Friday, 7 January 2011

Roy Keane, asset managers etc

I can't say I'm too displeased to see the back of Roy Keane. It had been a largely disappointing appointment, and the recent run of results in particular had obviously sealed his fate. Him getting the boot did make me think a bit about the way we view 'managers' of all kinds, and some of the wonky thinking involved.

First, and most obvious, is the halo effect. Most Town fans were pleased to see Keane appointed given his record as a player (far more than his record as a manager). But how many times have legendary former players turned out to be poor managers? Why should we assume that your ability as a player has a strong correlation with your ability as a manager? This to me seems to be a clear example of the halo effect. I think it's also a bit indicative of this English thing about the need for players with 'spirit'.

Second, it also makes you think a bit about 'big name' appointments more generally. Let's imagine that Keane had a reputation purely as a manager. It still might not be a good move to appoint him, because his previous success might be in no small part due to the context, rather than skills that were transferable, a point made in this book. This happens a lot in the corporate world, where nominations committees often seem to prefer a big name from outside rather than developing internal talent, the latter group having much more knowledge of the organisation.

Third, let's play devil's advocate. Is a season and a half long enough to judge a manager? Bear in mind we haven't even made the play-offs since Joe Royle was manager, and were under significant financial pressure until mystery man Marcus Evans invested. Maybe there was a bigger job to do than we realised. I'm also struck by the parallel with how we judge asset manager performance. Many mandates run for three years, and sacking a manager after 20 months for poor performance is rare. This is a good thing too IMO since asset managers often get fired at the point at which performance turns around (probably plain old mean reversion), and hired when they are doing well and about to fall away. Trustees might be tempted to 'manage' underperformance by dropping a manager early, when the most effective strategy might be to sit tight.

Have we made that mistake here? Are we falling for the delusion that there is an identifiable and manageable factor (or set of factors) that Keane was unable to address, but that another manager would identify and solve? Perhaps, as Keane himself suggests, we were on the brink of coming good. (Incidentally one might argue that by getting rid of Keane halfway though the season we have also demolished one of our myths - that we give managers time to prove themselves.)

Finally, to bring it back to one of my favourite topics, would anyone think that the reason Keane failed at Ipswich was because his remuneration was structured the wrong way? Serious question - if we think that better targets in executive pay reduce the agency problem, why not the same for football managers? You could even play on loss aversion - put say £1m in an account they can't touch, and then deduct a certain amount for losses or draws. Again I'm playing devil's advocate, and I think most people would expect managers to act in the club's best interest regardless of how their pay is structured. So why do we think differently about directors?

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