By genuine coincidence, I had just reached this passage in Amy Lawrence’s Invincible: Inside Arsenal’s Unbeaten 2003-04 Season, when Arsenal executives announced 55 redundancies at the club last week.
“Llungberg had been there only a week when Pat Rice pulled him aside for a pep talk. He said, ‘You know Freddie, at Arsenal we have certain principles of the respect that you’re supposed to show everyone else around the club. Everyone is equal, we show everyone respect, and that’s special, that Arsenal spirit.’
… It maybe sounds silly, but when I changed club afterwards, I would still go and shake hands with the cleaners every morning, or the receptions, whatever. A lot of players don’t at other clubs. And that was something I was taught at Arsenal: you show respect to everybody, everybody has the same value and brings something so this club can go forward. And I felt that was special.” (P92)
The firings came after high-profile negotiations between management and players, in which players, with the intervention of a new, well-respected coach, agreed to a pay cut on the condition it would save staff who were put under strain by the worldwide COVID-19 pandemic. (The announcement, for added effect, came three days after a euphoric cup win for the club, following the worst season in 25 years.)
There have been countless great ruminations on the firings, the disappointment in leadership’s communication and the lack of stated strategy in both off- and on-the-field matters (notably from Andrew Mangan at Arseblog, and James McNicholas and Daniel Taylor at the Athletic), but they have all skeptically conceded to Arsenal’s statement that such redundancies are the ruthless cost of doing business under COVID-19.
But I would like to put forward the argument that the club’s recent poor communication is actually in itself bad business, damaging the team’s reputation; and will only lead to further harm and revenue loss if not corrected. But first, a quick lesson in the value of reputation.
Reputation is Money
In 2012, 58% of Apple’s market capitalization (the total value of all the company’s share of stock) was attributable to its reputation, reported Simon Cole in the World Economics Journal. Google, Disney, McDonald’s, Exxon, all similarly had half their value or more wrapped up in reputation. (Arsenal Note: Tesco PLC, at 49.2%, surely have been nudged over the half-way mark by now, thanks to Kieran Tierney).
Cole continues:
“In most cases, 91% of companies, reputation is having a positive impact and creating shareholder value. In the remaining 9% it is destroying value.”
This trend has only grown since then. In 2018, for S&P 500 companies, tangible assets like real estate and equipment made up only 16% of company value, while intangibles, like intellectual property rights and reputation made up 84% of company value, reports IP CloseUp.
Finally, sources vary, but a 5% improvement in reputation has yielded between 1.6% and 2.5% market cap growth for an average-sized S&P company, and 2.2% growth for one in the FTSE100. This is all to say: Reputation is, tangibly, money. And if you’re not proactively working to protect and grow it, you’re losing face and money.
The “Sustainable Economic Sport-Model”
Football, though, is a weird business. No matter how great their reputation, no one is kissing the Amazon logo on their packages or painting their face to rep Facebook (Except, of course, Jim Halpert). Fans of a club, more than any other organization, are fans because they see something in it that represents themselves. They want to see their values and their way of doing things succeed against, say, another set values so unimaginative they built a giant stadium that looks like a toilet. A club has to honor that, at the most cynical level, to make more money.
In The Real Madrid Way: How Values Created the Most Successful Sports Team on the Planet, Steven G. Mandis writes:
“[Real Madrid President Florentino Pérez Rodríguez] believes that when Real Madrid represents the ideals of the community members, the community responds with more engagement, passion, and loyalty.
…The passion leads to an increase in stadium receipts, the value of broadcasting rights, and marketing and sponsorship opportunities, which contribute to higher revenues.
Since Florentino and his executives implemented their sustainable economic-sport model, revenues have soared as fans more closely identified with the club and their players and became more passionate and loyal.
Coming full circle, the high revenues allow the club to sign the world’s best players who share their community values. Real Madrid wants their community to see a player on the team and think, “I want to play like, and be like, that player; I want to win playing that style and with those values.” (P19)
The book’s “sustainable economic-sport model” strikes at the common misconception that winning on the field = more money = more winning. Its researched conclusion is that most soccer teams, even the best ones, lose money, and that strengthening revenue streams off-the-field is key to success. In Madrid’s case, fan passion, nurtured by club leadership, drives higher revenues in ticket sales, broadcasting rights and more—allowing them to sign the best players at exorbitant rates.
Madrid nurtures this passion in a few ways, though they also have an interesting governance structure that relies on fan involvement in order to run the club (Novel, right?). In any event, the point is: In the football world, a strong, dependable identity is necessary to foster passion; that passion drives revenue; that revenue drives victory; further fostering passion, and the cycle repeats.
Reputation is Earned
Reputation, ultimately, is the confluence of how you view success, what you’re doing to achieve it, and what you’re saying about what you’re doing. All of this is viewed through the prism of your “authenticity factor,” which is to say, how does this stack up against your stated purpose and values. Who is your organization and what is their purpose for existing?
Enter “The Arsenal Way.”
Steeped in history and tradition, Arsenal Football Club has thrived on a pioneering and innovative spirit that has existed throughout its 125 years in existence.
Often waxed poetic, the character of the club is somehow defined on their website in both extremely vague and specific terms. Beyond the broad appeals to fostering community, the page ends with:
How we work
Everyone who works for Arsenal Football Club understands that we will fulfil[l] our goal of making fans proud by being together, always moving forward and doing things the Arsenal way. This final element is a key ingredient of who we are. It’s about thinking about others, getting the detail right and going above and beyond expectations.
For a key ingredient, this redundancy saga has proved pretty tasteless: Announcing firings through a muddled statement with a myriad of evidence-less reasons doesn’t strike of getting the detail right. Particularly doing so before all staff members of the club were made aware of their status doesn’t strike of thinking about others.
By their own metrics, let alone the ones set by fans, Arsenal executives have failed to live up to the moment. The move in itself was obviously bad—to cut loose 55 employees during a worldwide pandemic doesn’t strike of fostering local community—but the manner in which it was done has demonstrated a lack of awareness of how any modern business should conduct itself, let alone one where fan trust is necessary to success.
For all their concern about assets, reputation is a key, and in this case, declining one.
What Now?
This is all to say: Both the move was bad, and the communication was bad—a double whammy of a reputation killer.
If the club has truly thrived on “a pioneering and innovative spirit” in service to the community, as they state in The Arsenal Way, this didn’t track here.
The back office at Arsenal has to better articulate this to themselves, and put it at the center of everything they do. If you’re running a team proud of their foundations in factory workers, protect and respect your workers at all costs. There is no doubt that pandemic-related finances are creating hardships for corporations, families and individuals, but the way you handle these crises can often be more harmful than the crises themselves.
If innovation and “moneyball” are your supposed style, get creative about ways to fundraise and engage your loyal fanbase to keep them more positive about Arsenal’s future. It seems like a good investment and the timing may be ripe to tap additional funds from Arsenal’s billionaire owner or their famous cash reserves.
Running a club in the traditional way will only get you traditional results—which just won’t cut it for any modern organization, particularly one scrambling through an unprecedented worldwide crisis. If you run your company without regard for the people it affects, don’t be suprised when they start to treat you with the same dismissal.
Sources:
Invincible: Inside Arsenal’s Unbeaten 2003-04 Season, Amy Lawrence
The Real Madrid Way: How Values Created the Most Successful Sports Team on the Planet, Steven G. Mandis
The Reputation Playbook, Jennifer Janson
Reputation equation and other ideas adapted from coursework under Sultana F. Ali, APR, MPS.
Kyle Bagin is a strategic communications professional, with roughly ten years’ experience building successful communications campaigns by using research and insights to see the bigger picture, solve problems and change behavior.
Currently the associate director of digital media at the American Association of Colleges of Pharmacy and a recent graduate of Georgetown University's public relations & corporate communications master’s program, he can be reached through the Contact page.