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Does a Coach or CEO matter?

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When it comes to management, the answer is an unequivocal no.

Soccernomics, the beautiful book written by Financial Times Columnist Simon Kuper and University of Michigan Professor Stefan Szymanski, makes the convincing case that "it turns out that coaches and managers simply don't make that much difference."

When studying years of soccer matches, the authors conclude that "the vast bulk of managers appear to have almost no impact on their teams' performance and do not last very long in the job. They seem to add so little value that is tempting to think they could be replaced by their secretaries, or the chairman, or by stuffed teddy bears, without the club's league position changing. The importance of managers is vastly overestimated."

How can this be?

As a culture, we laud coaches and CEOs for their superior management skills. Give them deity-worth reverence. Put them on the covers of magazines, see them interviewed on television repeatedly, and even some nations elect them to the top government job. 

The Great Man Theory of History happening in real-time.

What really matters are the players and the employees. The market makes this clear.

Johan Cruyff, the famous Dutch international soccer player who went on coach FC Barcelona to four straight La Liga titles and a Champions League title, said simply, "If your players are better than your opponent, 90 percent of the time you will win."

Those that can perform a specific task repeatedly, with few flaws and consistent enthusiasm are treasured and well compensated by the market. Often there is a shortage of the best talent, and there is massive competition to secure their services. 

You see, soccer teams have perfect market information on thousands of players. It is clear who on the pitch can play and who can't. Either you can play soccer, or you can't play soccer. Either you can perform the task at hand, or you can't.

Soccer players more or less get the job they deserve.

However, when it comes to coaching this is not the case. The market for managers does not work well. Many of the best managers rarely get proper attention while numerous managers who add no real positive value continue to get promoted to better-paying jobs.

You see this off the pitch as well.

According to a Wall Street Journal analysis of data from MyLogIQ LLC and Institutional Shareholder Services, among S&P 500 CEOs who got raises last year, the 10% who received the most significant pay increases scored—as a group—in the middle of the pack in terms of total shareholder return.

Similarly, the 10% of companies posting the best total returns to shareholders scored in the middle of the pack in terms of CEO pay, the data show.

Quoted in the Wall Street Journal, Herman Aguinis, a professor of management at George Washington University School of Business, reinforces this point, “Stars are often underpaid, while average performers are often overpaid.” 

The disparity between CEO compensation and performance appears to persist over more extended periods as well. Professor Aguinis analyzed the earnings of more than 4,000 CEOs over the course of their tenures against several performance metrics and found virtually no overlap between the top 1% of CEOs in terms of performance and the top 1% of highest earners. Among the top 10% of performers, only a fifth were in the top 10% in terms of pay.

On and off the field more coaches and CEOs are more sun god and head of public relations, less visionary executive. 

The forte of best-paid coaches and CEOs is often not winning matches or generating more revenue, something frankly they have little control over, but keeping all the various constituencies united behind them. Hence why as a culture we frequently prize charisma over competence.

Chris Tomlinson, a business columnist for the Houston Chronicle, penned recently, "There is also no shortage of CEO candidates and little competition for them. Few companies need CEOs with unique skills, and boards tend to buy charisma rather than skills anyway. The general economy and market forces within an industrial sector are far more accurate predictors of a company’s performance, regardless of how much the CEO earns."

All of that being said, I do think thought leadership and vision matter immensely, regardless of how it pays.

Leadership is different from management, but that's for a separate post.

-Marc A. Ross

Marc A. Ross is the founder of Brigadoon and specializes in developing winning communications, content, connections, and commerce for entrepreneurs and thought leaders.