Gloucester Rugby’s CEO Stephen Vaughan talks to AccountingWEB about stakeholder management, forecasting and the club’s World Cup legacy.
Vaughan started his working life as a professional footballer for Walsall, before heading to university in 2007 to complete a business management degree. From there he worked his way to MD of Club 18-30 and the Big Event Group, before moving to Thomas Cook, where he led the travel firm’s involvement with the London 2012 Olympics.
Vaughan joined Gloucester Rugby as chief executive in December 2012, and although results on the field have not always been positive, with the club finishing a disappointing ninth in last season’s Premiership, he is proud of their financial record. The cherry and whites recently recorded an operating profit for the fifth straight year, increasing turnover by 21.3% over the previous year.
So with experience of running businesses in both a sporting and non-sporting context, what does Vaughan feel the main differences are between them, and how does he adapt when the key metrics of the business aren’t purely financial?
“One of the key differences from working in a large PLC, for example, is the difference in stakeholder management”, said Vaughan. “At a sporting club, especially one like Gloucester which is a historic, rugby-crazy area, the game means everything.
“You have to consult with the supporters and use your emotional intelligence to ensure that if you’re having a tough season you don’t go shoving the prices up or changing the team colours to sell more shirts.
“We’re owned by two separate families, so we obviously have to manage their aspirations as well. Everybody would like to make a small fortune and to win the league in the same year, but I’m yet to see that happen in sport anywhere.
“I try to work to a virtuous circle, revolving around success on the pitch. If we get success on the pitch we have happy supporters and sponsors, which in turn has a commercial impact. The net result of that extra commercial revenue will mean that we can invest more in players, which means we’ll continue as a successful team.
“Another difference”, continued Vaughan, “is that our performance is totally transparent; if we play well in a match and run in four or five tries things are great, if we have an awful time then it’s not – it’s very week-to-week.
“In a way though it is similar to being at Thomas Cook. When Gloucester loses at home it’s like being on holiday when it starts raining – suddenly you notice everything that’s gone wrong.
“We have passionate supporters, and when we lose the price of beer’s suddenly too much or it’s not cold enough, the tannoy system is fuzzy, or pillars are obstructing their view.”
Budget for what you believe
Sport can be unpredictable, with league positions and cup runs affecting prize money, gate receipts and sponsorship revenue. So does Vaughan think it’s possible to forecast effectively in the world of sport?
“You can’t be a viable business and work on the principle that because you’re not sure what’s going to happen you shouldn’t budget”, said Vaughan. “We plan for different variations: We’ll have an assumption based on where we believe we’ll be, a sunny assumption and a worst-case scenario.
“We budget for what we believe – it’s an ‘aspiration stretch’ budget because that’s the kind of people we are and that’s how we like to operate.
“Is it different to budgeting in other areas?” continued Vaughan, “Not really. As MD of a business in the travel industry I still assumed things. We didn’t know there was going to be a SARS virus, bird flu or an economic crash. You naturally try to stretch the assumptions you make, but with the knowledge that things can change.”
World Cup legacy
Although Gloucester hosted four World Cup games in 2015, including the epic encounter between Japan and Scotland, Vaughan admits that financially the tournament didn’t bring significant amounts to the club. “If we’re talking hard metrics we gained very little”, he said, “you wouldn’t sign off hosting World Cup games off the back of the financials!
“We had to negotiate a venue-hire agreement with England Rugby 2015 to ensure we weren’t out of pocket for hosting, as there were disruptions to our conferencing, hospitality and catering businesses. It was a big disruption to business as usual: My own office was used for cold food storage for four weeks because of the air conditioning!”
However, for Vaughan and Gloucester Rugby the tournament was much bigger than just cold, hard cash. “It was around not wanting to turn down the opportunity of a generation”, Vaughan explained. “For our club to be seen by tens of millions of people around the world – you can’t put a tangible number on that. It’s just unfortunate England were knocked out so early because that would have been a boost to all of us.
“From a legacy perspective we kept things very simple. I worked on London 2012 with a lot of large businesses that had 15-point legacy plans, and you could just see them failing because they were too complex. Ours were simple: To engage with people new to Kingsholm [Gloucester’s home ground] in order to grow the club’s fan base; and to use the World’s Cup’s energy and enthusiasm to get more kids playing rugby. Ultimately we hoped to create the Gloucester fans of the future.”