Professional Documents
Culture Documents
Tailoring Performance Management Systems: A Sports Merchandiser's Case
Tailoring Performance Management Systems: A Sports Merchandiser's Case
Tailoring Performance Management Systems: A Sports Merchandiser's Case
net/publication/242344764
CITATIONS READS
3 817
2 authors:
Some of the authors of this publication are also working on these related projects:
How is Management Control taught in the world's main MBAs View project
All content following this page was uploaded by Jordi Carenys on 29 May 2017.
Findings: We found that organization objectives were clearly known by all managers
at all levels, despite not articulated in explicit statements, but conveyed in less formal
ways. The main finding is to explain how a performance management system can be
structured to effectively respond to the sports setting in which the company operates:
constant meetings, shared values, information exchange and fast response to events
substituted planning and forecasting.
Author(s):
Jordi Carenys (Accounting and Control Department, EADA Business School, Aragó, Spain)
Xavier Sales (Accounting and Control Department, EADA Business School, Aragó, Spain)
Citation:
Jordi Carenys, Xavier Sales, (2012) "Tailoring performance management systems: a sports
merchandiser's case",Sport, Business and Management: An International Journal, Vol. 2 Issue:
2, pp.115-126,
doi: 10.1108/20426781211243980
DOI
http://dx.doi.org/10.1108/20426781211243980
1
Tailoring performance management systems: A sports
merchandiser’s case
1. Introduction
Football is the most popular sport in the world. It has successfully outmanoeuvred
many other team sports and has been accepted worldwide as the number one sport in
terms of media attention and audience reception (Horne and Manzenreiter, 2002) and it
attracts fans who have a close-to-religious attachment with the sport (Dolles and
Söderman, 2005).
Winning championships allows European football clubs to garner more fans, who in
turn generate more revenue for the clubs by attending games, buying team
merchandise, and attracting more sponsors. In time, clubs use this increased revenue to
attract the best players, so that they can win more championships. In addition,
attracting the best players to a club directly generates marketing revenue for the club.
Since the end of the 1990s, the so-called Bosman law and the growth in revenue
generated from television rights have both contributed to the rising cost of players
(Simmons, 1997).
The importance of the relationship between sports and retailing has grown
tremendously over the past few decades; sport teams as well as individual athletes have
become quasi-brands, driving the sales of sport apparel bearing their names through
retail outlets (Runyan, 2009). As this commercial view of sport has emerged, the
debate about the importance of financial measures of performance has grown
(Chadwick, 2009). Indeed, Ferreira and Otley (2009) have gone so far to say that
administration of a commercial business should look beyond the measurement of
financial performance to the management of performance.
2
merchandising rights, retail branded sport apparel, and licensed products of a major
European football club. This study aims to analyse how the special features of sport
businesses influence the performance management system of a sports merchandiser.
It has been pointed out, that sport management is different from mainstream
management (Chadwick, 2009). Indeed, the unique nature and context of sport from a
business perspective have been identified by many researchers (Hess and Stewart,
1998, Mangan and Nauright, 2000, Foster et al., 2006).
Foster et al. (2006) concluded that although sport and business share a common
concern for value creation, branding, funding new sources of revenue, product
innovation, and market expansion, sport is significantly more concerned with beating
rivals, winning trophies, and channelling the passions of both players (the employees)
and fans (the customers). This creates a specific environment that must consider that
the uncertainty that lies at the heart of sport –of the outcome of a match or tournament,
for instance– or the fact that managers must deal simultaneously with the potential
conflict between major commercial and managerial opportunities and the constraints of
history and heritage (Chadwick, 2009).
The rest of this article is structured as follows: The next section reviews literature on
retail and performance management (since no specific research on sport retailing and
performance management was found). The third section presents the framework used
to analyse the performance management system in the case company. The fourth
section describes the research methodology and data gathering techniques that were
used. In the fifth section, the data collected through research on the case company is
then presented and discussed, following the 5 question framework. The final section
provides conclusions, introduces implications arising from the study, and suggests
further research opportunities.
3
aspects of retailing (Frasquet et al., 2002). This has largely been found to be because,
in retail organizations, no measurable output is created until a transaction with a
customer occurs (Lusch and Jaworski, 1991); indeed, the efficiency of service
businesses such as retailing may be more difficult to evaluate than manufacturing
business efficiency in the sense that it is difficult to determine the appropriate amount
or type of resources required to produce service outputs (Sherman, 1984).
1. What are the key objectives that are central to the organization’s overall
future success, and how does it go about evaluating its achievement for each of
these objectives?
4
2. What strategies and plans has the organization adopted, and what are the
processes and activities that it has decided will be required for it to successfully
implement these? How does it assess and measure the performance of these
activities?
4. What rewards will managers (and other employees) gain by achieving these
performance targets (or, conversely, what penalties will they suffer by failing to
achieve them)?
5. What are the information flows (feedback and feed-forward loops) that are
necessary to enable the organization to learn from its experience) and to adapt
its current behaviour in the light of that experience?
4. Research methodology
A case study is used to gather intimate and sensitive contextualised information
concerning real management practices (Keating, 1995). Our study aims to analyse how
the special features of sport businesses influence the performance management system
of a sports merchandiser. According to Yin (2003), case studies enable researchers to
investigate a contemporary phenomenon within its real context when the limits
between the phenomenon and the context are not clear and when the main questions
that need to be answered are ‘how’ and ‘why’.
We collected data using both open and semi-structured questionnaires developed from
the existing literature, internal documents, and meeting observations (Annex 1 presents
a description of the fieldwork; Annex 2 lists the internal documents analysed). From
January to June 2009, we carried out various separate face-to-face interviews with
relevant managers at AU Merchandising. Interviews took place on the company’s
premises and were strictly limited to one and a half hours each.
5. Case study
AU Merchandising was incorporated in 2002 following an agreement between a
leading global sports licensing and merchandising company and Athletic United
(pseudonymous) football club with the aim of ‘(…) managing the merchandising rights
while respecting the historical values of the Club’ (General Manager). Athletic United
is recognized as one of the most important football clubs in the world, and it is located
in a major tourist-oriented European city (attracting 8 million visitors in 2009).
Through its history, it has long been associated with patriotic values and ‘fair play’,
and it has a strong media resonance. The Club’s large and global support base and their
5
international name recognition represent an enormous potential source for the
generation of club’s revenue.
‘Managerial decisions are mediated by the fact that any transgression of the
values of the Club has a notorious media impact, it goes in the news right away
making everyone nervous’ (Retail Manager).
‘Everyone knows the values of the Club and how careful we need to be’ (Sales
Floor Manager).
Main objectives need to be codified in more concrete terms through the identification
of Key Success Factors, recognizing that control measures need to be reported on a
routine basis. Key Success Factors are those activities, attributes, competencies, and
capabilities that are seen as critical pre-requisites for the success of an organization.
Although not formally articulated, three Key Success Factors were mentioned
repeatedly or recognised by all interviewed managers: (1) Store traffic, (2) Product
availability, and (3) Check-out speed:
‘(…) [we try to] avoid queues, encourage impulse buying, improve store lay-
out, and have a wide range of products on the shelves’ (Sales Floor Manager).
6
‘During the peak period, we speed up the check-out and restocking processes;
we make sure there are no empty shelves’ (Stadium Store Manager).
An organisation needs to have Key Performance Measures for every Key Success
Factor. Our research found only one Key Performance Measure, Number of visitors,
evaluating a Key Success Factor—Traffic. No measures were found for appraising the
other two Key Success Factors—Check-out speed and Product availability—or the
processes and activities necessary to achieve them.i
The company made use of five more measures: Sales (total sales and sales by product
class), Contribution Margin (total and by product class), Average Basket (average
amount per sale), Conversion Rate (sale transactions/total visitors), Units per
7
Transaction (average number of products per sale transaction). These measures
evaluate the achievement of sales objectives, but they do not evaluate the success
factors believed to be critical to achieve those sales. In summary, only one Key
Success Factor (Store traffic) was directly evaluated through a measure; the other five
Key Performance Measures were found to be sales related, and consequently, oriented
to measure the outcome, but not the processes, that were presumed to lead to those
sales (Check-out speed and Product availability).
Despite the lack of a formal strategic plan, every year the management prepared a sales
budget according to the line of products and the operating costs per shop. These figures
were used to produce Income Statements for each shop.
These initial targets proposed by AU Merchandising managers are then discussed with
the managers of its parent company, and the same procedure is used to set Key
Performance Measures objectives,
‘(…) [we use] a bottom-up process, taking four rounds of negotiations which
review ‘why a certain amount’ or ‘what impact this new player’ or ’that
initiative’ will have on sales’ (General Manager).
Once the sales budget figures are agreed, they become the main data used to plan the
purchases of shirts, other textiles, and sports apparel, which must be ordered six
months ahead of the beginning of the league competition to be available for sale during
the season.
8
Store employees (including managers) receive a quarterly incentive with two
components: the first based on the achievement of budgeted sales and expenses of the
store (2% of annual salary) and the second based on the quarterly qualitative coaching
assessment of the employee (another 2%). For all other managers, the bonus ranges
between 5% and 10% of the annual salary, one half based on the accomplishment of
the company/stores budgeted quarterly profit, and the other half on the quarterly
qualitative coaching assessment of their performance.
This reward system, while aligned with the performance evaluation, is ineffective for
many staff as the small amounts in euros that the percentages represent for the salaries
of store staff are not a sufficient incentive. Both the General Manager and the Retail
Manager expressed their dissatisfaction with the current system:
‘(…) they [store staff] don’t value the quarterly bonus; the system was designed
for managers (…). The incentive system is not working well in the stores’
(Retail Manager)
The second meeting is the weekly Retail Committee.iii Sales and measures per store
and product line are compared to the budget, and store managers are expected to
explain any deviations. Actions taken to reduce unfavourable variances are also
presented and discussed. Store managers share any relevant incidents and initiatives
(e.g. availability of products, stock outs, possible clearance sales, and absenteeism). In
order to ensure compliance with the established guidelines, the Retail Manager visits
the stores without previous notice once every three or four months.
Finally, every store manager holds a Daily Store Meeting, a fifteen-minute meeting
with the entire staff of the store. This meeting is used to inform the staff about relevant
events of the day and to reinforce policies regarding operation (e.g. theft prevention,
application of discount policies, or display of products).
Two main findings emerged from this case study; they can be summarized as follows.
Firstly, the main objective of the organization, together with the values, history, and
heritage of Athletic United, were clearly known by managers at all levels, and this was
accomplished despite the fact that main objectives were not articulated in explicit
statements or formalised in a document, and consequently, were conveyed in less
formal ways. The values of Athletic United were discussed and reinforced through
9
regular and frequent meetings among the managers of AU Merchandising and with the
rest of the staff. In a football environment—mediated by the need to engage with the
values and heritage of the club along with the expectations of its fans, and under
permanent scrutiny from the media—sharing values and beliefs provides managers
with an overarching perspective that informs all of their decisions.
In line with the special features of sports management that the previous literature has
identified, our research found that the decisions and behaviour of employees and
managers at AU Merchandising must never contradict the history, heritage, or fans’
expectations of Athletic United. This means that the transmission of these values is
essential to the success of the business—especially when any transgression is likely to
be amplified by the media. The data suggested that, these values, despite not being
formally stated, are successfully transmitted by informal and social means.
As with all other empirical research, this study is also subject to potential limitations.
The study used Otley’s framework, which focuses on formal performance management
systems; while this was not necessarily a limitation, the authors recognise that
performance management also involves various subtle ways of motivating and
coordinating organisational behaviour that are not included in the framework.
Furthermore, the conformity required by the parent company limits the freedom of top
management to change the design of the performance management system. Finally, the
method chosen limited the generalizability of the findings; additional in-depth case
studies would be required to assess whether the insights provided by this study have
10
normative implications and discard idiosyncratic findings. We believe the article has
implications for research and practitioners. The article shows that research in
performance management must always have a holistic approach, since all areas are
connected and interdependent. Practitioners can benefit from understanding how this
organization was successful in communicating objectives and values, and on how to
make use of frequent meetings to address uncertainty in a sports environment.
i
Actual measures for the key success factors instead of the results could be: ‘Average waiting time at the
cashier’ for Speed factor, or ‘Number of stockouts per day’ for Availability.
ii
The General Manager, the Financial Manager, the Retail Manager, the Stadium Shop Manager, the
Inventory Planner, the Licensed Products Manager, and the External Legal Advisor of the company.
iii
The Retail Manager and all Store Managers.
11
Annex 1. Description of Fieldwork
12
Annex 2. Internal Documents Analysed
Doc
no. Report
1 AU Merchandising agreement
4 Organizational Chart
13
References
Covaleski, M. A., Evans Iii, J. H., Luft, J. L. & Shields, M. D. (2003) Budgeting
Research: Three Theoretical Perspectives and Criteria for Selective Integration.
Journal of Management Accounting Research, 15, 3-49.
Chadwick, S. (2009) From outside lane to inside track: sport management research in
the twenty-first century. Management Decision, 47, 191-203.
Chenhall, R. H. (2003) Management control systems design within its organizational
context: findings from contingency-based research and directions for the future.
Accounting, Organizations & Society, 28, 127-168.
Derbaix, C., Decrop, A. & Cabossart, O. (2002) Colors and Scarves: The Symbolic
Consumption of Material Possessions by Soccer Fans. Advances in Consumer
Research, 29, 511-518.
Dolles, H. & Söderman, S. (2005) Globalization of Sports - The case of Professional
Football and its International Management Challenges. Deutches Intitut für
Japanstudien.
Dragun, D. (2004) The financial implications of retail strategy. In Reynolds, J. &
Cuthbertson, C. (Eds.) Retail Strategy The view from the bridge. Oxford,
Elsevier.
Dunne, P. & Rothenberg, M. J. (1993) Measuring long-term retail performance using
non-financial measures. Symposium on Patronage Behaviour and Retail
Strategic Planning: Cutting Edge III. Lake Placid, New York.
Eccles, R. (1991) The performance measurement manifesto. Harvard business review,
63, 131-137.
Ferreira, A. N. & Otley, D. (2009) The design and use of performance management
systems: An extended framework for analysis. Management Accounting
Research, 20, 263-282.
Foster, G., Greyser, S. A. & Walsh, B. (2006) The business of sports: text and cases on
strategy and management, Mason, OH, Thomson/South-Western.
Frasquet, M., Molla, A., Gil, I. & Vallet, T. (2002) Research trends in retailing--a
comparative approach: Spain-Europe-USA. International Journal of Retail &
Distribution Management, 30, 383.
Hess, R. M. & Stewart, B. (1998) More than a game: an unauthorised history of
Australian rules football, Carlton South, Vic., Melbourne University Press.
Horne, J. & Manzenreiter, W. (2002) The world cup and television football. In Horne,
J. & Manzenreiter, W. (Eds.) Japan, Korea and the 2002 World Cup. London,
Routledge.
Keating, P. J. (1995) A Framework for Classifying and Evaluating the Theoretical
Contributions of Case Research in Management Accounting. Journal of
Management Accounting Research, 7, 66-86.
Lebas, M. J. (1995) Performance measurement and performance management.
International Journal of Production Economics, 41, 23-35.
Lusch, R. F. & Jaworski, B. J. (1991) Management Controls, Role Stress, and Retail
Store Manager Performance. Journal of Retailing, 67, 397.
Malmi, T. & Brown, D. A. (2008) Management control systems as a package:
Opportunities, challenges and research directions. Management Accounting
Research, 19, 287-300.
Mangan, J. A. & Nauright, J. (2000) Sports in Australasian society: Past and present,
London, F cass.
14
Otley, D. (1997) Better performance management. Management Accounting: Magazine
for Chartered Management Accountants, 75, 44.
Otley, D. (1999) Performance management: a framework for management control
systems research. Management Accounting Research, 10, 363-382.
Runyan, R. C. (2009) Retail and sport: an introduction to the special issue.
International Journal of Retail & Distribution Management, 37, 306-308.
Sandino, T. (2007) Introducing the First Management Control Systems: Evidence from
the Retail Sector. Accounting Review, 82, 265-293.
Sherman, A. J. (2001) Growth through technology, merchandise and character
licensing. In Sherman, A. J. (Ed.) Fast track business growth: smart strategies
to grow without getting derailed. 1st ed. Washington, DC, Kiplinger Books.
Sherman, H. D. (1984) Improving the Productivity of Service Businesses. Sloan
Management Review, 25, 11-23.
Simmons, R. (1997) Implications of the Bosman ruling for football transfer markets.
Economic Affairs, 17, 13.
Sport+Markt (2011) European Football Merchandising Report 2010. Cologne,
Sport+Markt.
Thomas, R., Gable, M. & Dickinson, R. (1999) An application of the balanced
scorecard in retailing. International Review of Retail, Distribution & Consumer
Research, 9, 41-67.
Waweru, N. M., Hoque, Z. & Uliana, E. (2004) Management accounting change in
South Africa: Case studies from retail services. Accounting, Auditing &
Accountability Journal, 17, 675-704.
Yin, R. K. (2003) Case study research : design and methods, Thousand Oaks,
California, Sage Publications.
15