The cost of a contract
Last week, investigations by The Sunday Times revealed some of the finer details of bonuses within players’ contracts. While perhaps not a surprise to those working inside the game, the revelations provoked much discussion about their influence on player behaviour.
The truth is that these clauses are the final details in a lengthy and often costly process of recruiting a player. We expend a great deal of energy trying to acquire talent, and it is difficult to ignore this significant sunk cost during the last stages of negotiation.
There are ways, however, to avoid sunk-cost bias in contract negotiations. The first is to ensure the club has clear principles around its fixed and variable cost structures, for example those set out by Ferran Soriano during his time at Barcelona. Of course this is easier when running a club that has limited competition in talent acquisition, but nevertheless having structures that are clearly articulated to the market can help eliminate potential signings earlier in the process.
The second is to keep options open, and never be fooled into thinking that any one player is the ‘perfect’ option. We know that as many of half of new signings will not even become ‘core’ first team players; there are many unknowns in recruitment.
In football, these are the two biggest forces that can increase buyer power in contract negotiations. Getting these processes working can produce more, comparable options for the same cost, or reduce the total cost of signing players altogether.