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Should You Sack the Manager?

November 25, 2011

Prime Minister Harold Wilson used to say that there were few jobs more stressful and more precarious than that of a politician but that the post of football manager was certainly one of them. Well, opinions are divided about the benefits of sacking those who run the country, and it is difficult to devise a measure which all would agree on, but there is a great deal of published analysis available which allows us to judge the effect of a change of management in other fields.

A seminal study in this regard, published by Professors Lieberson and O’Connor, found little evidence of any link between changes of Chief Executive Officer (CEO) and subsequent movements in company performance indicators such as sales and profits.

Other studies have found, in contrast, that changes of top managers do tend to be followed by sharp improvements in performance, particularly in certain sectors, such as computer equipment manufacture. Some areas of activity do seem impervious to changes at the top, however, as witnessed by a study of the effect of changes of Methodist ministers on church attendance, membership and donations. There was no discernible effect.

There is also a well-established literature which considers the impact of management change on team performance in professional sport, and this can be sub-divided into three distinct theories. According to the “common sense” theory, when a team is under-performing the manager is replaced, and if a better manager takes over, performance should improve. In the “vicious circle” theory, poor performance tends to trigger managerial change, but the disruption caused tends to make things worse. The there is the “ritual scapegoating” theory, in which the appointment of a new manager makes no difference, on average, to team performance.

Rick Audas, Stephen Dobson and John Goddard disentangled the competing theories, for the case of English football, in an article published in the Journal of Economics and Business. A detailed examination of the results of their study reveals that on average it takes up to 16 matches for a team subject to a within-season change of manager to adapt to the usual changes of tactics and playing style which ensue, and even then the team’s win rate tends to revert only to where it was prior to the change. The transition period is, on average, simply a sink into which some of the points that would have been earned are emptied.

What these results appear to tell us, then, is that the rate at which managers are replaced in English football is not optimal. The turnover is simply too fast.

So in light of these findings, is it possible to offer a rational explanation for existing attitudes to management change? Well, there may just be such an explanation, and it lies in a thing called “variance”, which is the dispersion of results about the average.

The idea here is that a change of manager may not improve performance but it does shake things up a bit. This can only be good news, of course, for a team which is likely to go down anyway. The reason is that while a change of manager may on average mean even fewer points, the change does at least improve the small chance of pulling clear of the relegation zone. Seen like this, it can be likened to an all-or-nothing throw of the dice. That’s the rational side of the argument. The problem comes when those in charge of the team’s future grow just a little too fond of the dice.

Links:

http://www.jstor.org/pss/2392715

http://onlinelibrary.wiley.com/doi/10.1111/1468-0270.00039/abstract

http://thevideoanalyst.com/does-sacking-the-manager-improve-results

From → Forecasting

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