Thursday, October 28, 2010
The travails of Wayne Rooney are not like those of more ordinary workers. The world’s 20th highest-paid soccer player (on his old contract), according to the Futebol Finance website, is a celebrity who earns his living by stimulating fans and investors to extremes of irrational exuberance. But the disgruntled Manchester United striker presented his employer with a problem that is all too typical at star-dependent companies, even those with strong financial discipline. Mr Rooney has signed a new five-year contract with United, but fans are likely to spend much of that time arguing over whether he and his team made the right call. There are three questions: is it better for the enterprise to keep the (formerly) unhappy player; is it better for the player to try his hand (and feet) elsewhere; and, can a sum of money change either of those balances?
These questions, with variations, are often asked at investment banks, hedge funds and direct-selling companies. Stars often feel unloved and underpaid, but bosses have to think of the team. The tension is created by the conflict between bureaucracy and charisma (in the words of sociologist Max Weber). Bureaucracies are efficient but dull. Charisma is exciting and effective – it scores goals, both literal and metaphorical. But it can be disorganised and disruptive. Companies that are too bureaucratic tend to miss the trend that kills them. But investors and consumers should be wary of firms that rely on charismatic individuals. Such stars can get away with pay demands that push up prices and cut into profits. The best managers, such as United’s Sir Alex Ferguson, can make charisma and bureaucracy compatible. Such leaders are the biggest stars of all.
Reference : The Financial Times, Oct. 23rd 2010.