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Asset Management - The Application of Analytics to Player Recruitment
Constrained by one of the most severe economic downturns for decades and restricted to four months of the year in which to conduct their transfer business, rarely has it been so important for football clubs to have a clearly defined recruitment strategy.
With many clubs operating under the burden of huge debts, the utilisation of all possible tools of financial and performance-related analysis is becoming an increasingly important feature of enterprise. Using a wealth of performance data and identifying strong trends in the market, Prozone aims to apply its expertise in informing and advising clubs operating in a variety of unique transfer systems across the globe, from Europe to North America and the Middle East, as to where true value for money is to be found in an often fevered and inflated trading environment.
While football has witnessed more investment in sports science over recent years, evidence suggests that clubs are still more likely to spend heavily on players than any other area at the football club. To focus on the British market and the much talked about English Premier League, the summer 2011 transfer window saw English clubs spend £485m despite the inclement financial conditions, a remarkable 33% increase on the outlay during the same period last year. While these figures demonstrate that the forthcoming implementation of UEFA’s ‘Financial Fair Play’ initiative is unlikely to reduce the total amount spent by teams, they do highlight the polarised nature of the Premier League’s economic map; Arsenal, Chelsea, Liverpool, Manchester City and Manchester United accounting for 66% of the division’s expenditure between them.
Figure 1: Number of transfers in, January 2010 - Summer 2011
With such huge sums involved, we take a closer look at the activity in the recent window and suggest how Prozone could be used to further enhance the due diligence process surrounding player trading against a backdrop of the economic climate and changing regulatory landscape.
Football’s Transfer Window
“Success comes from having good players” is the mantra often repeated by managers such as Sir Alex Ferguson. The issue for most managers of course is that they are often not afforded the time to adopt a strategic long-term approach to player development, owing to the high-pressure, results-orientated environment prevalent in football. Arsène Wenger recently made the observation that managers will receive criticism for trying to develop players organically as opposed to spending large amounts on players. With club owners and fans today demanding instant success, the focus on the transfer window is likely to remain as managers are often forced to find ‘quick fix’ solutions to their squad deficiencies. Indeed the Prozone data tells us that the percentage of transfers undertaken on the final day of the transfer window increased from last summer; for example those teams who finished 5-8th last season (those desperate to break into the Top 4) conducted 42% of their activity on the final day (Vs 14% during the same period last year).
Figure 2: Buying activity Summer 2011
Originally introduced after the European Commission expressed concerns that the previous system breached employment law, the transfer window now exists to restrict the periods during the year when clubs can trade players. In the UK for example, squad changes are no longer permitted from September to January and again from February until the end of the season, unless through a loan signing. The restricted opportunity for trading has led to widespread criticism from leading managers in the game, with Harry Redknapp previously describing the transfer window as “a nonsense” and Chelsea manager André Villas-Boas more recently championing for changes to the current system. It would seem, however, that - for the time being at least - the bi-annual frenzy of the window is here to stay and managers are under pressure to get their recruitment strategies unfailingly right. With the help of Prozone’s expertise in the field of recruitment, clubs are able to subject the market to increasingly detailed analysis and gain advantages over their rivals when it comes to the finer details of transfer business.
The Economic Climate
Upwardly spiralling transfer fees and wage inflation have in recent years become a problem in the football industry, leading to many football clubs running at a loss on a consistent basis and in some cases having their very existences threatened through administration. The pressure on clubs to spend huge amounts of money on players in order to maintain their position in the upper echelons of the game continues to increase despite debts mounting at alarming rates.
Despite the apparently bleak outlook, there is a chance that the presently difficult financial conditions could come to have a positive influence on the way in which football clubs are run. With the credit crunch having drastically limited the amount of available finance, it could be that clubs – who are still growing core revenues thanks to huge television deals – use the economic downturn as an opportunity to create more sustainable business models. As credit continues to be a scarcity, the focus for clubs more than ever is on improving their business performance, streamlining and more carefully managing their key costs in order to reduce the debt burden.
The Regulatory Landscape
European football’s governing body UEFA have also unveiled plans for ‘Financial Fair Play’ which is set to be introduced in full from the 2013/14 season. The aim of the regulations is to get all professional clubs who qualify for continental competition to break even in the long-term, with clubs being required to match their costs to their revenues within an acceptable deviation of €5m over any given three-year period in order to be considered for participation in UEFA tournaments.
In addition, the ‘Home Grown Player rule’ which was introduced by the Premier League last season stipulates that clubs must select in their 25-man squads at least eight players who have been on their books for at least three whole seasons prior to their 21st birthdays. The theory behind the rule is that it will serve to encourage youth development and prevent clubs from regularly spending massive sums of money on new players.
With such rulings, managers, scouts and analysts at clubs are being presented with a new framework that they must adhere to when recruiting new players. Unsurprisingly perhaps, we are already seeing the impact of the new regulation through the data captured by Prozone during the summer transfer window.
For example, the second most expensive transfer window in Premier League history, this summer saw clubs do more of their business domestically, the figure for transfer fees paid to overseas clubs being down by a quarter on 2010.
Figure 3: Number of transfers in, January 2010 - Summer 2011
Indeed, of the £485m spent, £165m was used to buy English players, and 44% of all Premier League transfers during the summer 2011 window were British players, compared to only 32% during the same period last summer, perhaps an indication of the home-grown player rule taking affect. Early this year, in the January window, the proportion was even higher (46%), which represents the highest percentage since the window was introduced in 2006.
Figure 4: Historical trend of percentage of British players transfers in, Summer 2006 - Summer 2011
There have also been marked differences in the nature of the deals which were conducted this year as opposed to 2010. In a trend which reflects the budgetary constraints many clubs are faced with, this summer saw free transfers constitute 28.2% of all deals made, the most common they have ever been. Alongside this development, we have also see a significant reduction in the number of loans, their 10.9% share of total deals reflecting the greater need teams have to raise funds through sales, and perhaps suggests that teams are looking to reduce their wage bill in light of UEFA 'Financial Fair Play' regulations.
Figure 5: Historical trend of types of transfers, Summer 2006 - Summer 2011
While all of these statistics are – at least superficially – useful, the figures and talking-points produced by the transfer market can be given far greater depth by Prozone’s vast bank of performance data. In fact, if we look at Prozone’s analysis of the 2010 summer transfer window, we are able to see how transferred players performed after their moves and, as a result, identify trends which may have continued this year.
Premier League Transfer Window Analysis
Using Prozone’s player performance ratings we are able to empirically demonstrate that players who came to the Premier League from overseas in the summer of 2010 had better average ratings over the course of the season than those who moved between clubs within the division (57.17 to 51.08). With domestic players often being sold at vastly inflated prices, it could be said that managers should possibly look abroad if they want true value for money, that being despite the conventional wisdom holding that English-based players will adapt to new clubs far more easily.
The data collected in 2010 also gives an indication as to the best time to conduct business during the window. The teams which finished the season in the bottom half of the table bought, on average, 36% of their acquisitions on the final day of the window, waiting until the very last moment to secure over a third of their targets. Conversely, the teams which finished fifth to eighth made just 14.2% of their signings on deadline day, a statistic which seems to support the widely-held view that teams perform better if new players are given time to settle. Indeed, perhaps unsurprisingly, the results of the analysis seem to come out in favour those clubs which pursued a clearer and more calculated transfer policy.
The data history suggests that those teams dealing late won’t perform as well as those who bought earlier (in relative terms), and Prozone will continue to analyse performance to provide further insights into the impact of this summer’s player moves on team dynamics and perhaps whether, the chasing pack to the Champions League contingent, Liverpool and Tottenham Hotspur – clubs which brought players in earlier in the summer – can close the gap on last season’s leading quartet. Also interesting when looking at early performances of last seasons top 4; Arsenal – a team which made several late signings - have until now been under pressure by a series of poor results whereas Manchester United, who did most of their business in the off-season, have started the new campaign in fine form and appear, for the moment, to be proving right the idea that teams play to a higher standard when given time to gel.
The Solution – A New Approach
Although short-termism may still be pervasive amongst many clubs, the evolution of clubs’ technical departments of late indicates a shift away from more traditional methods when scouting for new talent. Numerous clubs are now recruiting Performance Directors and Technical Scouts in order to improve both the scope and efficiency of their recruitment strategies. Prozone analysis is also being utilised to supplement the intuition of scouts and managers as clubs look to increase their diligence and accountability with regard to the recruitment of new players. By applying advanced statistical models to performance data, Prozone can help teams manage their player asset management strategy and reduce financial risk by assessing a range of market trading components - including player productivity, transfer valuations and even forecast likely future performance trends.
In order to provide more comprehensive advice in the field of recruitment consultancy in this particularly challenging economic time, Prozone has partnered with Orb Finance - a company which specialises in researching professional football player performance, valuation and remuneration. Recognising the economic realities and changes facing the football industry, Orb have developed the ‘Orb System’, a tool which aims to provide solutions for clubs using well-known and validated techniques from the worlds of finance and economics. In this way, clubs are able to use Orb and Prozone to assist with player trading (including valuations, transfer negotiation and loan deal pricing) and managing current assets (including performance-related pay and assessing player life cycles).
As David Zarmalwal, Chief Executive of Orb Finance, explains;
“As a consequence of these economic realities and regulatory developments, professional football clubs will be forced to reappraise their business model, taking a critical look at the organisation and management of their finances. Central to this reappraisal is the adoption of a new approach to the financial management of their playing assets and the associated costs.”
Commenting on the ongoing work being undertaken Blake Wooster, Head of Business Development at Prozone, points out:
“There are numerous ways in which data can be used to enhance the current methods being used when managing existing player assets and trading. For example, it would actually be possible to create a standardised system for player valuations and salaries which, if embraced centrally by those who govern the game, could help clubs manage their costs in what is obviously a challenging economic climate.”
This is a fascinating, transformational time in the fields of football finance and player recruitment as clubs seek to improve the efficiency of their business models while simultaneously attempting to maintain high competitive standards on the pitch. With the help of the analytic services provided by Prozone, clubs can use expert independent analysis and consultancy to adapt their recruitment policies to a rapidly evolving financial and regulatory environment, making informed decisions as they re-shape themselves for the future.
PROZONE SOLUTIONS
Applying football expertise and validated techniques from the world of finance, clubs are able to enhance the due diligence process around player trading.
PROZONE RECRUITER
Through applying advanced analytics clubs can compare players from their existing squad to transfer targets from over 60,000 players from 47 of the biggest leagues and competitions in World football. Image taken from Prozone RECRUITER software.
Case Study – Qatar Stars League
Through applying intelligence and analytics to performance data, Prozone have helped the Qatar Stars League create a performance related salary model to help raise standards and manage costs.
"This agreement has been made as part of QSLM’s plan to promote, develop and support the football matches whilst implementing the most advanced methods within the industry to raise the level of football in Qatar.”
Ahmed Abdulaziz Al-Buainain, Vice Executive Chairman - Qatar Stars League Management
For more information on Prozone RECRUITER email enquiries@prozonesports.com, or for more information on Orb Finance, visit: www.orbfinance.net
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