How can you tell if a football manager is actually good at their job? and How can you tell if CEO is actually good at their job?

Another great article by John Muller, from The Athletic,” on how we can draw a line between good football managers, the ones that add value to innate talent of a team vs. the ones that destroy it. A great question when we see the England national team talent vs. performance and other teams (but we will let concrete examples aside). Only counting the trophies won cannot be a good way to assess it, due to all the externalities and macro impacts that play an outsized role in a team’s winning capacity. John has proposed a model that takes into consideration the squad strength (innate value), based on players market values, and for the value that the manager brings, he uses a 70/30 of non-penalty expected goal difference and actual goal difference the teams generate. The results are compelling! 80% of team success are explained from the squad strength and only 20% would come from what the manager brings (team’s performance). So main conclusion is the very relative role a manager plays in the overall outcomes, but still 20% can make a huge difference between winning or losing a trophy (see picture below). If the model would hold, this would be a great to assess the quality of a manager, thus the ability to draw the line between values added ones, value neutral or value destroying ones. Unfortunately, the model does not hold from season to season, thus a value-added coach does to transfer that result to the next season (stability problem). Although not stable, still think that this is the way to make such kind of analysis, most probably we did not find the correct independent variables to properly assess it but is a starting point and there is the need to have more data (although a manager career is not that long, to provide most probably all the data points one would require). Moving this problem to the corporate world, where we see CEOs and Directors with such an income premium due to the value they “bring” to the organization and recognizing that also at corporate level the success or failure of company is >80% tied to the external environment (trends), this should also be a method to proper assess upper-management value added into an organization and select/paying them accordingly, otherwise most of the time it looks like we are on a rent-seeking scenario! If a CEO gets paid $10m/year, are we sure that he is generating at least the $10m of added value plus a premium, vs the best alternative? Something to think about for a future work (academic or consulting), but i really think there is a lot to improve there! https://www.nytimes.com/athletic/5392417/2024/04/07/good-manager-how-to-tell/

- Pedro

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