secure a continued place between the greats was to ensure your income. Football was spreading to new markets and they saw the opportunity to professionalize the club. They got filthy rich.

Valencia on the other hand was blind to this side of football. They enjoyed the success, sold players expensively and reinforced well enough to win league titles in 2002 and 2004. Even selling players for 100s of millions of euros, the club was loosing money. Under Juan Soler it reached it’s maximum losses of more than 30 million euro losses every single season. In the middle of this it chose to invest in a new stadium. In itself it was a right thought. Not raising the money first was fatal to the club. As the markets went downwards in 2008, the club never managed to sell the old stadium and was caught in a catch 22, needing to sell the old to build the new and build the new to sell the old.

In came Manuel Llorente. In business we would call him a cost cutting leader. One that only has one focus; cutting everything. On the way to their goal, these people often ignore what is the real purpose of the business or the club; the value of it’s business to it’s customers. Income, season tickets, player quality all spiraled downwards. At this time I was in contact with the club over their sponsorship material. It was a 10-slide powerpoint, badly put together and mainly focused on local businesses’ opportunity to have a VIP experience. I was shocked. It was 2012, and the club didn’t have a real marketing plan. Worse; It had no concept of what a brand was, and most of the material did more to harm it than to strengthen it. It was very much the «village club» Fernando Gago was despised for calling it.

Llorente would have driven the club towards bankruptcy. The biggest creditor Bankia would squeeze the club dry for any assets to satisfy the enormous loans totaling more than 300 million euros. In this scenario, Amadeo Salvo entered. Salvo knew that the purpose of the club could not be to satisfy it’s creditors, it had to be to create value for it’s customers; the fans. Surrounding himself with experts in several key areas, he slowly started rebuilding the club; Branding, city planning, marketing, sponsorship deals, legal advice. One of these experts was also Jorge Mendes. Yes, he was actually not brought in by Peter Lim.

We have all read pages up and down about Jorge Mendes’ domination in the football market. I am going to approach it in a different way. I am going to approach it as any other market space where a businesses operates. Every business has core capabilities which constitutes what is its «raison de etat», it’s reason to exist. No matter what those core competencies are, that business will be dependent on many other technologies, knowledge and services to get that core competence to the market. In my case, the core competence of the business is to get energy out of nature and provide this to it’s customers. To do that we need engineers, researchers but also IT professionals, tax experts, salary advisors, legal experts etc. There are of course two main ways of getting that; having your own people performing the tasks, or buying them. Then there are different ways of buying it from one-off consultancy to what we call «managed service» where one ideally only feed in requirements and outcome needed, then let the vendor choose how to fulfill that need within the framework given.

The outsourcing market itself has developed from mainly relying on «hiring consultants» to what we call «managed service». While the first gives you control and day to day detailed decision authority, the latter, in theory, lets the vendor use it’s core competences to provide more value for less money using it’s best of breed practices. Each, of course comes with it’s advantages and disadvantages and there is as usual no one right answer.

Now, let’s apply this to football. The traditional role of an agent was to advice the players on contract and transfers. Over years, also clubs saw the opportunity to use some of them as advisors, but it was rather rarely applied. Instead, clubs depended on it’s own internal resource (scouts and sports directors) to identify the talent they needed. Often people in these roles had limited competence, and strong knowledge of the market was less common than most would like to admit. My proof for that statement is the frequent changes in the sports director roles. In teams where the manager possessed these responsibilities it seemed even more volatile, as managers are changed often and many of those given more power seemed to heavily lean on their own contacts and even their representatives players. One example is Quique Sanchez Flores who worked closely with agent Garcia Quilón while at Valencia.

There are of course exceptions such as Sevilla’s Monchi who overall has brought his club a lot of value for money and sportive success to follow. Often though, the manager and the sports director disagree over the direction. At Valencia we have had «wars» between García Pitarch and Benitez, Carboni and Quique Sanchez Flores and lately also between Rufete and Nuno. In fact, more often than not it seen there are discrepancies between the sports director’s plan and the manager’s. That also means one could question whether it is the most effective way of recruiting.

Enter Jorge Mendes. Mendes with his Gestifute has become one of (no, not the only, nor the biggest) the major players as far as football recruitment is concerned. And in the same way businesses face shock and resistance when outsourcing, clubs mainly using the services of Gestifute to recruit are portrayed as «everything that is wrong with modern football». In my view, it is a long time since football stopped being mainly a sport, and started being mainly a business. It is only natural then that the football business go the same way as other businesses to get access to markets, global expertise and good value for money.

RPO, or recruitment process outsourcing is one of the most mature outsourcing businesses in the service market. Access to a stable force of skilled recruiters (scouts), local knowledge (local vendor centers), strong competence, specialist knowledge, access to large pools of potential talent etc. Just ask the expert and you will get a list of options. All selling points for letting an expert provider do all of this for you. Does it always work? No, of course not. Every business is different, every business has it’s social and organizational culture and society it operates in. And no doubt, such providers will be easier to criticize than any internal provider.

This is in essence the same happening at clubs like Valencia. Instead of building it’s own capabilities, Peter Lim has chosen for Valencia to depend on external expertise, personified by his friend and advisor «George». In itself it can be defended as a reasonable decision. It could even be argued that it is an advantage for Valencia compared to being on the outside of the «Mendes market». For me, the problem in the Valencia model is not the use of Mendes and Gestifute. It is the position of the recruitment agency (Gestifute) in the decision process.

The usual «modus operandi» in a recruitment outsourcing is that the hiring manager defines the position to be filled, the qualities, education and traits needed. The recruitment agency then does a first screening before presenting findings to the hiring manager (in this case Nuno) who decides who to observe more closely in an interview. After a selection process, the hiring manager decides based on what he needs and a portion of gut feeling, before his leader signs the deal.

The problem at Valencia is that the recruiter is also «career services» for the players, even earning a commission. In addition, it is the hiring manager’s career services. Not to mention the owner’s close friend, even if the final word is always Peter Lim’s. In that way one could claim that «George» has a spot on all the chairs around the table, representing the player, the manager and the owner. In a «normal» business context, this would of course be highly questionable and taking such risk, unthinkable.

Even though football has become more and more a business in the way it operates, the way business is done in football is still decades behind. Sadly, Valencia seem to have become a prime example of much that is wrong at this point in football history, somewhat unfairly and somewhat fairly. Only the next few transfer windows will prove or disprove the control Jorge Mendes seems to have over Valencia and many other teams. Meriton has so far stated they are not looking for a Sports Director and scouts at the club, despite the apparent hole left by Rufete and his team. The question is; Is this sustainable for the club long term? Are prices too high? Is Valencia locked out from the non-Gestifute market? I’m afraid only time will tell.

One Comment

  1. Great article. Articulates the reality of the current situation at Valencia with great clarity and analogy with the world of business.

    I agree with Hans, its beneficial to be able to work with influential agents. But when those agents also represent the players, hold a percentage of their sales value-there is always bound to be conflict of interest.

    And an agent will never fully understand a teams dynamics, the skills, the mindset it requires. And like Hans says, a coach must be able to pick his players from the pool of options. Unfortunately VCF is stuck with a situation where the coach might comply with thinking of the agent due to friendship and respect than the teams requirement.

    Perhaps a combination of these two reasons is why Valencia fans are so irrate and unhappy about the Nuno-Mendes scenario

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