Blog: Corporate Finance: Less Real Madrid, More Swansea

Talent Acquisition

Corporate Finance: Less Real Madrid, More Swansea

Recent examples indicate that it is more prudent to invest in a balanced team rather than a superstar
Corporate Finance: Less Real Madrid, More Swansea

Although research into corporate finance and the performance of European football (soccer) clubs may seem worlds apart, it’s not always the case. Real Madrid, one of Europe’s mega-clubs is threatening to break the world transfer record for the second time in four years with its 100 million euros bid for Welshman Gareth Bale. And this, as our recent research shows, is not a guaranteed recipe for creating successful teams.

Investing in superstars is unlikely to generate the same returns as investing in a balanced team, even if that means employing less obvious individual high-performers. This is an approach taken by Madrid’s big-money rival in the Spanish football league, Barcelona, which has won significantly more trophies in recent years. While it does make some expensive signings, Barcelona’s players’ competencies dovetail with one another’s, and the club also invests considerable sums in developing new talent and coaching them to play as a team. Indeed, arguably its three most famous players (Xavi Hernandez, Andres Iniesta, and Leo Messi), were all unknown youngsters when they began their Barcelona careers.

Another less famous footballing example might be Swansea City FC in the English Premier League. A club that was in the lowest rung of English football 13 years ago finished 9th in the top-tier Premier League and won the club’s first-ever national trophy this year, and it did this without spending money on recognized household names but with a dedication to teamwork and ensuring that teammates’ skills balanced one another’s.

Don’t Hire Superstars at the Expense of an Effective Team

As with football, so with corporate finance. CEB’s Finance Pathfinder Research of 2200 finance staff at over 75 global organizations found that finance heads who built a team with the right mix of competencies were more successful than those focused on building teams with star individuals.

Our research split the competencies of finance department employees into five distinct groups, each associated with particular employee behaviors: these are learners, doers, persuaders, strategists and builders. Doers display behaviors such as “is able to break down problems into manageable tasks” and “takes initiative and executes independently” and learners display behaviors such as “seeking feedback on performance” and “willingness to change opinion”.

Although these may sound desirable skills, they are the equivalent of poker’s ‘table stakes’ for finance teams. All finance employees should possess the necessary basic skills but managers from the world’s most effective finance teams (measured by feedback from business partners and Finance’s influence on business decisions) also test for people during the recruitment process that will display behaviors from the builder and strategist groups of competencies. Builders display behaviors such as “creates vision and fosters buy-in” and “reinforces efforts of team-members”. Strategists display behaviors such as “has a strong understanding of business operations” and “understands emerging technology”.

This sums-up the difference between Barcelona’s or Swansea’s recruiting policies and Real Madrid’s. Real tends to focus on people who are really really good at football, which isn’t a bad idea given the business they’re in. But more is needed to build a successful team (as long as players have sufficient ability; i.e. the ’table stakes’), such as someone who helps young players settle in the team or someone who makes good strategic decisions when the game is raging about their ears. Managers who understand this need for a mix of talents and sufficient ability, rather than just phenomenal raw ability, tend to see a better return on talent investments.

Focus Training and Coaching Efforts on Developing the Best Team, Not the Best Team Members

As well as the hiring process, we see the most effective finance departments concentrate their technical training on those skills that are easiest to teach while providing coaching to develop the more difficult builder and strategist competencies.

Many early- and mid-career finance professionals lack builder and strategist competencies, which are difficult to develop using classroom-based training alone. Rotations, commonly thought to help build these skills, also have limited effect (although they are effective for attracting and retaining talent). Progressive functions create well-rounded finance leaders by coaching early and mid-career staff. Furthermore, finance managers often disproportionately reward doer and learner behaviors. This propagates a self-fulfilling prophecy: the competencies rewarded are the competencies that are cultivated. Good performance management should emphasize builder and strategist competencies.

Anyone associated with Real Madrid would never countenance learning from Barcelona but maybe teams like Swansea (and corporate research) might convince them to build a balanced team in the future, and not just fawn over individual superstars that can never carry a team on their own.

Topics: Talent Acquisition

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