Saudi Sport Clubs Strategy & Football Privatization
By Mansour Baker, SHRM-CP Posted: 20 October 2017 | Revised: 08 November 2019
Saudi Sport Clubs Strategy
The Saudi General Sports Authority revealed a strategy to support sport clubs in July 2019 as part of the Saudi 2030 Vision. There are two key takeaway points from the strategy, governance and finance dependence.
The goals are:
Increasing the number of sports and physical activities
Achieving world class competitive sport
Enhancing the efficiency & quality of sport facilities & stadiums
Maintaining financial sustainability in the sector and increasing its contribution in improving the national economy
Developing the organizational approach and adopting a culture of excellence, accountability, and transparency
There are about 170 sport clubs licensed from the Saudi General Sport Authority participating in 22 different sports.
Most to all sport clubs lack proper governance and finance dependence
Sport clubs are mostly focused on football on a season-by-season and operate on an ad hoc basis. There is a lack of strategy, planning, road-map, and resources which explains why the Saudi General Sports Authority strategy emphasis is on governance and finance dependence.
One of the leading sports clubs without naming who they are during the football season 2018-2019 finalized their business processes (strategy, business planning, marketing, finance, etc.). Unfortunately, a change in management during August 2019 prevented its efforts to progress any further.
Decoding Strategy
Let’s look at one of the goals “maintaining financial sustainability in the sector and increasing its contribution in improving the national economy” and decode it into meaningful and practical objectives.
Several objectives can be identified from this goal:
Objectives map onto goals and once met, objectives contribute to the achievement of goals. A key performance indicator (KPI) is a way of measuring (performance) how well we as individuals or how well-entire companies are performing. A KPI should help us understand how well a company, business unit or individual is performing compared to their goals and objectives.
In summary, sport clubs drivers are their people, management experience & continuity, and commitment to start planning for the near future to set up the goals, objectives, and KPIs needed to align with the Saudi General Sports Authority strategy.
This is an excellent opportunity for sport clubs to lead by example, it takes commitment, experience, and if your successful you will become a benchmark for the other sport clubs. The sky's the limit!
Saudi Football Privatization
Introduction The government of Saudi Arabia in November 2016 approved plans to turn state-owned sports clubs into private companies. This is part of the economic reforms to reduce Saudi reliance on oil exports and ease financial burdens on the government.
The Saudi National Football Team is one of the most successful national teams in Asia. The team has won the Asian Championship three times and has qualified for the FIFA World Cup four times. The Saudi Football League has been ranked 27th in 2015 by the International Federation of Football.
Why Privatization? During the last decade business in football has grown to an industry. The United Nations believes that sport may account for almost 3 per cent of global economic activity. The European Union, the figure is thought to be around 1 per cent of Gross Domestic Product (GDP) and in the UK sport is thought to generate around 2.5 per cent of GDP. Estimates for the USA indicate that sport is worth almost $300 billion per annual to the US economy.
Football sport is one of the most popular with over 4 billion followers in the world. Media companies that broadcast sporting events has become a very important tool to attract viewers and advertisement.
The money a football club receives on match day was traditionally a source of revenue. Match day revenue is mostly obtained from gate tickets. In modern day football, a large part of income is acquired by revenue obtained from broadcast sources, commercial sources (sponsorship/merchandising), player transfer fees and non-football activities. Professional football had changed to a consumer-oriented service where the market plays a major role.
Football Business Model Marketing and branding are a very important theme in the development of professional football clubs. Sport clubs produce an emotional response from their supporters that is greater than in any other industry.
In 1993, Manchester United Football Club raised its operating profit and turnover significantly, largely due to merchandising and branding. The club brand was a more stable source of revenue than winning football matches on a consistent basis. Manchester United has a reputation for being Europe`s most innovative club and it is also the most profitable. One of the objectives of the club is “Treating fans as customers”. The finances of a club are an important factor for achieving football company goals. The model in figure 1 cumulative causation by Myrdal describes the series of indicators that are connected to achieve success. Figure 1: Cumulative Causation Model
Football Governance Football governance is needed at all levels, based on principles such as business ethics, transparency, accountability and integrity.
Every football company should be headed by an effective board, which is responsible for the long-term success of the football company. The board committees should have the appropriate skills, experience, independence and knowledge to enable them to perform their duties and responsibilities effectively.
Good governance is necessary if football companies are to be managed effectively. A representation of a governance structure of a sample football company is shown in Figure 2.
Figure 2: Sample Football Company Structure
Disclaimer: The views set out in this article do not constitute legal advice and readers are urged to seek specific advice in relation to any particular issues from this article.