Project Reset - The Way Forward

“Project Reset has become Project Inept” – Not our words but the double barrel shots fired by outgoing Ospreys Chairman, Mike James as he resigned from the Professional Rugby Board (PRB).

It’s not the purpose of this blog to review the events of the last week, that’s already been done to death. Our interest is what happens next? Yes, it’s of prurient interest to know who said what, and who’s to blame but that doesn’t solve the immediate problems that Welsh professional rugby face. It doesn’t give comfort to those players who are waiting to know whether they have a contract in a few months’ time and neither does it help supporters who have invested years of emotional energy supporting four regional teams.

In a previous blog we have been supportive of the establishment of the PRB and the culture Martyn Phillips is trying to create. We stand by those comments. In fact, it’s more important than ever that the initial aspirations of the PRB are not lost. However, it hasn’t got off to an auspicious start, almost certainly because it didn’t get the basics right. Setting up sub-committees is no different to building a stadium; you get one opportunity to get it right and that’s at the beginning. If you haven’t got it right, it’s going to cost you time, money, energy and reputation to solve errors.

So, what needs to be done to get things right?

Change of Culture

The problem with writing a blog about the way forward is that we don’t know where we are now! All sides are very quick to put out press releases trying to deflect blame but we don’t know the purpose of the PRB, its terms of reference, what in effect it’s been charged with doing. There needs to be a change of culture. One that’s based on openness and transparency not secrecy and confidentiality.

The WRU should publish the Terms of Reference of the PRB, making clear what delegated authority it has given and what powers it reserves. Words like ‘PRB will run the professional game in Wales’ are meaningless if the WRU Board has to ratify all decisions.

Trust is the most important ingredient in a business relationship. The PRB won’t work (as we have seen this week) if the members don’t trust each other. That has to be item 1 on the next agenda. The members need to have an open discussion about how they will behave and how they will operate collectively. They have to ensure that what they do is consistent since this is the foundation of trust and they need to keep the promises they make to each other or they shouldn’t make them in the first place. The Ospreys broke ranks this week and are therefore vulnerable to collective criticism from the others. But you don’t develop trust by taking advantage of someone when they are vulnerable. How the members behave in relation to each other will be crucial.

Membership

People make decisions; people behave with integrity; its people who are duplicitous not terms of reference. It’s essential that all members are comfortable with the baggage that each of them brings to a meeting otherwise you won’t develop trust. Those conflicts of interest or perceive conflicts of interest, need to be discussed and resolved. If it means that some members need to be replaced then so be it. Mike James made a crucial point:

“Amongst the concerns is the independence of the WRU’s role given its conflict of interests, the lack of appropriate transparency and adequate governance..”

Let’s look at the membership:

David Lovett is the Independent Chair and a finance consultant. As an independent chair he also becomes a Board member of the WRU under recent changes to its statutes. He was first employed by Martyn Phillips to review the financial position of the regions. We assume this role was paid but who knows. He was proposed as the independent chair and we assume members of the PRB accepted. But were they really content to have an individual so closely associated with the WRU to chair the PRB or did they just go along with it? He can no longer be considered ‘independent’. In fact, if he has a vote and uses that vote to support a WRU proposal what will other members think? At best we feel he should be non-voting. A bit like the Speaker of the House of Commons; he can’t be independent because he’s a party member but he can be unbiased and act with integrity. The PRB members need to consider this.

It’s odd that the chairs of the Scarlets, Ospreys, Cardiff Blues and Dragons are members but the WRU is represented not by Board members but by the executive, CEO Martyn Phillips and Group Finance Director Steve Phillips. You should either have all Board members or all executive staff on a Board. An alternative is to have the four regional CEOs as observers. The regions are at a significant disadvantage when dealing with professional staff. Moreover, the WRU executive should be there to service the PRB and to provide as much impartial information to the members who would then make decisions. It’s a strange set up.

Of concern is the fact that Steve Phillips is also a director of the Dragons. That is a direct conflict of interest and should never have been allowed. He should stand down immediately, notwithstanding the point above.

Nigel Short and Rob Davies, the chairs of Scarlets and Ospreys respectively have no direct or perceived conflicts of interest of which we are aware.

Alun Jones the recently appointed chair of Cardiff Blues is Managing Partner at Hugh James solicitors which acts for the WRU. There is therefore a perceived conflict of interest. We raised this matter with him when we met on 19 December because the same applies from a Cardiff Blues perspective. Alun said that he recognised the issue of a potential conflict of interest and this was a matter he’d raised throughout the appointment process. He has a fiduciary duty as a director of Cardiff Blues Ltd. There were standard approaches for dealing with this conflict in governance terms at Board meetings and the creation of Chinese Walls at Hugh James Ltd. If however there was a major dispute between the WRU and CBL then Hugh James would not act for either party. We welcomed the clarity of his position and suggested he might want to make a written statement to supporters in order to show transparency. We are not aware this has been done but a similar discussion needs to be held at PRB if it already hasn’t.

The situation with David Buttress is probably the most complicated. He is executive chair of the Dragons, which is a subsidiary of the WRU. On that basis, it is questionable whether he should be a voting or a non-voting member of the PRB. Again this is a matter for the sub-committee to resolve.

In some ways, voting is a bit of a distraction since we are dealing with four independent companies and votes can’t be forced on them. It is how the PRB come to decisions which is important and whether people trust each other to act with integrity and without conflict of interest.

Vision

Because we don’t know the terms of reference of the PRB it is difficult to know what its role is. You would hope it has been charged with developing a vison and strategy for the professional game. All we know is that the first answer they came up with was a merger between Scarlets and Ospreys and the establishment of a North Wales professional team. We’d hate to think what the question was!

If players, supporters and other stakeholders are going to buy into change then they need to know why it’s going to be better than where we are at the moment. A vision that makes you want to jump out of bed in the morning is needed not one that makes you want to jump back into bed and pull the duvet over your head.

What is the vison for the regional game underpinning the national team? As some wise businessman once said, chase the vision not the money; the money will end up following you. Improving regional rugby won't be resolved by tinkering with a single issue like merger. Money will help in the short term, but lots of other changes both within (how each company manages itself etc.) and outside the regions' control (league structure, rugby calendar etc.) need to happen.

Strategy

‘Strategy without tactics is the slowest route to victory. Tactics without strategy is the noise before the defeat’ – Sun Tzu

All we have heard to date is the proposed merger. That’s not a strategy, it’s a tactic and one which nearly resulted in a number of people being ‘mortally wounded’. We don’t know the principles underpinning how we should move forward. Is it four teams that we need and why; is it about increasing attendances or increasing income etc. All these ambitions have different options to achieve them. We need clarity.

Whatever version of Reset eventually arrives, the major problem is not the structure of the regions, but the structure in which the regions play. Tinkering with the former has no impact on the latter. The Pro 14 generates relatively low TV revenues, attracts few away supporters and features unfriendly kick off times. The attractiveness of the product is further reduced by regions being stripped of their prize assets for long periods of the season

The over dependence on international matches to fund the domestic game fuels this problem and, while attempting to make the Pro 14 more attractive by including more diverse teams is laudable, it exacerbates the issues above.

The only real solution is probably a British league but, as is often reported, the English don't need it or want it. The only hope therefore might be that CVC Capital Partners do actually want to invest in the Pro 14 as well as the English Premiership. This would create an external driver for the two to eventually merge. The WRU, SRU and IRFU should therefore be doing everything in their power to attract CVC into the Pro 14 as a first step.

In the interim, the 2+2 model for the existing regions might be the only way to go. Differential funding for the regions isn't new there has been a huge imbalance in the allocation of NDCs and therefore revenue in recent years. 2+2 is just another version of this, but with perhaps clearer strategic intent and greater variance in financial distributions. Most regional fans given a choice would rather see their team on semi-skimmed funding rather than merge with another region. While no side will volunteer to become a semi-skimmed region this might be a better option than (in Lewis' terms) ceasing to exist.

If changes to the competitive environment can be achieved hopefully the cream can be more evenly distributed once more in the longer term. Reset can then be reset again when the time is right. In order to placate supporters a review date of 3-5 years should be set.

A more attractive domestic structure will help reduce the dependence on endless games against Australia as the primary cash cow and perhaps result in star regional players appear more routinely for their teams.

It may even help heal the increasingly widening gap between followers of the regions and team Wales. Starting up a completely new region in the north will do nothing to impact on the financial difficulties facing regional rugby except to possibly make them worse. In better times having another development team in the north would be great. In the circumstances we're facing it's a thinly disguised vanity project. Moreover, those who think the potential fan base is bigger - for games in this league - have no basis for that opinion.

The above are only a set of suggestions. The point we make is that there should be open discussion about the options, what is feasible and what the proposed strategy will be. Simply allowing social media to debate these is not the way forward.

Acting as One

Now isn't the time to make a decision on the way forward with players and supporters up in arms. A massive lack of confidence exists because of the information vacuum and the way this whole episode has unfolded.

Once we have got the basics right, the vison agreed and a strategy in place there is a real chance that progress can be made. You get buy-in when you take people with you not when you present them with a fait accompli. There should be a full and open consultation with stakeholders about the future. As Mike James said:

“A new process must be expedited, with respected and competent leadership - professionally outlined and responsibly led - with transparency and genuine consultation as its foundation”.

Amen to that brother!