Analysis of Godolphin Restructuring

Judging by what has been done and what has been said, Sheikh Mohammed's decision to consolidate his racing and breeding operations under the Godolphin banner conveys a restlessness with the status quo. It remains to be seen how it will differ from a rebranding exercise.

In the press release which announced the restructuring on Godolphin's own website this week, there appeared at least one interesting quote by their newly minted supremo John Ferguson.

“Our long-term objective is to improve on Godolphin's results on the racetrack,” he said.

Much of the language of all press releases is perfunctory, sterile and often rather pointless. But this line is notable when viewed in this context: could you imagine John Magnier saying it?

No. Who can improve on Aidan O'Brien's training which drives the results of Magnier and other Coolmore partners, such as Michael Tabor and Derrick Smith?

At the global level, Godolphin's results on the track in 2015 were pretty good. In Britain and Ireland, Godolphin-owned runners raked in record prize-money of over £5.4 million, albeit requiring a record number of runners touching 1,200 at time of writing. In the United States, Godolphin Racing sits third to Zayat Stables and Ken Ramsey by earnings, and in Australia, head trainer John O'Shea has saddled a bag full of group winners in the royal blue, with lots of promising horses coming through.

In Britain, Godolphin now has a couple of good jockeys to call on in James Doyle and William Buick, and for a while now ,has steadily diversified its training portfolio from main handlers Saeed bin Suroor and Charlie Appleby to Jim Bolger, Mark Johnston, John Gosden, Richard Fahey and Richard Hannon. This has been achieved partly by leaving horses purchased in training with their original handlers, which has to be a sensible move.

Godolphin's mission statement always has been to represent Dubai on the global stage, so it was inevitable it would become a more sprawling operation from its nascent compact, elite structure of the mid 1990s. One of the main tasks Ferguson faces as its CEO is to determine whether the necessary fragmentation is having an effect on efficiency: in general, the more an operation spreads, the harder it is for central office to maintain control of aspects such as standards of practice.

A fascinating global awakening in major sport, is that superior resources now translate less to dominance on the field of play. In the Premier League, for instance, the current season has showcased that the hegemony of the richest teams like Chelsea and Manchester United has slipped, an echo for that seen for a while now in Major League Baseball in the U.S., where the New York Yankees can no longer parlay the Steinbrenner family's wealth into wins at the same rate as in the last millennium.

This is the process which has narrowed the gap: as the world has become smarter, those at a material disadvantage in certain systems have been able to employ strategies more open to those with less pressure of expectation. It is easier to implement new ideas if you are an upstart rather than a behemoth, as David found with Goliath.

A principle of economics is that efficiency is best assessed at the margin. In other words, to get better you need to be able to tell how well you are doing, then measure the effect of different strategies. (This is what led the Oakland A's to sabermetrics, for instance.)

When you have few resources and a compact operation, establishing where the margin lies is easy: you are a nobody, the only way is up. But, the more sprawling you become, the more of your vast resources you employ, the harder it is to tell how you are doing.

So, in reference to Ferguson's marquee quote–“Our long-term objective is to improve on Godolphin's results on the racetrack” –one might ask whether this is actually possible, given the constraints of its particular situation, of which it might be said that the most difficult to overcome is that Godolphin simply doesn't own breeding rights to Galileo (Ire) (Sadler's Wells).

To make improvement more than a concept you just use in a press release, demands that an operation actually knows where the slack exists.

The obvious place to start for Godolphin is with its trainers. It is not my intention here to cast aspersions on the talents of Saeed bin Suroor and Charlie Appleby. I neither have the desire nor the evidence to do that, and the latter consideration is a classic example of how big operations in the modern world can find it hard to improve, and sometimes hard even to maintain their own standards.

Years ago, it was famously asked by esteemed journalist David Ashforth in The Sporting Life: “How Good is Gosden?” At the time, it was a perfectly fair question, but one which seemed to provoke most observers to balk at the writer's temerity, rather than ponder the answer to the question.

Well, in this case, the trainer has certainly answered the question positively via his exploits, but it isn't that easy in general to come to a reasonable conclusion regarding the effectiveness of a training operation, whether you adopt intuitive, homespun methods or robust statistical ones.

And the more well-bred, expensive horses a trainer has in his yard, the more difficult it becomes to find a benchmark. Who really knows how good bin Suroor and Appleby are at training horses, given their resources and their situation.

Could it be, for instance, that the effect of a trainer at the margin is far less than the effect of his staff? Could the signal of a trainer's talent be drowned out by the variance in the strength of his ownership base? I would like to think not, from a sporting perspective, but could it be that sourcing and maintaining a coterie of powerful owners is the true talent of training nowadays? If this were true, changing only the trainer would achieve a similar illusory effect to that which academics insist is the case with football managers: managers get sacked when results drop below a minimum, and when a new man comes in nothing more dramatic than a temporary mean reversion occurs.

In a business setting, uncertainty caused by a particular potential problem–however difficult it is to be certain of–is often met with diversification away from that domain. Godolphin has already begun to do this, as mentioned above. But could this be a significant plank of Ferguson's plan going forward? It isn't for certain that the trainers listed above are better than bin Suroor or Appleby, but it is for certain that they are different.

That Godolphin is striving for improvement–not just evinced by word but also by deed of its restructuring–is creditable. Moreover, it restates Sheikh Mohammed's desire to compete more effectively with Coolmore, O'Brien and Galileo. Improvements don't come without significant change, however, and it's on Ferguson to make them happen as CEOs must.

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