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Master Thesis: Human Capital Investment

Training and Recruitment in Dutch football

University of Maastricht Faculty of Economics and Business Administration Maastricht, 1st December 2007 Name: T.J.P. Kuijer ID number: I179825 1st Supervisor: A. van Iterson 2nd Supervisor. S. Dixon

Foreword
This thesis is an study on the practices of Human Resource Management in professional football. It gives an overview of the existing literature on recruitment and training and tries to apply it to Dutch football organizations. Although it was hard work and very time-consuming, I really enjoyed working on my thesis and it was definitely a special experience. I would like to thank Huub Narinx (Roda JC), Marcel Michiels (Roda JC), Serve Kuijer (Roda JC), and Frank Rutten (Eredivisie nv) for their help in finding information for my thesis. Furthermore I am grateful for the help of Ad van Iterson (University of Maastricht) in guiding me through the process of making my thesis.

Table of Contents:
CHAPTER 1: INTRODUCTION.................................................................................. 3

1.1 INTRODUCTION ................................................................................................... 3 1.2 PROBLEM STATEMENT ...................................................................................... 5 1.3 LITERATURE REVIEW ........................................................................................ 6 1.4 THESIS OUTLINE ................................................................................................. 7
CHAPTER 2: TRAINING ............................................................................................. 8

2.1 TRAINING ............................................................................................................. 8 2.2 TYPES OF TRAINING ........................................................................................... 9 2.3 COSTS AND REVENUES OF TRAINING ........................................................... 11 2.4 EFFECTIVENESS OF TRAINING ........................................................................ 14 2.5 EFFECTS OF TRAINING ON PRODUCTIVITY AND WAGES .......................... 15 2.6 ROLE OF INFORMATION AND MOBILITY ...................................................... 17 2.7 PRE-EMPLOYMENT AGREEMENTS.................................................................. 18
CHAPTER 3: RECRUITMENT ................................................................................. 20

3.1 SELECTION ......................................................................................................... 20 3.2 RECRUITMENT ................................................................................................... 21


CHAPTER 4: ADVANTAGES AND DISADVANTAGES ...................................... 25

4.1 ADVANTAGES AND DISADVANTAGES OF RECRUITMENT ......................... 25 4.2 ADVANTAGES AND DISADVANTAGES OF TRAINING ................................. 27
CHAPTER 5: TRAINING IN FOOTBALL .............................................................. 29

5.1 TRAINING IN DUTCH FOOTBALL ................................................................... 29 5.2 COSTS OF TRAINING ......................................................................................... 32 5.3 REVENUES OF TRAINING ................................................................................. 34
CHAPTER 6: RECRUITMENT IN FOOTBALL .................................................... 39

6.1 RECRUITMENT IN DUTCH FOOTBALL ........................................................... 40 6.2 ADVANTAGES AND DISADVANTAGES OF RECRUITMENT IN DUTCH FOOTBALL ................................................................................................................. 44 6.3 DSM ACADEMY OF FOOTBALL ..................................................................... 46
CHAPTER 7: CONCLUSION .................................................................................... 51

7.1 CONCLUSION ..................................................................................................... 51


8. REFERENCES.......................................................................................................... 55

Chapter 1: Introduction
1.1 Introduction
The summer of 2007 showed three remarkable transfers in the Dutch football market. 20 year old Ryan Babel, trained and developed at the youth academy of Amsterdam Football Club Ajax, was sold to Liverpool F.C. for circa 17 million. Wesley Sneijder, 23 years old and also a product from the well known Ajax academy, was transferred for circa 27 million to Real Madrid. Feyenoorder Roysten Drenthe joined Wesley Sneijder at Real Madrid for approximately 13 million at an age of only 20 years. These examples show how important human capital is in football. It is by far the most valuable and important resource in the soccer industry. Big European clubs are willing to pay millions of euros to attract the most promising talents and the best players. Although perhaps less so as in football, the performance of companies in other businesses also depends on the human capital in the company. The resource-based view indicates that key human resources can be sources of competitive advantage (Barney, 1991). The human capital of the firm and the complex, inimitable interrelationships between the firms human resources and other firm-resources are enormously valuable to the firm. According to the influential study of Appelbaum et al. (2000), the performance of individuals depends on their ability, motivation and opportunity. In other words, people perform well when they have the necessary knowledge and skills to do so, when they have to motivation to do it and when their work environment provides them the necessary opportunities. This AMO (Ability, Motivation, Opportunity) theory of performance has become very influential in Human Resource Management literature and shows that HR practices like recruitment and training should be designed in such a way that they enhance the ability, motivation and opportunity of the individual. Focusing your human resource practices on enhancing these three factors will lead to higher performance by your employees and consequently to improved company performance (Appelbaum et al, 2000). The previous discussion shows that training and recruitment are important practices in determining the strength of the human capital in your company. Firms that focus on

recruitment try to attract qualified workers from other companies or talented graduates from universities. A company that focuses on training tries to increase the skills and knowledge of their internal employees and hereby increase the performance of their company. Dutch football is an interesting example when looking at training and recruitment practices. Whereas some clubs mainly focus on developing and training talented youth players to become professional football players, others mainly recruit skilled players from other teams and try to sell these players for a higher price to remain financially competitive. This thesis will use two Dutch professional soccer organisations to illustrate the use of training and recruitment in the soccer industry: Roda J.C. and Ajax. Kerkrade based soccer team Roda J.C. is an example of an organisation that mainly focuses on recruitment. To stay competitive and survive financially, the club focuses on buying relatively cheap players and selling them later for a higher price to bigger clubs. Research done by the Dutch football bond, the KNVB, showed that Roda JC performed extremely well compared to its budget over the period 2003-2007. Figure 1 shows the results, where the red spots are the expected performances (based on the budgets) and the blue spots are the actual performances of the Eredivisie clubs. By using a successful recruitment strategy, Roda has been able to end up higher in the competition rankings than the budget would predict.
4,5 Q(4) 03-07 model Q(4) 4 Ajax 3,5 Feyenoord AZ PSV

Heerenveen 3 Utrecht

Twente Groningen Vitesse NAC

Roda NEC ADO Sparta RBC Heracles

WillemII

RKC

2,5

Graafschap

1,5

0,5

Figure 1: KNVB Research on expected performance (based on budget) and actual performance

A.F.C. Ajax is internationally known and recognized for training and developing young talents. Ajax invests heavily in the training of youngsters and is very successful in doing so. Many professionals in Dutch and international football have spent their youth development years at Ajax. The last two successful players from the Ajax school have already been mentioned in this introduction, Ryan Babel and Wesley Sneijder. They enjoyed their training at Ajax and were sold for approximately 18 and 27 million euro to Liverpool FC and Real Madrid. Although Roda J.C. has been quite successful in recruiting players in the past, the club is now starting to focus more on the training and development of young players. In October 2007, Roda J.C. will start the DSM Academy of Football, which will focus on the special training and guidance of young, talented players. Within ten years, this special program must yield 50% of all players playing at Roda JC.

The case of Dutch professional football illustrates an interesting point of human capital investment. Why do some organisations focus their resources on training internal people, while others focus on recruiting external people? Why are organisations

changing their focus from recruitment to training? What are the advantages and disadvantages of training for companies? In which cases do firms prefer to focus on recruitment instead of training? What are the risks of focusing on one instead of the other? Why would companies invest heavily in training if they lose their employees anyway when fully trained? In this thesis these and more questions will be examined.

1.2 Problem Statement


To answer these questions, it is important to look at the advantages and disadvantages of both recruitment and training in the soccer industry. This leads us to the following problem statement:

What are the advantages and disadvantages of the training and recruitment of players for Dutch football clubs?

1.3 Literature Review


Although some aspects of Human Resource Management and HR practices are discussed in literature (for example Boxall & Purcell, 2003), there are still some interesting aspects of training and recruitment missing. There is, for example, no general consensus on the rate of return that employers earn on the investment in training. There are two approaches in the literature that measure this return. The first approach uses data on a large sample of firms and compares the experiences of firms that invest in training with those which do not. In the second approach, typically labelled case study method, detailed data from one company are gathered in order to estimate the costs and returns from the companys training program. The advantage of the second approach is that it has the potential to accurately control for all other factors besides training (e.g., worker and firm characteristics) that may influence productivity. The disadvantage is that the results from a case study may not generalize to other companies. While the first approach avoids the generalization problem, it can suffer from a lack of data to accurately measure a rate of return on investment. A review of the human resource management literature for the time period 1987 through 1997 uncovered a total of only 16 company case studies in which the rate of return on training investments was measured. Many studies do not provide much guidance on the question of the employers returns of training because they typically lack data on training costs, they may not accurately model a firms unique production process, and they may not sufficiently account for the endogeneity of the training process. In order to address the problems created by studying a sample of heterogeneous firms, this thesis tries to measure the advantages and disadvantages, the costs and returns of training and recruitment, from data of one or two companies. This study includes the direct collection of data from the companys personnel files and face-toface interviews with managers to understand the role of training and recruitment at the firm.

Football is an interesting field to do research on Human Resource Management. The human capital within a company can be compared to the human capital within a football team. The players in this case are the employees within a firm. Human Resource

practices like training, recruitment, and compensation are very obvious in football. Recruitment happens when one club is interested in a player from another club and tries to attract this player. There is information known about transfer fees, contract offerings and budgets of clubs that determine the recruitment power of these organisations. Furthermore, training and the effects of training can be clearly shown in football. In this thesis training is seen as offering skill-enhancing practices to young players in a football club. A youth player is valuable to a club if he manages to become a professional player. Costs of training can be found by looking at the investments of clubs in their youth players. Revenues from investments in training are for example the transfer costs of selling the young player when fully trained and also future transfers of that player.

1.4 Thesis Outline


Different human resource practices are of great importance in the soccer industry. Some clubs focus on training, while others focus their human resource strategy on recruitment. There are also soccer organisations where a shift from one practice to another is observable. By using personal communications with important people involved, looking at financial data of the clubs and discussing the theoretical backgrounds of Human Resource Management, this thesis will investigate training and recruitment within the Dutch soccer industry by looking at the cases of Roda JC and Ajax. This thesis will start by discussing training and recruitment as human resource practices in chapter 2 and 3. This will be done by reviewing academic literature on both subjects. Chapter 4 will discuss the advantages and disadvantages of both practices. In chapter 5, training in Dutch Football will be analysed by looking at the successful school of Ajax. This thesis will continue in chapter 6 by discussing the practice of recruitment in Dutch football. Roda JC will be taken as an example for identifying important factors influencing the success of recruiters. This chapter will also look at the DSM academy of Football and the shift of focus from recruitment to training by Roda JC. The thesis will conclude by answering to the problem statement.

Chapter 2: Training
In the introduction of this thesis the importance of human capital to a company has been discussed. Resource management practices like recruitment, selection, training and development play an important role in determining the strengths and weaknesses of the human capital in a company. Boxall & Purcell (2003) identified recruitment and training as being crucial in managing the ability of employees. Many academic books and articles are devoted to the subject of human capital, human resource management and more specifically to employee recruitment and training. The first two chapters of the thesis will discuss this literature in order to understand the fundamentals of training and recruitment. This basis will be used later on to discuss the training and recruitment practices of professional football clubs in the Netherlands. It will also be used to determine the advantages and disadvantages of both training and recruitment. This part of the thesis will start by discussing training. What types of training exist and why is training within a company important? The effects of - and requirements for successful training will be discussed. Also the costs and revenues of training and the division of these costs and revenues between employer and employee will be explained. Later on the subject of recruitment and the advantages and disadvantages of both these investments in human capital will be examined.

2.1 Training
Many organisations recognise that a large part of their true value depends on intangible assets a skilled workforce, patents and know-how, software, strong customer relationships, brands, unique organisational designs and processes, and the like (Nisar, 2006). In fact, these soft assets give modern corporations their hard competitive edge (Ulrich and Smallwood, 2004). As Ulrich and Smallwood (2004) argue, the organisational capabilities the collective skills, abilities, and expertise of an organisation are the outcome of investments in staffing, training, compensation,

communication, and other human resource areas. They represent the ways that people and resources are brought together to accomplish work. In many companies, the most significant long-term investment in intangible assets is in training (Nisar, 2006). Training is extremely important in determining the strengths and weaknesses of the human capital in a company. How important training is for companies is shown in the article of Lange (2003). According to Lange, American companies spend more money on education than all the public school systems in the United States. This part of the thesis will discuss what kinds of training exist, what the different costs and revenues of training are, and how these investments in human capital influence the productivity and earnings of employees.

2.2 Types of Training


Training can be defined as the activity leading to skilled behaviour. It refers to the acquisition of knowledge, skills, and competencies as a result of the teaching of vocational or practical skills and knowledge that relates to specific useful skills (wikipedia). There are many examples of training in firms, like classes taught by third parties, apprenticeship programs, tuition reimbursement programs, tradition onpremises classroom instruction, audiocassettes, satellite/broadcast television,

teleconferencing and video-conferencing, and computer-delivered education, just to name a few (Galvin, 2003).

Training is the field concerned with workplace learning to improve performance. Such training can be generally categorized as on-the-job or off-the-job. On-the-job describes training that is given in a normal working situation, using the actual tools, equipment, documents or materials that the employees will use when fully trained. Offthe-job training takes place away from the normal work situation, which means that the employee is not regarded as productive worker when training is taking place. An advantage of off-the-job training is that it allows people to get away from work and totally concentrate on the training being given. This type of training is most effective for training concepts and ideas.

There are two different types of on-the-job training: general training and specific training. As opposed to general training, where the training increases the marginal productivity of trainees by the same amount in the firms providing the training as in other firms, specific training increases productivity more in firms providing it. Completely specific training can be defined as training that has no effect on the productivity of trainees that would be useful in other firms. Much on-the-job training is neither completely specific nor completely general but increases productivity more in the firms providing it and falls within the definition of specific training (Becker, 1980). The fact that general training offers skills that are useful at firms other than the one providing the training has several implications. Becker (1980) for example argues that a firm which pays for the training of workers in skills of potential use to other firms will lose these workers. Other firms bear none of the costs of general training and therefore can attract a general trained worker by outbidding the firm which trained him. The fact that general training increases productivity of the worker at the present firm and also at other, competing firms leads to increased employee job mobility, a reluctance of employers to invest in worker training and development and a search by organisations to limit substantial training investments and costs. The effects of general and specific training on productivity, wages, job mobility, costs and revenues will be discussed later in this chapter.

A special kind of training is schooling. A school can be defined as an institution specialising in the production of training, as distinct from a firm that offers training in conjunction with the production of goods. Some schools specialise in one skill, while others, like universities, offer a large and diverse set. Schools and firms are often substitute sources of particular skills. The development of certain skills requires both specialisation and experience and can be gained partly from firms and partly from schools. Schooling has the same kind of implications as general on-the-job training. Schools could be treated as a special kind of firm and students as a special kind of trainee. An analysis of on-the-job training therefore leads to general results that apply to other kinds of investments in human capital as well (Becker, 1980).

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2.3 Costs and Revenues of Training


Workers demand learning opportunities, but they are not always willing or able to pay for them. The provision of these learning options is not costless, for otherwise there would be an unlimited demand for training. Productive resources must be diverted away from current production and towards teaching and learning (Rosen, 1972). Included in these costs are for example the value placed on the time and effort of trainees, the teaching provided by others, and the equipment and materials used. In addition to these costs of delivering the training program, there are costs associated with analysing and evaluating the programs effectiveness. Economists have recognised that investments in new skills, or human capital, should be evaluated in the same way as investments in physical capital. Employers and workers will spend resources, and forgo potential output, to acquire new skills if they expect the future discounted gains from these enhanced skills will exceed their costs (Ashenfelter & LaLonde, 1996). Before beginning a training program, managers must therefore weigh the costs of the current problem against the costs of training to eliminate it. It could be that the training cure is more costly than the performance ailment. In such cases, training may be appropriate but not cost-effective (Gomez-Mejia, Balkin & Cardy, 2001). Determining whether training is a good investment therefore requires measuring the trainings potential revenues and costs. This part of the thesis will discuss the costs and revenues of training, and will show how these costs and revenues are divided between employer and employee.

The costs of providing training are part of the fixed employment costs of a firm. These fixed employment costs can be separated into hiring and training costs. Hiring costs are defined as those costs that have no effect on a workers productivity and include outlays for recruitment and for processing pay-roll records. These costs are closely related to the number of new workers and only indirectly related to the flow of labour services. Training expenses, on the other hand, are investments in the human agent, specifically designed to improve a workers productivity (Oi, 1961). Employer investment in such training can take many forms: proprietary training curricula built by the employer specifically for its employees, funding commitments for employees to attend classes taught by third parties, and apprenticeship programs are a

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few examples of the more common methods (Cappelli, 1999). More specific training activities may include tuition reimbursement programs, tradition on-premises classroom instruction, audiocassettes, satellite/broadcast television, teleconferencing and videoconferencing, and computer-delivered education, just to name a few (Galvin, 2003).

The question about who has to pay the costs of training and who receives the revenues has been extensively dealt with in literature. According to Beckers human capital theory (1962), in a competitive labour market the analysis of general investment is straightforward. If training were completely general, all returns would accrue to the worker and none to the firm. Upon completion of general training, the worker would find that his marginal productivity to several firms has been increased. He could now demand a higher wage from a competing firm or his own employer. In either case, the net value of the training to the firm would be reduced to zero. Workers capture the full return on their general training, which implies that firms should not pay for general training (Balmaceda, 2005). Rational behaviour therefore implies that workers pay for general training and that the bulk of a firms investment in training must be devoted to specific training. Workers can bear the costs of training either explicitly or indirectly in the form of a lower wage. The work by Loewenstein and Spletzer (1998), that uses the 1988-1991 National Longitudinal Surveys of Youth documents, finds that employers pay for nearly all spells of formal company training and a large portion of what appears to be general training. The employer almost always pays the explicit costs of training that the worker receives on the employers premises. Much more surprisingly, the employer often pays for the explicit costs of what appears to be general training. There is no indication that a workers compensation is reduced while training is occurring. These observations are at odds with the standard human capital theory model, which predicts that workers should pay for all the costs and realize all the returns to general training investments (Loewenstein & Spletzer, 1998). An explanation for this is given by Black and Loewenstein (1998). They explain that contract enforcement considerations can lead to employers paying for purely general training. The key to this explanation as to why employers share the returns and costs of general training is that a wage guarantee can be helpful in preventing employers from extracting excessive rents from workers in the future. When this wage guarantee is binding, a small increase in a workers productivity caused by an increase in his stock 12

of human capital will not cause the employer to pay a higher wage. This helps to explain the fact that the effect of an hour of training on productivity growth is about five times as big as the effect on wage growth (Barron et al., 1989). Sharing the returns of general training makes the worker less willing to pay for the training alone but provides the employer with an incentive to share the costs (Loewenstein & Spletzer, 1998).

Research done by Groot (1999) analyses the distribution of the costs and revenues of enterprise-related training between employers and employees in 479 Dutch companies. The research found that a sizeable fraction of the workers contributes to the costs of training but receives none of the benefits, while another fraction of the trained workers shares in the benefits of training without having contributed to it. In 60% of the firms the training is fully taken in working time. However, more than 75% of the workers contributed leisure time to the training. On average, workers invested 90 hours of their own time. Only 5% of the workers contributed in the monetary costs of training, while 10% contributed in other ways than money or leisure time. It appears that workers contribute to the costs of training by sacrificing leisure time, while firms take up more of the pecuniary costs. This distribution of costs probably reflects the differences in wealth and the differences in the value of time between firms and employees, with both parties contributing to the costs in a way that is relatively least expensive to them. Table 1 contains a cross-tabulation of whether the worker has shared in the costs and revenues of training. The worker shares in the costs of training if (s)he has contributed to the direct monetary cost, had invested leisure time in the training or has contributed in any other way. The worker shares in the revenues if the wage growth of training is greater than zero.

Table 1. Cross-tabulation of whether the worker contributed to the costs and shared in the benefits of training in percentages Shared in the benefits No Yes Total Contributed to the costs No 40.1% 7.5% 47.6% Yes 35.3% 17.1% 52.4% Total 75.4% 24.6% 100% Source: Groot, W. (1999). Productivity effects of enterprise-related training.

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Almost 40% of the employees has neither shared in the costs nor in the benefits, while 17% shared both in the costs and in the benefits. 7,5% of the employees did not share in the costs, but did receive a wage increase because of the training. The human capital theory predicts that if the worker contributes to the costs, (s)he will share in the benefits. And the worker shares in the benefits, only if (s)he has contributed to the costs. Nearly 43% of the observations are at odds with the human capital prediction that costs and benefits will be shared. This can be explained by the fact that after the specific investment in training is made, one of the parties unilaterally changes the terms of the contract and forces the other part to accept poorer conditions (Groot, 1999).

2.4 Effectiveness of Training


Beyond the type of training and its content, a number of contextual issues can determine a training programs effectiveness. For example, an organisational culture that supports change, learning and improvement can be a more important determinant of a training programs effectiveness than any aspect of the program itself. Furthermore, if participants managers do not endorse the content and purpose of the training, it will not influence work processes. Finally, training will not work unless it is related to organisational goals. A well designed training program flows from the companys strategic goals. These goals must be realistic and clearly stated to be successful. The goals will guide the programs content and determine the criteria by which its effectiveness will be judged. Unless the goals are clearly articulated before training programs are set up, the organisation is likely to find itself training employees for the wrong reasons and towards the wrong end (Gomez-Mejia, Balkin & Cardy, 2001). Effective training can raise performance, improve morale, and increase an organisations potential. The effect of training on amongst others productivity and wage will be discussed in the following part.

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2.5 Effects of Training on Productivity and Wages


In his study, Gary S. Becker (1980) helps to explain different phenomena that are related to training. This paragraph will discuss these phenomena and explain the influence of training on productivity and wages. Among the phenomena are: (1) earnings typically increase with age at a decreasing rate. Both these rates tend to be positively related to the level of skill. (2) Unemployment rates tend to be inversely related to the level of skill. (3) Younger persons change jobs more frequently and receive more schooling and on-the-job training than older persons. (4) The distribution of earnings is positively skewed, especially among professional and other skilled workers. (5) Abler persons receive more education and other kinds of training than others. (6) The division of labour is limited by the extend of the market. (7) The typical investor in human capital is more impetuous and thus more likely to err than is the typical investor in tangible capital. In this article, Becker argues that general training, where the marginal product of employees also increases for many other firms than their own, will lead to increasing future wage rates. Since in a competitive labour market the wage rates paid by any firm are determined by marginal productivities in other firms, future wage rates as well as marginal products would increase in firms providing general training. These firms could capture some of the returns from training only if their marginal product rose by more than their wages. Perfectly general training would be equally useful in many firms and marginal products would rise by the same extend in all of them. Consequently, wage rates would rise by exactly the same amount as the marginal product and the firms providing such training could not capture any of the returns. Why, then, would rational firms in competitive labour markets provide general training if it does not bring any return? As explained earlier on in this thesis, Beckers human capital theory (1962) says that firms would provide general training only if they did not have to pay any of the costs. Persons receiving general training would be willing to pay these costs since training raises their future wages. Hence it is the trainee, not the firm, who would bear the costs of general training and profit from the return. Employees would pay for general training by receiving wages below their current productivity. Earnings of persons receiving on-the-job training would be net of investment costs.

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Since training costs would be deducted from earnings during the training period, the economic value of a trainee would at first increase rather than decrease with age, and only later begin to decrease. Training has an important effect on the relation between earnings and age. Suppose that untrained persons receive the same earnings regardless of age, as shown by the horizontal line UU in Figure 2. Trained persons would receive lower earnings during the training period because training is paid for at that time, and higher earnings later because the return is collected then. The combined effect of paying for and collecting the returns from training in this way would make the age-earnings curve for trained persons, shown by TT in Figure 2, steeper than that of untrained persons, the difference being greater the greater the cost of, and return from, the investment (Becker, 1980).

figure 2. Effects of training on earnings and age (Source: Becker, 1980)

Income-maximizing firms in competitive labour markets would not pay the costs of general training and would pay trained persons the market wage. If, however, training costs were paid, many persons would seek training, few would quit during the training period and labour costs would be relatively high. Firms that did not pay trained persons the market wage would have difficulty satisfying their skill requirements and would also tend to be less profitable than other firms. Firms that paid for the training and less than the market wage for trained persons would have the worst of both worlds, for they would attract too many trainees and too few trained persons.

Football is a conspicuous example of an organisation that pays at least part of the training costs and does not pay market wages to skilled personnel. It has had, in consequence, relatively easy access to students and heavy losses of graduates.

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Indeed, its graduates make up the predominant part of the supply in several bigger and richer, mostly foreign, football clubs.

The discussion until now focused on the effects of general training on productivity and wages. However, if training was completely specific, the wage that an employee could get elsewhere would be independent from the amount of training he had received. Firms would collect the returns from training in the form of larger profits resulting from higher productivity. However, there is a risk that employees quit after the training. In this case, firms are not able to gain the returns of higher productivity achieved by the training. The companies therefore do not bare the total costs of specific training. In effect, firms would offer employees some of the returns from training by offering higher wages than they could get elsewhere and let the trainees pay a part of the training costs. The shares of each depend partly on the relations between quit rates and wages, and layoff rates and profits. This result of specific training on wages and productivity is demonstrated by the research of Groot (1999). His work uses individual productivity ratings of supervisors of 479 Dutch companies to analyse the productivity and wage effects of enterpriserelated training. The average productivity growth of training is 16%, while the average productivity difference between trained and non-trained workers is 8%. The average wage growth is less than a quarter of the average productivity growth.

2.6 Role of Information and Mobility


Following the seminal work of Becker (1964), firms will be unwilling to finance general training. Becker argues that a firm which pays for the training of workers in skills of potential use to other firms will lose these workers. Since other firms bear none of the costs of general training, they can attract a worker with such training by outbidding the firm which trained them. Recognizing this absence of property rights over an investment in general training, firms will refuse to provide it. Hence, if general training is to take place, the trainee will have to pay for it. If potential trainees are unwilling or unable to pay, general training will not take place. A shortage of general training is likely to emerge. The possibility of shared worker-employer investments in

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general training is also briefly discussed in this thesis. The role of information asymmetry in this will be discussed in this paragraph.

In his research, Becker assumes that a recruited worker can immediately and painlessly start working, and yield full value, in a job commensurate with his training. This approach therefore implies negligible transaction costs. In particular, Beckers theory seems to suggest that a potential recruiting firm has full information regarding training carried out by other firms. No costs related to the absence of information are admitted. The paper of Katz & Ziderman (1990) indicates that potential recruiters do not possess much information on the extend and type of workers on-the-job training. Workers taken as being trained might turn out to have had no, or very little, general training. Also, a worker recruited for a given job may have had the wrong type of general training. A non-training firm may, though at significant costs, obtain information regarding a workers value. With time and careful observation this information is unfold. There are however some components of general training that other firms will find extremely difficult to observe. All this imposes substantial information-based costs on firms that recruit rather than train. These costs include opportunity costs, actual expenses and increased exposure to risk. As a result, a recruiting firm will place a lower value on a recruited worker which has had general training, than the firm that trained him. The wages paid to such a worker will reflect this lower value. The information asymmetry between a training and a recruiting firm therefore reduces the net benefits that a worker with general training can obtain by moving to another firm. A training firm would therefore find it feasible to finance part, or all, of a workers general training (Katz & Ziderman, 1990).

2.7 Pre-employment agreements


The loose connection of employees to todays employers along with the high costs of training encourages firms to raid other employers for skilled workers, free riding off of any training efforts of the original organisation (Herzenberg et al, 1998). Businesses

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that provide employee training should be concerned with receiving a return on this substantial investment. Firms may lose a significant amount of money when employees trained at their expenses resign soon after the training program is completed. This has led organisations to examine various legal approaches, like pre-employment agreements, to protect their expenditures. Pre-employment agreements require that job applicants sign contracts promising to engage in or refrain from certain behaviours in order to be considered for employment (Soper et al, 2004). These are permissible contracts that require employees to continue in service for a period of time or reimburse the organisation an agreed-upon sum if they leave before agreed-upon time (Von Bergen & Mawer, 2007). A factor contributing to the increased usage of pre-employment agreements is that more organisations realize that their most valuable resources are trained and skilled employees and the information they possess. As a means of protecting their investment in human resources and the information they possess, more firms are turning to employment agreements for selfprotection (Von Bergen & Mawer, 2007). Pre-employment agreements and employment contracts typically address one or more of the following topics: (1) non-disclosure of business information and trade secrets, (2) non-competition by the employee, (3) mandatory dispute resolution (4) nonsolicitation and (5) training expense reimbursement (Soper et al, 2004). Training expense reimbursement agreements provide for recoupment, in whole or in part, of training expenses from an employee, if the employee does not remain with the organisation for a designated time period after completion of the training. Two key elements of any training reimbursement contract involve the determination of the amount to be reimbursed to the firm and the duration of the obligation to remain with the employer (Von Bergen & Mawer, 2007).

Firms have much to gain from the institution of employment agreements, which offer protection for their investments in training employees. However, these agreements have far-reaching consequences to an organisation with respect to attracting and recruiting new workers. For example, skilled and talented employees/applicants may be concerned about such agreements and as a result may move to firms with less restrictive employment considerations (Von Bergen & Mawer, 2007).

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Chapter 3: Recruitment
In the introduction of this thesis the importance of training and recruitment has been discussed. During conditions of intensifying national and international competition, the only way in which a company can outstrip its rivals is by attracting and retaining a better team of employees, supervisors, managers and directors (Harper, 1987). People constitute the main asset of an organisation, and recruitment and training determine the strengths and weaknesses of this main asset within the company.

3.1 Selection
At the basis of successful recruitment lays successful selection of candidates. Selection mistakes are often difficult to correct quickly and may involve considerable expenses, like the high costs of premature turnover. It takes a while for almost all organisations to get newcomers to achieve their optimal value. There are always costs involved when turnover occurs. For example, in an insurance company the replacement costs have been estimated to be $24,000 for a field examiner and $185,100 for a sales manager (Flamholtz 1972). These replacement cost figures include such items as acquiring a new person, training, and moving the present holder to another organisation (Wanous, 1980). So the fact that turnover is expensive, is certainly a good reason to look more carefully at the selection and recruitment strategy of a company. This conclusion is further reinforced by also recognising that the highest turnover rates are found among the newly hired employees.

There are two aspects that are important when selecting the right person for the job. First of all the company has to determine whether the candidate possesses the intellectual ability, knowledge, qualifications and experience which would make it possible for that candidate to achieve the required level of performance in the role. Furthermore, the candidate must have the motivation and temperament to perform in the job competently.

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3.2 Recruitment
Besides successful selection, recruitment also plays a crucial role in managing the abilities of your employees. Recruitment is best understood as the way in which a firm tries to source or attract the people among whom it will ultimately make selections. So recruitment strategies include attempts to sell the organisation as an attractive place to work and attempts to reach better pools of candidates. It is a process of matching the organisation with the individual, and can be seen as the model shown in figure 3. Figure 3 shows two ways in which individuals and organisations get matched to each other. The top half of the diagram shows that the abilities of an individual are matched to the organisations job requirements. This matching process is the traditional view of organisational selection. Clearly, this represents the viewpoint of the organisation rather than that of the individual.

Figure 3. Matching the individual and the organisation (Source: Wanous, 1980)

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In contrast, the lower part of the figure shows a second type of matching process. This process matches the needs of human beings and the capacity of the organisation to reinforce those needs. The attractiveness of an organisation to a person consists of the belief about each need and the importance of each need that the company can reinforce (Wanous, 1980). Needs could for example be to learn a lot, to earn a lot, good job prospects, desirable geography, etc. The impact of a mismatch is on job satisfaction and commitment rather than on job performance. This implies that the ability and motivation - the determinants of employee performance of the employee should be carefully matched with the job requirements and the ability of the organisation to motivate the worker. If motivation is totally absent, performance is zero even if abilities are high. If abilities are zero, performance is zero even if motivation is high. When abilities and job requirements are mismatched, turnover with its additional costs - can result (Wanous, 1980). Recruitment has its greatest impact on the matching between individual needs and organisational climates, while selection has its greatest effect on the matching between the abilities and organisational job requirements. The effectiveness of recruitment can therefore be best assessed by examining employee job satisfaction, organisational commitment and voluntary turnover. On the other hand, the effectiveness of selection methods is better judged by examining the job performance and involuntary turnover of new employees (Wanous, 1980). Failure to recruit workers with appropriate competence will doom the firm to failure or, at the very least, to lower growth. Firms need to attract and nurture people with the kind of abilities that will make the firm productive in its chosen sector. The need to recruit successfully is particularly important where higher levels of discretion or specialised blends of skills are required in the work. As job complexity increases, so does the range of human performance (Hunter, Schmidt and Judiesch 1990). Some people simply lack the blend of capabilities and personality traits needed and should not be recruited at all.

Windolf (1986) identifies the task of profiling the ideal kind of candidate and the choice of recruitment channels as key dimensions of recruitment strategy. Boxall and Purcell (2003) add a third dimension: the quantity and quality of inducements offered to job candidates. Some firms are powerful recruiters because they are sufficiently wellresourced to be able to pay wage premia, which increases their ability to pick and 22

choose in the labour market. The capacity to offer better pay and greater internal development makes it easier for firms to build high-performance work systems and out-compete under-capitalised firms. Figure 4 shows that firms vary in their labour market power and in the extend to which management is creative and proactive in forming and reviewing recruitment strategies. This figure indicates that some firms (status-quo recruiters) have resource advantages but do not use them thoughtfully. On the other hand, innovative firms attempt to recruit talented people who can help them to develop a stream of new products and processes.

Another proactive type, the autonomous firm, plans very carefully all types of

recruitment and aims to cream off the best candidates,

whatever the condition of the labour market. as Most firms

classified

muddling

through or flexible are small to medium-sized and cannot offer above-average conditions. They have serious difficulties in recruiting successfully. Flexible firms however are more thoughtful: they make more astute use of the little power they have.

A great number of recruitment sources is available to organisations. The appropriateness of these sources depends on the type of job to be filled and the state of the economy. When the unemployment rate is high, companies find it easy to attract qualified applicants. When it is low, organisations need to be more resourceful in locating qualified applicants. Small firms often find it difficult to recruit qualified applicants. Finding qualified and motivated employees is amongst the top 3 business worries of small business managers. Because of the ongoing economic expansion and the shrinking labour force, a large labour shortage exists. Because of this labour shortage, companies are looking for creative ways of recruiting new workers. Some non-traditional labour pools are hereby used, like prisoners, welfare recipients, senior citizens, and workers from foreign countries. 23

Innovative recruiting techniques have helped companies to attract talented new workers. These techniques include signing bonuses, referral bonuses, and benefits that enhance an employees quality of life. Companies expect that the extra costs of these techniques are offset by the ability to attract the best employees.

24

Chapter 4: Advantages and Disadvantages


Hiring external candidates through recruitment and hiring internal candidates through training both have their advantages and drawbacks.

4.1 Advantages and Disadvantages of Recruitment


Gomez-Mejia, Balkin & Cardy (2001) found several advantages of recruitment. Recruiting external persons gives the firm the advantage of fresh perspectives and different approaches. Sometimes it also makes economic sense to search for external specialists rather than bear the expenses of training current workers. On the downside, current employees may see externally recruited workers as rookies and therefore discount their ideas and perspectives. Another disadvantage is that external workers need time to become familiar with the firms policies and procedures. Bringing in someone from the outside can also cause difficulties, if current workers resent the recruit for filling a job they feel should have gone to a qualified internal worker. In addition, the outsiders style may clash with the work units culture (Gomez-Mejia, Balkin & Cardy, 2001). Furthermore, the recruiting process itself can result in problems. Matching the individual with the organisation can lead to several conflicts. Porter, Lawler, and Hackman (1975) identified four types of conflict that occur during the recruitment process.

Figure 5. Four types of matching conflict (Source: Porter, Lawler, and Hackman, 1975)

The first type of conflict occurs because individuals need to have complete information about an organisation, and the information needs to be accurate. Without such information, the individual cannot make a very wise choice, i.e., one that matches

25

needs with organisational climates. The conflict occurs because typical actions by organisations to attract, or recruit, newcomers do not give full information (usually only positive information) and do not give accurate information (biased by recruiters). The second conflict occurs when individuals feel that its important to generate as many job offers as possible, in an attempt to obtain one that will be highly desirable. Because of this desire, individuals are not prone to disclose their own shortcomings in terms of abilities, and quite often describe their desired job in terms of what they think the organisation has to offer. The third conflict indicates that recruitment efforts may hinder effective selection of new personnel. Typical recruitment practices that emphasize on the information that is limited to the positive aspects of the organisation may result in a mismatch between human needs and organisational climate. The fourth kind of conflict occurs when individuals mispresent themselves to appear more attractive to an organisation. They run the risk of being offered jobs ill suited to their own skills and needs (Wanous, 1980).

Another disadvantage of recruitment could be the limited information individuals have about their future organisation. Based on the earlier discussion of the organisational entry matching model and the conflict occurring during entry, it should be quite clear at this point that individuals need complete and valid information to make effective organisational choices for themselves (Wanous, 1980). A comprehensive study conducted at the American Telephone and Telegraph (AT&T) company by Bray, Campbell, and Grant (1974) showed that recruits expected to find jobs almost exactly like the ones they desired. This was interpreted as completely unrealistic because it is a good example of how ones desires can influence ones expectations. Clearly, the new recruits did not find the reality of organisational life to be quite as they expected. Ultimately these recruits left their new jobs. Recruiters play an important role in the forming of initial expectations of new recruits. Several research studies have confirmed that satisfaction with ones organisational choice is decreasing when that choice was made on the basis of inflated expectations. Sources that provide job candidates with the most realistic picture of a job situation (referral by a present employee) will lead to higher job survival rates than those sources from which candidates get less information (employment agencies, newspaper adds), which will eventually yield employees with much lower job survival rates. 26

Sources of effective new organisation members are of crucial importance to organisations. This can give a company a competitive edge over its rivals. The personnel costs from turnover is hereby an important reason (Wanous, 1980).

4.2 Advantages and Disadvantages of Training


Training also has its advantages and disadvantages. On the positive side, it is usually less costly than external recruitment. It provides a clear signal to the current workforce that the organisation offers opportunities for advancement. And internal recruits are already familiar with the organisations policies and customs (Gomez-Mejia, Balkin & Cardy, 2001).

The most important disadvantage of training is the risk of losing the trained employee to a competitor. At one time employers would invest considerable money in employees futures by funding their training and education with confidence that they were also investing in their companys futures. However, unlike in the past when there was little risk or fear of losing the trained individual to another employer, firms now face significant turnover and turnover costs because of a lower level of employee commitment and loyalty and because of a higher level of employee mobility (Von Bergen & Mawer, 2007). In their article, Von Bergen & Mawer (2007) argue that once the bonds of long-term employment are broken, employer-sponsored training in skills becomes a public good or, even worse, a potential liability if the employee leaves the company with trade secrets and employer-specific skills. Knowledge of specific businesses or a specialty which is only known by an employee of that business makes that worker very attractive to competitors. Hiring a person with business and technical knowledge saves a new employer the time and expenses of training, while providing competitors reluctant to invest in training a free-ride because they can recruit well-trained employees without having to assume the costs of training (Von Bergen, Mawer, 2007). Thus, employer-provided training offers skills that are useful at firms other than the one providing the training and portable across employers. This leads to increased employee job mobility, a reluctance of employers to invest in worker training and

27

development, and a search by organisations to limit substantial training investments and costs. Another drawback of training internal persons is that it reduces the likelihood of introducing innovation and new perspectives. Furthermore, workers being promoted to higher-level jobs may be undercut in their authority because they are so familiar with their subordinates (Von Bergen, Mawer, 2007).

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Chapter 5: Training in Football


Golden future for the Oranje!. This sentence was stated on the FIFA website, right after the European Champions Cup final for players under 21 in 2007. For the second time in a row, the youngsters from the Netherlands won the European Championship. The website states that there is a consistency with which the Dutch have produced new crops of talented players over the decades. Indeed, in international football the Netherlands are known and recognized for their attractive style of play and for their talented youngsters. The ability of Dutch football clubs to develop young talented players into high quality professionals is also shown in other ways. A lot of Dutch players act in the best football leagues of the world. Ruud van Nistelrooij became champion and topscorer of the Spanish league. Clarence Seedorf won the highest price in club football with AC Milan, the European Champions League. Another interesting fact showing the performance of the Netherlands in international football is the sixth place in the FIFA world rankings, just behind international super powers Brazil, Argentina, Italy, France and Germany. Out of all the players from the 20th century, two Dutch players, Johan Cruijff and Marco van Basten, are ranked in the top six of best players of the 20th century. It is interesting to see how a small country like the Netherlands, with a population barely exceeding 16 million, grew to become such an important player in international football. The role of the excellent training capabilities of Dutch football clubs helps to explain this. Therefore this part of the thesis will now look at training in Dutch football.

5.1 Training in Dutch Football


The theoretical part in the beginning of this thesis discussed the different types and effects of training. Training was defined as the activity leading to skilled behaviour. It refers to the acquisition of knowledge, skills, and competencies as a result of the teaching of vocational or practical skills and knowledge that relates to specific useful skills. This part of the thesis tries to show an overview of how training in football

29

works, what type of training is given, and what the effects of training are in this particular sport.

Training is the acquisition of knowledge, skills, and competencies as a result of teaching. In football, and sports in general, it is not difficult to imagine what this involves. Training is the acquisition of football-related skills, mainly through activities with your colleague players by, and under the supervision of, your trainer. Football clubs in the Netherlands have a senior - and a youth division. The youth division of a club consists of players up to the age of eighteen years old.

The kind of training that is most interesting to research is the training given to youth players. Here, the effects of training on costs, revenues, productivity and wages can be easily discovered. Young players that develop and make it to be a professional football player can generate a revenue to the club. However, youngsters that are not able to become a professional football player, are costly for their club. For these players, the club is not able to generate revenues to pay the costs of their training. Also, the effect of the training of young players on wages is interesting to have a look at. When is a young player offered his first contract? How much does he earn on that moment? Are the costs of training subtracted from his salary in early years? How does the salary of a successfully trained youngster develop? For young players, these developments are clear to observe. This thesis looks at investments in human capital to achieve a capable workforce. In football, a capable workforce consists of a first team with capable players. This is achieved through recruitment of players from other clubs, or training young players in the youth division. Therefore, in this thesis training will be considered as training young players in the youth division of a club in order to increase their football-related skills and capabilities.

The theoretical part of this thesis discussed the different types of training. Training can be generally categorized as on-the-job or off-the-job. On-the-job describes training that is given in a normal working situation, using the actual tools, equipment, documents or materials that they will use when fully trained. Off-the-job training takes place away from normal work situation which means that the employee is not regarded as productive worker when training is taking place. 30

Training in football is a typical example of on-the-job training. Youth players get trained in normal situations that occur in football, using the actual tools, equipment, and materials that they will also use when fully trained. The kind of training now will not differ a lot from the working situation they are in fully trained. Literate showed that there are two different types of on-the-job training: general training and specific training. As opposed to general training, where the training increases the marginal productivity of trainees by the same amount in the firms providing the training as in other firms, specific training increases productivity more in firms providing it. Completely specific training can be defined as training that has no effect on the productivity of trainees that would be useful in other firms. Much on-thejob training is neither completely specific not completely general but increases productivity more in the firms providing it and falls within the definition of specific training (Becker, 1980). The training that players get in football is an example of general training. When fully trained, players can use the skills and capabilities at the club that trained them, but also at other clubs. Techniques to control the ball, shooting capabilities, mental resistance to pressure, and physical strength are all aspects of football training that can be used in multiple teams. It increases the productivity of the player by the same amount in the club providing the training as in other clubs.

Because football training is a type of general training, it is very interesting to look at the implications of this kind of training. Literature on this subject discusses the effects of general training on productivity and wages, but also the costs, revenues, and the division of these costs and revenues between employer and employee. How does football training increase productivity and influence the wages of trainees? Who pays for training in football and who gets the revenues? Is it worthwhile to invest in the training of players? These are questions that this part of the thesis will try to answer. Most importantly, these questions help to answer the question why some organisations in Dutch football focus on training, while others focus more on recruiting.

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5.2 Costs of training


The provision of training is not costless. Productive resources must be diverted away from current production towards teaching and learning (Rosen, 1972). Included in these costs are for example the value placed on the time and effort of trainees, the teaching provided by others, and the equipment and materials used. In addition to these costs of delivering the training program, there are costs associated with analysing and evaluating the programs effectiveness. Earlier on, this thesis already discussed the fact that economists have recognised that investments in new skills, or human capital, should be evaluated in the same way as investments in physical capital. Employers and workers would only spend resources, and forgo potential output, to acquire new skills if they expect the future discounted gains from these enhanced skills to exceed their costs (Ashenfelter & LaLonde, 1996). Therefore managers must weight the costs of the current problem against the costs of training to eliminate it, before beginning a training program. Determining whether training is a good investment therefore requires measuring the trainings potential revenues and costs. This part of the thesis will discuss the costs of training in football organisations. To illustrate, it will have a look at the internationally known and excellent youth academy of Ajax.

AFC Ajax is the most successful football club from the Netherlands. They became Dutch champion 29 times and won sixteen national cups. They played the Champions League final six times and ended up winning four of them. Ajax also won the UEFA Cup and the European cup once. Furthermore, the World Cup went to Amsterdam twice, making Ajax together with Barcelona and Juventus the only team that managed to win all three European Cups at least once. The success, rich history, and worldfamous players from the unique youth academy make Ajax to be recognised and admired in the Netherlands and the rest of the world.

The excellent youth academy lays at the basis of the success of Ajax. World famous players like Johan Cruijff, Marco van Basten, Frank Rijkaard, Dennis Bergkamp and Patrick Kluivert are products of the excellent youth academy of Ajax. Following the strategy of Ajax, its youth academy plays the most important role in determining the

32

goals and values. When selecting the players for the first team, the goal is to have at least fifty percent of players from their own youth academy. These players are familiar with the Dutch language, the Dutch football culture and more specifically the culture of Ajax. By having at least fifty percent of own players, the culture of Ajax stays recognizable for the supporters and sponsors.

The presence of youngsters in the first team is essential for Ajax. Therefore the main purpose of the youth academy is to develop and guide young talented players towards becoming fully capable professionals for the first team. To make the academy as effective as possible, Ajax invests heavily in guiding and training talented players. First of all, skilful trainers with lots of training and football experience are attracted to guide the players. These trainers must be perfectly fit to be able to develop the techniques, tactics, and physical and mental resistance to pressure. Furthermore, heavy investments are made in the creation of a perfect training environment. The youth academy is located at a specially designed sport accommodation, thoughtfully called De Toekomst, or The Future. This is an accommodation with all the necessary comfort and facilities needed to create a perfect environment for the youngsters to learn. For the season 2005-2006, the costs of the youth academy were an astonishing 2.8 million.

According to Ajax, these investments in a high quality accommodation and skilful personnel are necessary, since the quality of the academy determines the number of players that will make it towards becoming a professional player. When the inflow of young talented players to the first team hampers, for what reasons at all, the first team must be strengthened by recruiting players from outside. So the quality of the youth academy determines the number of players that are needed to be recruited from outside and the costs associated with that. Figure 6 shows the investments of Ajax in recruiting new players. Although important players like Sneijder and Babel were transferred to another club, Ajax did not have to invest a lot in new players. Ajax believes that their excellent youth academy will be able to fill the gaps of the departing players. So, a high quality academy increases the number of own players in the first team and consequently decreases the costs of recruiting players. Since the recruitment of skilful players involves high costs, it is worthwhile to invest in a high quality accommodation for your youth. The quality of your academy is therefore not only important for the sportive results, but also for the financial results. These financial results are affected by 33

these costs of recruitment, but also by the revenues from selling skilful players trained by your own academy. These revenues from training will be discussed in the following part of the thesis.
Players Bought 2007/2008
millions Totaal Luque Rommedahl Leonardo Bakircioglu Suarez

0
Suarez Players Bought 8

2
1,5

4
Bakircioglu

6
Leonardo 0,75

8
Rommedahl 1

10
Luque 2

12
Totaal 13,25

14

Figure 6: Players bought in season 2007/2008 by Ajax.

5.3 Revenues of training


To evaluate the appropriateness of investments in training, we must look at both the costs and the revenues of training. Besides the costs of training, the previous part of the thesis also discussed some positive points of training. Having a training academy of exceptional quality can, for example, lead to international attention and appreciation. The example of Ajax illustrates that they succeeded to create a positive and successful image. They are recognised as being one of the best training organisations of the world. In 2007, Ajax has been awarded for having the best youth academy of the Netherlands. This was the third time in a row. Having a positive brand image has its positive financial consequences through sponsoring and marketing. More importantly, because of this positive image, more talented players are willing to play for your club, leading to an even higher quality level of your training academy. Another positive point of training is the ability to influence and control how the players develop. With your own youth academy, the players become familiar with the style of football, the culture, and the norms and values of your club. By having your

34

own trained players, the culture of your club Ajax stays recognizable for the supporters and sponsors. Probably the most important reason of focusing on training is a financial one. The quality of the academy determines the number of players that will make it towards becoming a professional player. When the inflow of young talented players to the first team hampers, for what reasons at all, the first team must be strengthened by recruiting players from outside. Therefore, a high quality academy increases the number of own players in the first team and consequently decreases the costs of recruiting players. In the season 2007/2008, fourteen out of the twenty-nine players of the first team of Ajax are talents from their own youth academy. Furthermore, being able to transform young talented players into skilful professionals in your academy, can result in revenues by selling these players. Not only the transfer of a trained player to another club, but also subsequent transfers of that player will result in financial rewards for the club that trained him.
Players Sold 2007/2008 Totaal Perez de Mul* Babel* Sneijder* 0 10 Sneijder* Players Sold 27 20 Babel* 17 30 de Mul* 4 40 Perez 2 50 Totaal 50 60 millions

Figure 7: Players sold in season 2007/2008 by Ajax

Figure 7 shows the possible revenues of player transfers for a training organisation. Ryan Babel joined AFC Ajax in 1998 at an age of 11. After going through different youth teams, he signed his first contract in January 2004. One month later, at an age of 17 years, he made his debut in the first team of Ajax. In the summer of 2007, after playing four years for Ajax, he is sold for an astonishing 17 million to Liverpool. Wesley Sneijder also enjoyed the youth academy of AFC Ajax for multiple years before becoming a professional player in the first team. On January 2nd 2003 he made

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his debut, and in the summer of 2007, after 121 games in five seasons he is transferred to Real Madrid for an amount of 27 million.

The transfer fee associated with a transfer is not the only possible revenue for the training organisation. In 2004, the FIFA created a new rule to reward the organisations that focus their effort and money on training young players. This solidarity contribution happens when a player is transferred from one club to another. Five percent of the fee associated with a transfer has to be divided between the football organisations of which the transferred player enjoyed his training between the age of 12 and 22 years. In the case of Babel, this means that when he is transferred by Liverpool to another football organisation, Ajax gets a big amount of the solidarity contribution. Babel has been a player of Ajax from the age of eleven till the age of twenty. This means he enjoyed eight out of the ten training years at Ajax and Ajax therefore gets 80% of the solidarity contribution. If Babel is for example transferred for 30 million euros from Liverpool to another football club, the solidarity contribution will be 1.5 million. Ajax will then get 1.2 million, a nice bonus on the original transfer fee. Since many professional players enjoyed their youth years at the academy of Ajax, these multiple solidarity contributions can generate a nice amount of money as a revenue for training.

There is an important factor that influences the possible revenues of training discussed above. When focusing on training, it is extremely important for an organisation to make use of contracts. The problem with training in soccer is that it is general. By training at one organisation, these players also increase their productivity for other organisations. The soccer industry is characterized by short-term employment and high player turnover. This paper already discussed that the loose connection of employees to todays employers along with the high costs of training encourages firms to raid other employers for skilled workers, free riding off of any training efforts of the original organisation (Herzenberg et al, 1998). Football clubs that provide training should be concerned with receiving a return on this substantial investment. They may lose a significant amount of money when talents trained by the business leave soon after the training program is completed. Pre-employment agreements can solve this problem and protect the investments in training.

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The theoretical part on pre-employment agreements explained that job applicants are required to sign contracts promising to engage in or refrain from certain behaviours in order to be considered for employment (Soper et al, 2004). Pre-employment agreements are permissible contracts that require employees to continue in service for a period of time or reimburse the organisation an agreed-upon sum if they leave before agreed-upon time (Von Bergen & Mawer, 2007). This is exactly what happens in the football industry. The most talented players of the youth academy are offered contracts, which bind them to the club for a certain period of time. If another club wishes to buy this player, they have to pay a certain amount of money, including an reimbursement for the training costs. Contracts in Football became even more important when legislation on this subject changed in 1995. The so-called Bosman ruling allowed professional football players in the European Union to move freely to another club at the end of their term of contract with their present team. Before this European Court of Justice decision, clubs could ask a transfer fee, even if the contract of the player had ended. The court ruled that this system was a restriction on the free movement of workers, and therefore forbidden. The Bosman ruling had great implications for the Football industry. Contracts became even more important because clubs could not afford to let players go for free. Football organisations needed returns on the investments they made in players that received many years of training at the club or players that were bought for a large amount of money. Therefore careful planning on contract offerings became a necessity for the survival of professional football organisations. The former explanation indicates that football organisations have much to gain from the institution of employment agreements which offer protection for their investments in training employees. However, these agreements can have far-reaching consequences to a club with respect to attracting and recruiting new talented players for their youth academy. For example, talented players may be concerned about such agreements and as a result may move to academies with less restrictive employment considerations. The use of contract for youth players also helps to explain why the clubs pay for the general training of young talents. Of course, they want the best talents from their region to join the club and will therefore not ask these talented players to pay for their training. However, if these organisations that provide training are not able to generate enough revenue from this human capital investment, they would not invest in this. As we

37

discussed earlier, contracts and solidarity contributions make it worthwhile to invest in training and therefore football organisation are willing to pay the costs.

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Chapter 6: Recruitment in Football


The soccer industry is a multi million dollar business. Clubs are willing to pay millions of euros to attract the best players. The summer of 2007 showed some interesting transfers, illustrated in figure 8.

Fernando Torres

Atl. Madrid to Liverpool

39.0m

Arjen Robben

Chelsea to Real Madrid

36.0m

Pepe

FC Porto to Real Madrid

30.0m

Wesley Sneijder

Ajax to Real Madrid

27.0m

Anderson

FC Porto to Man Utd

25.0m

Figure 8. Top 5 International Transfers. Source: Soccerlens.com

Two of the top five international transfers are Dutchmen. The introduction of this thesis already mentioned the transfer of 20-year old Roysten Drenthe from Feyenoord to Real Madrid. The Spanish club had to pay Feyenoord circa 13 million for a talent that only played 29 matches in the highest division of the Netherlands. This transfer is an illustration of how important human capital is in football. The theoretical part of this thesis explained that during conditions of intensifying competition, the only way in

39

which a company can outstrip its rivals is by attracting and retaining a better team of employees, supervisors, managers and directors (Harper, 1987). The football industry is extremely competitive. World class football players are scarce, since there is a high demand for them and only a limited supply. Having the resources and creative capabilities to recruit successfully can result in very positive financial and competitive results. Failure to recruit skilled players with appropriate competence will doom the club to failure, especially in the highly competitive football industry. Now we already understand the importance of training in Dutch football, it is now time to explain the importance of recruitment. This will be done by using the example of Roda JC as an illustration.

6.1 Recruitment in Dutch Football


Roda JC is a medium-sized football organisation from Kerkrade in the south of the Netherlands. With only 11.5 million, it has the 12th budget of the 18 football clubs in the highest division of the national soccer league. Looking at the performance of the last couple of years, it is very interesting to see that Roda JC performs extremely well. Since 1980, they always ended up at a higher place than their budget would expect. Looking at budgetary terms, you could even say that Roda JC performs best out of all the Dutch soccer teams. At the basis of this special performance lays successful recruitment. Although they do not have a large budget to spent, Roda has been able to creatively recruit skilful players.
Budget and Ranking Eredivisieclubs 2006/2007

Budget in millions of

70 60 50 40 30 20 10 0

65 55 40,2 21 23 15,1 11,5 12,5 15 11,9 11 13,5 8,8 11,8 7,9 8,1 7,3 3,6 Feyenoord NAC NEC Sparta RKC Groningen Utrecht Heracles Vitesse Excelsior Willem II ADO

Ajax

AZ

Twente

PSV

Figure 9: Ranking Eredivisieclubs 2006/2007 (PSV 1st - ADO 18th) and Budgets. 40

Heerenveen

Roda JC

Figure 9 shows the performance of the Eredivisie football clubs and their budgets in the season 2006/2007. Roda managed to end up on a 6th place in the final rankings with a budget of only 11.5 million. The following table shows that if you compare the budgets of each club with their final rankings, Roda JC does best with a difference of 6 places.
Table 2: Relation Budget and Ranking Eredivisieclubs (2006/2007)
Ranking 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 Club PSV Ajax AZ FC Twente Heerenveen Roda JC Feyenoord FC Groningen FC Utrecht NEC NAC Vitesse Sparta Heracles Willem II Excelsior RKC Waalwijk ADO 05/06 50,0 60,0 15,5 14,0 21,0 11,5 43,0 10,4 14,5 11,5 11,8 12,5 7,8 6,5 10,5 2,0 7,9 8,1 06/07 55,0 65,0 21,0 15,1 23,0 11,5 40,2 12,5 15,0 11,9 11,0 13,5 8,8 7,3 11,8 3,6 7,9 8,1 Budget Ranking () 2 1 5 6 4 12 3 9 7 10 13 8 14 17 11 18 16 15 Budget Ranking Ranking +1 -1 +2 +2 -1 +6 -4 +1 -2 0 +2 -4 +1 +3 -4 +2 -1 -3 07/08 65,0 65,0 28,0 16,5 25,0 11,7 38,6 14,8 15,0 12,5 12,5 14,2 9,9 8,0 12,0 3,8 5,0 10,8

Source : www.log-isch.nl An important aspect of recruitment is the selection of the right person for the job. There are two aspects that are important in this process. First of all the company has to determine whether the candidate possesses the intellectual ability, knowledge, qualifications and experience which would make it possible for that candidate to achieve the required level of performance in the role. Furthermore, the candidate must have the motivation and temperament to perform in the job competently.

According to general manager Huub Narinx, Roda J.C. uses different criteria when selecting a player. First of all, a player must have the individual competency associated

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with a specific position. A defender must have the associated competencies of being able to keep your opposition from scoring and being able to contribute to a decent attack. An attacker must have the competency of being able to score and being able to switch from attacking to defending. Players having the right competencies are linked to positions at Roda that have to be filled within the coming year because of transfers, injuries or lack of quality. Having the right competencies for a specific position just is a basis on which Roda selects it players and is probably used by every club looking for new players. More importantly for a club as Roda is that a player must fit within the team and the culture of the club. New players must fit within the team that is already present to create cohesion, but more importantly they must fit within the culture of Roda J.C. Roda has the identity of being a peoples club. Surrounded by a region with a history of hard working miners, supporters of Roda JC want their players to be hard workingpersons with a fighters mentality. To create a family feeling associated with the culture of the club, there is no place for elitist persons, and players are therefore selected on this club identity. Finally, Roda mainly focuses on young players that have high grow potential. In Belgium Roda is known as the club de vitrine. It is a perfect place to grow and get the attention of bigger clubs. Many players, like Arouna Kone, Bob Peeters, Yannis Anastasiou, Tom Soetaers and Joost Valgaeren came from Belgium to Roda and were later on transferred to bigger Dutch or international teams. An important criteria when selecting a new player is therefore that he is young and has the potential to grow.

Recruitment strategies include attempts to sell the organisation as an attractive place to work and attempts to reach better pools of candidates. It is a process of matching the organisation with the individual, and can be seen as the model shown in figure 3 from the work of Wanous (1980). This thesis already showed that recruitment involves the task of profiling the ideal kind of candidate, the choice of recruitment channels (Windolf, 1986) and the quantity and quality of inducements offered to job candidates (Boxall & Purcell, 2003). Some football organisations are better capable in selling their organisation to players than others. Some are powerful recruiters because they are sufficiently well-resourced to be able to pay wage premia, which increases their ability to pick and choose in the labour market. The capacity to offer better pay and greater development makes it easier for firms to build a skilled players force and out-compete under-capitalised clubs. This 42

explains how well-resourced and powerful clubs in the Netherlands, like Ajax and PSV, are able to attract most of the players they desire. How are less-resourced clubs, like Roda, then able to recruit attractive players?

Figure 4 showed that firms vary in their labour market power and in the extend to which management is creative and proactive in forming and reviewing recruitment strategies. Some firms (status-quo recruiters) have resource advantages but do not use them thoughtfully, while innovative firms attempt to recruit talented people. Another proactive type, the autonomous firm, plans vary carefully all types of recruitment and aims to cream off the best candidates whatever the condition of the labour market. Most firms classified as muddling through or flexible are small to medium-sized and cannot offer above-average conditions. They have serious difficulties in recruiting successfully. Flexible firms are however more thoughtful: they make more astute use of what little power they have. According to president Serve Kuijer, Roda tries to be creative and flexible in their recruitment strategy. Roda only has a small budget compared to other professional football organisations in the Netherlands and therefore tries to be creative in attracting new players. We already saw that Roda focused on young players that have to potential to grow and become better and more valuable players. These young players still have to prove themselves and are cheaper that older, more well known and experiences players. Furthermore, Roda mainly looks at players of which the contract ends at the end of this or at the end of the following season. Transfer fees of these players are lower than players having a contract that lasts for multiple years. Finally, Roda focuses on foreign, mainly Belgium players. Clubs from the Netherlands pay relatively high wages compared to Belgium organisations, and the Dutch players are therefore quite expensive for Roda. Besides the fact that Belgium players are cheaper, Roda also has the reputation in Belgium as club de vitrine and a place with a culture perfectly suitable for Belgium players. Scouting at Roda JC happens by four persons, under the guidance of the head of scouting. When a suitable player is selected by one of the scouts of Roda JC as having the right competencies for a certain position, the recruitment process will continue to the second stage. The player will be followed by the other scouts as well. Positive reports from the other scouts on the specific player will lead to the following phase of the recruitment process where the coach/manager himself will evaluate the performance of 43

the player. The reports of the different scouts and the coach/manager are discussed in a technical consultation. During this consultation the competencies of the player are discussed as well as the financial possibilities and the tactics of attracting the player. Using these special and creative recruitment tactics, Roda JC tries to attract talented and skilful players with the potential of becoming even better and more valuable. Using successful recruitment strategies enables Roda to be competitive and perform above budgetary norms.

6.2 Advantages and Disadvantages of Recruitment in Dutch Football


Being a successful recruiter can have many advantages. Looking at the transfers of Roda in the last years, we see that they managed to creatively recruit skilled professionals and sell these for an attractive price to other clubs. Arouna Kone has been the most profitable player for Roda in history. Bought for only 500,000 from Lierske SK in 2003, he was sold for approximately 9.5 million to PSV Eindhoven in 2006. Another example is Bob Peeters, bought for 900,000 from Lierske SK in 1997 and sold for 6 million to Vitesse in 2000. Other profitable transfers for Roda were Tom Soetears to Ajax in 2004, Joost Valgaeren to Celtic in 2001 and Tiijani Babangida to Ajax in 1996. These transfers all show the quality of Roda to identify talented players, to recruit these players effectively and later on sell them for an attractive price in order to stay financially competitive. Figure 10 shows Rodas most profitable transfers.
Bought
Laszlo Bodnar Johan de Kock Ruud Hesp Marco van Hoogdalem Tijjani Babangida Joost Valgaeren Bob Peeters Arouna Kone 0
Ar ouna Kone Sold Bought 9.000.000 1.000.000

Sold

2.000.000
Bob Peet er s 5.500.000 450.000 Joost

4.000.000
Tijjani Babangida 3.200.000 90.000 Valgaer en 5.500.000 140.000

6.000.000
Marco van Hoogdalem 1.800.000 350.000 Ruud Hesp 1.800.000 150.000

8.000.000
Johan de Kock 1.800.000 110.000

10.000.000
Laszlo Bodnar 440.000 0

Figure 10. Top 8 Most profitable transfers Roda J.C.

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Besides the financial revenues of transfer fees from successful recruitment, another important advantage of recruitment is the fact that you do not have to bare the costs of training. Clubs focussing on training invest heavily in their youth academy and have the risk that players leave after being fully trained. Recruiting clubs save the costs of training and can attract trained players by offering higher wages. Furthermore, focussing on recruitment makes the organisation flexible to its environment. It can help to react quickly to sudden changes. When a player suddenly leaves the club or gets seriously injured, a good recruitment system can help you to address these problems by attracting a new skilled player. Another advantage of successful recruitment has to do with reputation. One advantage of training was the positive image associated with it. Having a positive brand image has its positive financial consequences through sponsoring and marketing. This could also be the case for recruitment. When a club has the positive image of being a successful recruiter and an interesting and attractive place to work, it can attract the best players. One important factor in this is the possibility to develop. Roda, for example, is known as a perfect step towards bigger organisations. Players are willing to play for Roda because they know Roda has a good reputation and they can develop there and later on go to a bigger club.

The biggest disadvantage of focussing on recruitment is the risk of selection mistakes. These mistakes are often difficult to correct quickly and may involve considerable expense, like the high costs of premature turnover. In the football industry, recruitment of players is associated with high investments. When a player turns out to lack the desired skills and qualities after recruitment, considerable costs are already made. Not only a possible transfer fee is paid, also a long-term contract for a predetermined period of time has to be paid. When this player does eventually not have the capability to be a first team player, it is a waste of money and can have very negative consequences for the club. A positive point of training was the ability to influence and control how the players develop. With your own youth academy, the players become familiar with the style of football, the culture, and the norms and values of your club. When focussing on recruitment this becomes a lot more difficult. Players that come from other clubs often have a different mentality and different norms and values. The risk could be that

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supporters and players do not accept these players or do not want to associate recognize themselves anymore with the club. Another problem of recruitment is that players and clubs often do not have complete and accurate information about each other. A player does not totally know what to expect when joining a new club. Without accurate information, the individual cannot make a very wise choice, i.e., one that matches his personal needs with organisational climate. This conflict occurs because typical actions by organisations to attract, or recruit, newcomers do not give full information (usually only positive information). The other way around, clubs often to not have the complete information about a player. Individuals try to be attractive to an organisation and therefore not disclose their own shortcomings in terms of abilities. In football, individuals however have to show their capabilities before being recruited. The information the club has about the player is therefore pretty accurate. The only problem that can occur is when the player temporarily performs above his own abilities. It could be that a player performs extremely well for a short period of time and the recruiting organisation gets wrong information about his true capabilities. Often a club does not have the time needed to get all the accurate information about the player and his capabilities. The soccer industry is highly competitive and waiting too long can result in other teams attracting the player.

6.3 DSM Academy of Football


Roda JC is changing its focus from recruiting external players towards training talented players. The reason for the change of focus has to do with the advantages and disadvantages of both human capital investments. This part of the thesis will try to explain why organisations focus on training or recruitment using the example of the DSM Academy of Football.

The DSM academy of football will start in October 2007 with the professional football clubs from the Dutch province Limburg. Roda JC, VVV, Fortuna Sittard, and MVV will join their forces to create a special program that tries to increase the number of youth players from Limburg in professional soccer. Even though Dutch football is internationally recognised and of world class, there are only a handful of players

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representing Limburg in the different national teams of the Netherlands. Looking at the current players, only one Limburger, Mark van Bommel, has the quality level to represent Limburg in the national team. Because of the availability of professional guidance and talents, most professional football players come from the Randstad. The DSM youth academy tries to change the current situation by offering specialized guidance in the development of young talents from Limburg. The most promising talents from the four youth divisions of the clubs will come together forty times a year to be intensively trained. The academy will offer a special program with the use of specialist from different fields. The training will be done by famous trainers like Huub Stevens and Bert van Marwijk. These trainers have a close relationship with the region and worked with top class players and world class teams. Furthermore, professional football players like Mark van Bommel and Boudewijn Zenden will visit the academy and help the young talents in their development. Also experts of physics and psychology from the University and the Academic Hospital of Maastricht (UM & AZM) will contribute to the program, by doing tests that will increase the physical and mental resistance of the young players. The president of the youth academy will be Jeu Sprengers, currently president of the national football bond, the KNVB.

The goal of the youth academy is to increase the number of Limburgers in professional football. Within five years, 30% of all contract players at Roda JC must be from Limburg. Within ten years, this percentage must 50%. With two players the percentage of youth players at Roda JC nowadays lays around 8 percent. The DSM academy of football also has other important goals. Roda wants to promote its own youth from the region and hereby increase the attractiveness of the club to its supporters. Furthermore, Roda wants to stimulate the youth by showing examples of players from the region that make it to professional football. The academy is also meant as a competition to the well known youth academies from the Randstad, especially that of Ajax. Finally, it is a first step towards the collaboration between the different clubs in Limburg and a link between football and scientific research of the University of Maastricht.

According to the recent plans, the costs of the DSM academy of Football will be around 11,000 euro per player per year. Luckily, the academy attracted a lot of attention from sponsors that are willing to invest in the positive image such academy creates. 47

Main sponsor is DSM, that is willing to pay millions to connect its name to the academy. Furthermore, some subsponsors, like insurance company Aevitea (main sponsor of Roda), are also willing to invest in the idea.

By guiding the regional talents in a better and more professional way, the youth academy must result in a high number of talented players making it towards becoming a professional soccer player. Focusing on the youth, instead of using recruitment as the main way of strengthening your human capital, has a couple of advantages for Roda JC. First of all, your own academy gives you the ability to influence and control how the players develop. The players become familiar with the style of football, the culture, and the norms and values of your club. The club has complete and accurate information about the player and therefore knows when a talented player is ready for the 1st team. This means that there is no risk of selection mistakes as is the case with recruitment. By having your own trained players, the culture of your club Roda stays recognizable for the supporters and sponsors. The relationship with regional people will improve and sponsors are willing to invest in a positive image that such an academy could create. Furthermore, players in the youth will be extra motivated because of the examples of regional youngsters making it to professional football. Comparable with the Ajax example, there are of course also financial advantages. Successful talents can lead to extra revenues through transfers fee and solidarity contributions. Another advantage of the academy is that Roda will not be dependent anymore on the successful recruitment of players. The success of the DSM academy of Football is still to be proven, but when the academy becomes successful and highly valuated and appreciated in the Netherlands and Europe, more talented players will be willing to follow this excellent and special academy. This will eventually lead to more and better talents, more players making it to professional football, a higher quality level of players at Roda JC and more Limburgers in (international) professional football. Up till now, Roda has always been dependent on selling the most valuable players. With a constant inflow of talented players, roda will not be dependent anymore on selling its best players and can compete with major players in the market.

There are however risks attached to the change of focus from recruitment to training. Probably the biggest risk is the lack of talent in the region of Limburg. Looking at the 48

demographic figures of Limburg and North Holland (table 3), we can see clear differences. In 2007, North Holland has 2,613,070 inhabitants, of which 311,648 are within the possible population of manly talents younger than 20 years old. In Limburg, this population than can supply talents consists of 126,648 men younger than 20 years.

Bevolking per regio naar leeftijd, geslacht en burgerlijke staat Bevolking totaal Totaal Regio's Flevoland (PV) Utrecht (PV) Leeftijd Totaal alle leeftijden Jonger dan 20 jaar Totaal alle leeftijden Jonger dan 20 jaar Noord-Holland (PV) Totaal alle leeftijden Jonger dan 20 jaar Zuid-Holland (PV) Limburg (PV) Totaal alle leeftijden Jonger dan 20 jaar Totaal alle leeftijden Jonger dan 20 jaar Perioden Absoluut 2007 374424 2007 110528 2007 2007 2007 2007 2007 2007 2007 2007 1190604 298815 2613070 610293 3455097 835166 1127805 247630 Mannen 186980 56887 581749 152424 1284716 311648 1701319 427875 558886 126648

Centraal Bureau voor de Statistiek, Voorburg/Heerlen 2007-08-21 Table 3. Demographic figures of the Netherlands

Figure 11 shows the population growth of different regions in the Netherlands. Limburg has a decreasing population as compared to a growing population in North Holland. These figures indicate that the possible pool of talents in North Holland is almost 2,5 times bigger than that of Limburg. Furthermore, Ajax has a much bigger attraction to other provinces than Roda. Ajax is able to attract young talents from other parts of the country as well, extending their pool of talents even further. It is important for Roda to question if this pool of talents is big enough to deliver the necessary amount of professional players to be successful. Once this academy is able to create a positive image and compete with other academies, it can extend its pool of talents by attracting young talents from other regions of the Netherlands and cross-border regions in Germany and Belgium.

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Figure 11. Population Growth in the Netherlands

Another risk of the DSM academy of football could be the costs. Because of the support of well known individuals and sponsors, the costs are covered for now. But how will this be in a couple of years? On the long term, the academy must show some positive results and there will be some struggles along the way to success. The academy must strive to become an organisation that can stand on its own feet, without being dependent on the investments of one big sponsor.

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Chapter 7: Conclusion
7.1 Conclusion
The resource-based view on human capital indicates that key human resources can be sources of competitive advantage. The human capital of a firm and the complex interrelationships between a firms human resources and its other resources are enormously valuable to the firm. There are two ways in which a company can generate an outstanding human capital advantage, through recruiting or through training. Organisations in football are also very dependent on the human capital available in the company. Big European clubs are willing to pay millions of euros to attract the most promising talents and the best players to strengthen their human capital. Other clubs, like Ajax, focus on training their own youth in order to generate a workforce that has a competitive advantage over other teams. Training and recruitment are important practices in determining the strength of the human capital in your company. Being a successful recruiter enables you to attract qualified workers from other companies. A company specialized in training is able to increase the skills and knowledge of their internal employees and hereby increase the performance of their company. This thesis used two Dutch professional soccer organisations to illustrate the use of training and recruitment in the soccer industry. Roda J.C. is an example of an organisation that mainly focused on recruitment in the past. Although they do have a youth department, they mainly focused on buying cheap, mainly foreign players and sell them later for a higher price to bigger clubs. Although having the thirteenth budget of all professional football clubs in the Netherlands, a creative and successful recruitment strategy enabled them to end up higher in the competition rankings than the budget would predict. A.F.C. Ajax is internationally known and recognized for their training and development of young talents. Ajax invests heavily in the training of youngsters and is very successful in doing that. On this moment, many players in Dutch and international football have spent their youth development years at Ajax. Ryan Babel and Wesley Sneijder are two successful players from the Ajax school. They enjoyed their training at

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Ajax and are now sold for approximately 18 and 27 million euro to Liverpool FC and Real Madrid.

The case of Dutch professional football illustrates an interesting point of human capital investment. Some organisations focus their resources on training internal people, while other organisations focus on recruiting external people. This thesis discussed the literate available on both these resource management practices. The advantages and disadvantages of recruitment and training are shown using the illustrations of two Dutch professional football organisations. This thesis identified several advantages and disadvantages of training. One disadvantage has to do with the fact that training in football is an example of general training. When fully trained, players can use the skills and capabilities at the club that trained them, but also at other clubs. This means that organisations that invest in general training bare the risk of loosing the player to recruiting firms once they are fully trained. Another disadvantage of training is the amount of money needed to develop a successful training academy. The provision of training is not costless, since productive resources must be diverted away from current production towards teaching and learning (Rosen, 1972). Included in these costs are for example the value placed on the time and effort of trainees, the teaching provided by others, and the equipment and materials used. In addition to these costs of delivering the training program, there are costs associated with analysing and evaluating the programs effectiveness. Ajax invests an amount of circa 2 million a year in its training programme. These disadvantages have to be weighted off against the advantages of training. A positive point of training is the ability to influence and control how your players develop. The players become familiar with the style of football, the culture, and the norms and values of your club. Having your own trained players will lead to a culture of your club that is recognizable for the supporters and sponsors. Furthermore, having a training academy of exceptional quality can lead to international attention and appreciation. The example of Ajax illustrates that they succeeded to create a positive and successful image. They are recognised as being one of the best training organisations of the world. Having a positive brand image has its positive financial consequences through sponsoring and marketing. More importantly, because of this positive image, more talented players are willing to play for your club, leading to an even higher quality level of your training academy. 52

Probably the most important reason for focusing on training is a financial one. The quality of the academy determines the number of players that will make it towards becoming a professional player. When the inflow of young talented players to the first team hampers, for what reasons at all, the first team must be strengthened by recruiting players from outside. Therefore, a high quality academy increases the number of own players in the first team and consequently decreases the costs of recruiting players. Furthermore, being able to transform young talented players into skilful professionals in your academy, can result in revenues by selling these players. Not only the transfer of a trained player to another club, but also subsequent transfers of that player will result in financial rewards for the club that trained him.

This thesis also discussed the advantages and disadvantages of recruitment in Dutch football. Besides the financial revenues of transfer fees from successful recruitment, another important advantage of recruitment is the fact that you do not have to bare the costs of training. Clubs focussing on training invest heavily in their youth academy and have the risk that players leave after being fully trained. Recruiting clubs save the costs of training and can attract trained players by offering higher wages. Furthermore, focussing on recruitment makes the organisation flexible to its environment. It can help to react quickly to sudden changes. When a player suddenly leaves the club or gets seriously injured, a good recruitment system can help you to address these problems by attracting a new skilled player. Another advantage of successful recruitment has to do with reputation. When a club has the positive image of being a successful recruiter and an interesting and attractive place to work, it can attract the best players. The biggest disadvantage of focussing on recruitment is the risk of selection mistakes. These mistakes are often difficult to correct quickly and may involve considerable expense, like the high cost of premature turnover. In the football industry, recruitment of players is associated with high investments. When a player turns out to lack the desired skills and qualities after recruitment, considerable costs are already made. A positive point of training was the ability to influence and control how the players develop. With your own youth academy, the players become familiar with the style of football, the culture, and the norms and values of your club. When focussing on recruitment this becomes more difficult. Players that come from other clubs often have 53

a different mentality and different norms and values. The risk could be that supporters and players do not accept these players or do not want to associate themselves anymore with the club.

The human capital available to your company is the most valuable asset, especially for football organisations. Like in all companies, managers of professional football organisations should carefully weight off the advantages and disadvantages of both training and recruitment. Whether this human capital is strengthened through the recruitment of external employees or through the training of internal talents depends on several factors, including the demographic figures of the region and the financial resources available to your club. Managers should try to control these factors and look for the optimal resource management practice for their specific organisation.

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8. References
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Hunter, J. E., Schmidt, F. L. and Judiesch, M. K. (1990). Individual differences in output variability as a function of job complexity. Journal of Applied Psychology 75(1): 28-42. (uit boxall)

Katz, E., Ziderman, A. (1990). Investment in General Training: The Role of Information and Labour Mobility, Economic Journal, 100, December, 1147-58

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Lange, D. (2003). Guest Commentary. In training programs should be seen as investment, not expense. Nashville Business Journal. Retrieved June 14, 2007, from http://www.bizjournals.com/nashville/stories/2003/09/15/smallb5.html

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Porter, L. W., E. E. Lawler, III, and J. R. Hackman (1975). Behavior in Organizations. New York: McGraw-Hill. (uit Wanous)

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Soper, B., Von Bergen, C. W., Mawer, W. T., Von Bergen, A. N., & Rosenthal, G. T. (2004). Job applicants and preemployment agreements: What employment counselors need to know. Journal of Employment Counseling, 41, 168-182.

Ulrich, D., Smallwood, N. (2004). Capitalizing on Capabilities. Harvard Business Review 82 (June 2004): 119-27.

Von Bergen, C. W., Mawer, W. T. (2007). Recouping Training and Development Costs Using Preemployment Agreements, Employ Respons Rights J. (2007), 19, 127-143

Wanous, J.P. (1980). Organizational Entry, Addison-Wesley Publishing Company, Inc.

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Windolf, P. (1986). Recruitment, selection, and internal labour markets in Britain and Germany. Organization Studies 7(3): 235-54 (uit boxall)

Websites: www.ajax.nl www.wikipedia.nl www.rodajc.nl www.vi.nl www.cbs.nl www.log-isch.nl

Personal Communication: Frank Rutten, President Eredivisie NV Huub Narinx, General President Roda JC Serve Kuijer, President Roda JC and DSM voetbalacademy

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