Reverse hiring arrangements

Liverpool's hiring of Richard Hughes, who had been Bournemouth's sporting director, is interesting, and reminds me of some aspects of "corporate game theory"

Once I overheard a conversation at a party between two people, who were each other’s colleagues. One of them (A) had been tasked with downsizing their team significantly, and the other (B) was asking how this task had been going.

A: Things are going fine, but there are these few people who are refusing to resign. Maybe I might have to fire them or something. Will be talking to HR next week.
B: Hmmmm. You seem to be doing all the right things. If they are refusing to resign, then tell me. I can help get them a job with <this competitor>.
A: But why will <this competitor> want to take these people? Are they hiring in large numbers?
B: That I don’t know. What I know is that there is this one senior guy there who has been asking me for a job for a while now. So he will do me a favour now by hiring all these people that I don’t want, and I’ll do him a favour later by hiring him.

I thought this was rather interesting and profound. What we nominally think of as dealing with companies is actually about dealing with people. And sometimes the people involved in the companies may not have the same incentives as the companies that they represent.

The extreme case of this, of course, is Jho Low, who raised billions for 1MDB (using Goldman Sachs as the banker), and then decamped with the whole lot of it (not passing on any of the money to the company!). Most good operators don’t operate so brazenly, but subtly take advantage of principal-agent misalignments.

I’m thinking of the story I started this post with because of Liverpool’s appointment of Richard Hughes as sporting director. For the last decade, he had been sporting director at Bournemouth, where, among other things, he had led to the recruitment of Dominic Solanke, Jordon Ibe and Brad Smith, all from Liverpool.

The person who had sold all these players to him had been Michael Edwards, who was then sporting director of Liverpool, and is now back in the fold as the “CEO of football” for the Fenway Sports Group (which owns Liverpool FC, Boston Red Sox, etc.).

In addition to these transfers, Edwards also negotiated large sums of money for fringe players in the Liverpool squad. Dominic Solanke and Jordan Ibe were sold to Bournemouth for a combined £34m, even though they never had a look in at the club, while Rhian Brewster was offloaded to Sheffield United for £23.5m, despite failing to make an appearance in the Premier League before departing the club.

And now Michael Edwards is going to be Richard Hughes’s boss. After having sold him a lot of players over the years.

Another club who Edwards sold heavily (and successfully) to was Crystal Palace, who bought Mamadou Sakho, Martin Kelly and Christian Benteke. Now I wonder what the sporting director who made those purchases for Crystal Palace is doing!

Also, in my most recent job, I realised that “corporate game theory” is a rather interesting topic, and something people don’t really talk much about. However, it can be rather useful in terms of how to run a company. Maybe someone should offer it as a “learning and development program”. Only issue might be in getting HRs to pay for it!