What Can We Learn From the Financial Meltdown of Glasgow Rangers FC?

It seems hard to fathom how one of the 25 biggest football clubs in the world (ranked by Forbes in 2007 at #25 with a valuation of $194 million) could come so close to cratering into the abyss.  At least it does until you really understand how the club got here.  Much like the Greek and the French citizens, Rangers nation refused to take its medicine when it got sick.  Years and years of mortgaging the future by stealing tomorrow’s revenues to pay for today’s ambitions were a big part of the problem.  When you combine that with an organization that did not tie its expenses to it revenues or even construct any sort of internal metrics to measure the effectiveness of its staff or player wages, you can start to get a picture of how the mighty Rangers arrived at bankruptcy and how 140 years of celebrated footballing history was almost terminated.  While there are many contributing factors that will be explored here, the evidence points to hubris as the primary cause.  While television revenues in the SPL were becoming increasingly smaller as a percentage of turnover (8% for Rangers in 2011) and season ticket sales were declining every year (down to 37,500 from 44,000 five years ago), Rangers continued to rearrange the deck chairs on the Titanic.  Clearly, Rangers believed their Titanic was incapable of sinking – simply too big to fail.  Failing to acknowledge the global shifts and winds of change, Rangers continued to pay more than they could afford to players, managers and executives (£26MM towards wages on £35MM of revenue).  Employee benefits and perks continued to grow – creating an unsustainable set of obligations for a club that was seeing revenues decline. (sounds a lot like the US Government today) Like so many before them, the answer was always to place a bet on winning football as the catapult over the morass.

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