Success in the transfer market

By Ian McHale and Kris Nikolov

Defining success in football

The concept of success in football might, at first, seem like a simple idea: winning is success, losing is failure. But not every team can win: every year there is only one ‘winner’ in each league, a couple of cup winners, and two European competition winners. That leaves an awful lot of failing clubs in the football universe. As such, to measure and understand the concept of success more properly, we should think a little more carefully about its definition. What is missing from this simple picture is the idea of “expectations”, and the question football fans, and club owners should be asking is: “given the spend of the club, where are we expected to finish in the league?”. Of course, it is an entirely other debate whether fans are happy with what a club spends. In this article, we talk about defining and understanding success in the transfer market.

 

Managing Expectations

A common question in a job interview for managers and sporting directors is: “under your stewardship, what do you think would represent a successful season for this club?”. The question compels the interviewee to give a response which inflates expectations: “Champions League football”, or “reaching the playoffs”. The interviewers may like these optimistic answers, and fans may unite behind a new manager at the start of a season talking of finishing in the top half, but in reality, the measured response should be “given the club’s budget is 13th in the league, finishing above 13th would represent over-performance”. I have no idea how this would go down in a job interview, so use it at your peril!

 

Defining success in recruitment

Success on the field is driven primarily by successful recruitment and development of players. And this is true no matter the industry: successful recruitment is at the heart of a successful company. Google’s recruitment processes are (in)famously rigorous, as they are in the City or on Wall Street where success and failure can literally be assigned a monetary value. Given its central role in determining the success or otherwise of a football club, sporting directors (and managers and owners) should monitor success in the transfer market carefully, and use the findings of such monitoring to adapt and improve processes.

Of course, the first step in monitoring success in the transfer market is to define it. Ask yourself: “what is success in the transfer market?”. Of course, there is no single right answer, and different people, and different clubs will have different definitions. However, what is surprising is how few in the football industry can answer the question: “what is your club’s success rate in the transfer market?”, or “what percentage of transfers are successful?”. Is it 5%, or 75%? I imagine the range of responses to the question would be wide, but answering this question will provide a baseline expectation to benchmark performance against. Having a baseline expectation, and monitoring the successes and failures of the individuals appointed to spend millions of euros, will help sporting directors better understand the strengths and weaknesses of a club’s transfer process. Below, we try to come up with a simple benchmark for the “percentage of transfers which go on to be successful”.

 

A simple benchmark of transfer success rate

To determine success of a transfer, we need to look at transfers from several years ago so that we can see what happened to the club after the transfer took place. Using data on the 317 transfers of players to Premier League clubs in 2014 and 2015, we take a look at what a baseline success rate might be. Looking back this far means we can see if the player was still at the club now which serves as a proxy for a contract being renewed.

A one-size-fits-all definition of transfer success probably does not exist. Different clubs have different objectives including player development, generating a profit, and maximising team success. Even for a club wishing to generate a profit, a ‘buy low, sell high’ strategy may not be applicable to each and every player: clubs may decide to allow an asset’s value to depreciate to zero, as Chelsea and Liverpool both did with Frank Lampard and Steven Gerrard respectively. Nevertheless, even a simple definition is worthwhile looking at.

As we are searching for a (very) basic benchmark of transfer success, we used the following simple criteria. A single transfer was deemed successful if:

  1. The player was sold for a profit (after adjusting for inflation in transfer values)
  2. The player played more than half of the total minutes for the team
  3. The player was rewarded with a second contract (this was proxied by assuming a second contract had been awarded if the player had stayed at the club for more than 4 years).

Using this definition, we arrive at a transfer success rate of 44%. Of course, this is a simple benchmark and clubs should create their own definitions of success.

Whatever the figure a club arrives at, sporting directors should be asking what their clubs success rate is. If it is lower than a baseline rate, seek explanations. Even if it is higher, you should try to understand whether it is higher because you have superior recruitment department or is it just random luck? Lastly, no matter what transfer success rate your club has, don’t rest, seek ways to improve it.

 

Key message

A key determinant of success on the pitch is success in the transfer market. Monitoring and measuring success in the transfer market is essential to understanding strengths and weaknesses in a club’s transfer policy. But defining and measuring transfer success are non-trivial tasks which need to be tailored to the ambitions of the individual club. Nevertheless, each club should know its own definition, and its current recruitment performance metrics, and be striving for ways to improve the success rate.

The individuals with top-level responsibility in football clubs, including sporting directors, are judged by the success, or lack of it, of their club’s transfers. It is vital to get it right, and measuring and monitoring success rate is just the first step.

 

Featured image sourced here.

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