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About this podcast

Sports and business are equally competitive - they're industries where people want to win. Habib Subjally, Jeremy Richardson and Simon Gregory from the RBC GAM Global Equity team in London explore the crossover between approaches to leadership in sports and in investment management, as well as the lessons each can learn from the other.

Transcript

Simon Gregory

Good afternoon, my name's Simon Gregory and I'm joined by the Head of Global Equities at RBC, Habib Subjally, and Senior Portfolio Manager, Jeremy Richardson. And, Habib, I wanted to really follow up on the LinkedIn post that you put out a few days ago, and you suffer from being an Arsenal fan, alongside many others and you made quite an interesting point tying in sport and business, and as a portfolio manager, a lot of what you do is looking at management teams, and particularly management succession, which can often be a thorny and difficult issue. And you tied that in with the situation that Arsenal finds themselves in, having once been a leader under a visionary manager Arsène Wenger, it's been a long drawn out saga of his demise. And I just wondered if you could expand on that a bit and how that is important and what you can learn from that in the context of portfolio management?

Habib Subjally

Yeah, well, let me begin by saying that I am an Arsenal fan, that means I'm not entirely unbiased in this conversation. Look, there are great parallels between sport and business and commerce. They're both highly competitive, highly sort of success-orientated industries where people want to win. And there are different strategies to win, and the thing about sport is that it's very public and that competitiveness is very open, and people don't hide that at all. Whereas, in business, people wear suits and ties and they're very polite and competition is conducted over the dining table, often with very polite conversations, but nonetheless, it's equally competitive.

Habib Subjally

So, I think one can learn quite a lot from what goes on in sport. Now, I think what's interesting with Arsenal is when they brought Arsène Wenger in 22 years ago. Brought him in from a Japanese club, Grampus Eight, who... I mean to be honest, no one knew who he was, and the board were visionary in being able to identify a potentially great manager and they took a risk on him. And he came in and he brought in all sorts of new training techniques, by nutrition, tactical play and a philosophy of play that has been phenomenal, he transformed the English game, brought great success to the club, both in terms of trophies as well as... let's be clear about it, he financed the move from the old Highbury Stadium to the Emirates Stadium now, and then he kept them in the Champions League for all those years and made it financially viable.

Habib Subjally

But then he saw the results dating off, other teams caught up, they, in fact, they started leapfrog Arsenal in terms of just innovative play, training techniques and so on.

Simon Gregory

That's been very clear that Wenger's effectiveness has been winning over recent years. So, should the club had acted sooner, but perhaps put it back in the business context, do you see a few examples of companies where management teams have stuck around for too long and got stall?

Habib Subjally

Yeah, absolutely, I think we see this all the time. We see management teams that have been there too long and CEOs are there for, in a sense, their legacy, to present their legacy, which, I think is not something that shareholders and other stakeholders should be, should be supporting, there is a wider purpose. So, I think there is, and at the same time I think in the commercial world, we also see, very short-time horizon where boards bring, well, you know, hire and fire and change CEOs every three or four years. I mean the average tenure of CEO in U.S. and UK markets is like four years.

Simon Gregory

Yeah, it can't be that long.

Habib Subjally

Which, you know, you begin to think...

Simon Gregory

Probably, probably a little bit longer than the average tenure of a football manager

Habib Subjally

Yeah, I know.

Simon Gregory

So, what's the magic formula then, not to replace too soon, but not to hang on too long? How do you as, I wonder about the bigger issues like Arsenal find themselves in a bit of a predicament now, because Wenger decided is going to walk, after 22 years, he's walking out with his head held high, rather than being pushed, he's chosen the time of his own departure. But what does the Arsenal Board do now? Do they bring in somebody from the outside, do they repeat what they did 22 years ago trying to find talent? Or should they have anticipated this moment, knowing that for the last three seasons, he could have easily gone. Should they have been creating, cultivating that talent internally?

Habib Subjally

I think, this is the key point, it's not just another manager, in football there's this belief that, you know, it's really unfair to throw in a young manager into the premiere league at a big club, and that, you know, you can't groom a manager and develop one internally. I'm not sure I completely agree with that. But certainly, the board should have been thinking about this and making sure that there is a recruiting staff, a training staff, a strategy team, a commercial team, that are all there independent of Arsène Wenger. So that when he does go, that there is sufficient infrastructure there for a new coach to come in. Now, we will see over the next season or two whether the preparations have been adequate or not.

Simon Gregory

So, they could bring in somebody from internally?

Habib Subjally

I think if they had thought about it five or six years ago, they should have developed it.

Jeremy Richardson

So, I was thinking, cause Simon you're a little bit more of a footballer than I am. I'm afraid to say my preferred game is cricket rather than football, but, if I think back to Leicester City for example, that was a sensation, they won the Premiere League and that was a new manager, he got brought in, so he can work.

Simon Gregory

Yeah, of course, clearly Ranieri did a super job there, but, a season later or a half a season later with the Premiere League Trophy in the cabinet he was fired by the club. What the companies do, because in football, as you said, the manager gets fired and then they start the search for a new one, very seldom you have this sort of considered succession planning. Do we see any sort of best practice in the corporate world, perhaps the sport teams could do well too to learn from?

Habib Subjally

Yes, well, I think in a corporate world you see best and worst practice, some is very short-term, hire and fire, you bring in someone from outside. I always find it interesting that, in my view, every time a board brings in a new CEO from outside, it has to be viewed as a failure of succession, and a failure to develop talent and to bring talent from within. I think also the way succession is handled in the corporate world is far from perfect, now look, I don't have all the right answers, but, to me there's two classic ways of, the way boards handle succession in the corporate world. One is, you create this gladiatorial "fight to the death" of the 10-15 most senior managers around, and guess what? You take your 10, let's call it 10, right, highly talented greatest potential managers in the organization into a race, at the end of which, one will become CEO and the other nine will be gone.

Habib Subjally

I mean that just seems like a irresponsible waste of talent. The other classic approach is that the board goes out and brings in a new CEO from outside, at vast expense, who then comes in and he, and it's typically a "he", does a clear-out of the level below and brings in more loyal people, so then, you tend to lose another bunch of your most senior leadership. There has to be a better way where you internally develop and grow a few people and you have a very clear way of easing them into that leadership role. This is not easy by any means, because CEOs tend to be quite big personalities, leaders in their own right, and they like people who complement them, not other big leaders, risk-takers around them, but, that's the responsibility of the board, no one's saying it's easy.

Habib Subjally

The board have this task, and they have to do it, that's why the board are paid what they're paid, and that's that.

Simon Gregory

So, a question for you, Habib, cause if this is a corporate, and this was this change going on at senior management, you might as a respected shareholders, wait to see how this settled down or whether this is a change, which is going to work. Now, Arsène Wenger is going to be leaving Arsenal, when, is it at the end of this year? (End of this season...) End of this season, (a couple of months' time) a couple of months' time. So, can you say, for sure now, not knowing who's going to be his successor, whether you'd be renewing your season ticket for next year?

Habib Subjally

This is such a difficult... I have always said that everything else in my life is sort of rational to do with probabilities and doing the sensible thing... everything except football. I'm afraid my support of Arsenal, it is irrational, it is, it's just blind loyalty. So, yes, I will be renewing my season ticket, and I'm writing that check.

Simon Gregory

In that respect, Habib, we wish you well for next season.

Habib Subjally

Thank you.

Simon Gregory

Thank you, Jeremy, thank you, Habib.

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