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Monday, 8 December 2014

Juggling the tectonic plates - what makes for a good chief executive in the gambling sector?

By David Loveday

Every time a chief executive role becomes vacant in the gambling industry the rumour mill cranks up and even new betting markets are released by competitor firms with a list of possible names - ranging from the plausible to the outright fanciful. (My name appeared in the runners and riders for the Ladbrokes job in the list compiled by Paddy Power last week – I will leave you all the speculate where my odds of 11/1 place me on that spectrum).

Given the nature of the gambling industry, it should perhaps be no surprise that this type of high-profile speculation is an important element of the make-up of the sector, and it may even be one of the contributing factors behind the lack of talented individuals entering the sector from the outside.

But there are other reasons that can be identified behind this lack of supply of new blood.

First, expectations on the part of stakeholders in gambling companies tend to be sky-high and they generally eclipse the reality of what is actually possible and achievable (partly due to the growth-driven nature of small-cap; partly the lure of attractive cash flow and partly due to an over-simplification of regulatory and technology issues). Second, this is a sector which fairly neatly divides between companies which cut their teeth in unregulated markets (with an extremely 'entrepreneurial' culture and risk profile) and those from heavily regulated backgrounds (with the equally challenging opposite culture akin to government or police).

This has led to a disconnect: while the balance between unregulated and regulated is now changing markedly, the expectations of stakeholders have yet to catch up. The job of the modern gambling chief executive is therefore to manage this tectonic shift, from whichever part of the scale the company is on. The sheer complexity of the task relative to the size of the companies might be another reason for the reluctance of big hitters to join the fray from the outside.

Given this backdrop there are, I believe, a number of attributes which contribute to the suitability and success of a chief executive in this sector. Different chief executives will suit different companies at various stages of their evolution. Businesses need to pick the right people with the right profile. Would you put an entrepreneurial/start-up guy in charge of a major PLC? Has promotion from within worked? Are left-field candidates ever given the time and support to get to grips with the sector's idiosyncrasies and complete the job?

A large part of the equation is understanding what the new chief executive will have to deal with once they have taken up the role and what it will take to handle the multi-faceted and rapidly changing issues that will inevitably arise. Here’s my brief rundown of what I think these issues are:

Management skills
Any new boss needs to be able to assess their inherited team then make sensible judgement calls. Bringing in an army of staff from a previous role is tricky and they have to deliver very quickly to be deemed successful. Harnessing the talent within is critical, as is getting this balance right. This point dovetails nicely with culture - do you break it, modify it or add to it? In an industry where a lot of companies are very similar (but are often convinced they are very different) you have to carry the troops and the senior management team along with you. Destruction or modification of a culture just for the sake of it is potentially dangerous and damaging.

Any CEO has to grasp the technology required and really understand how it can be a help rather than a hindrance, whether land-based, remote or, increasingly, multi-channel. Technology in this sector must be understood from the start. From a transactional point of view, the modern gambling company can be (and increasingly should be) hugely advanced and highly complex - and so, therefore, is the supply chain. The old adage of ‘leave it to the techies’ simply won't cut it any longer.

The impact of regulation on  gambling can never be under-estimated. Regulation has to be understood, the CEO has to have a sure grasp of the issues, and all decisions in this regard need to be well thought through. I believe that here relationship building (rather than grandstanding, mudslinging or simply ignoring) is of vital importance; this sector can get political very quickly, so the ability to handle key governmental stakeholders is key, This is a key difference between gambling companies and other tech-driven consumer businesses; it is hugely dangerous to get wrong and often thankless to get right (keeping gambling off the public agenda is often the best outcome!).

Owners, board members and investors
Given the nature of the market all of these important factors are liable to huge change. They need to be understood and managed by the CEO as they evolve. Communications is key - to the staff, to the customers and of course to the owners. Strong communications can build confidence, especially if expectations are set at realistic levels and risks are properly articulated. The CEO needs to embrace this factor and lead this battle. Their profile and the perception of who they are in the outside world must be positive and accessible but also frank, grounded and carrying gravitas.

The competition
Competition is always fierce. The chief executive needs to know how to fight, defend, co-operate, destroy, merge or acquire the competition. To survive, every CEO has to be adept at this kind of combat and has to lead from the front in addition to being a player in the wider industry. All CEOs have read the art of war; in this sector as with any other the CEO must avoid fighting battles that cannot be won. They need to fully understand both their own and their company’s weaknesses as much as those of their opponents ranged against them.

 It all sounds like the CEO needs to be something of a Clark Kent and it is true that they will need to deploy extensive powers. For anybody who has never been a CEO, I can tell you now it is a lonely role. When things go well you get little credit (it would have all happened anyway!) and when things go badly it is entirely your fault.

Anybody who takes on the role of chief executive at any company will soon find out that there are consequences to having ultimate decision-making authority. But what really makes it a lonely job are the questions that can keep you awake at night, such as who is spinning you a line, who can you ultimately trust, and who among your staff are telling you things they simply think you want to hear.

The gambling market can be a brutal and unforgiving place, and reputations can be shredded if decisions go awry. As Napoleon well knew, every leader needs a bit of luck to carry them along, but it is my belief that a chief executive job at a major firm can be rewarding, and not just financially.

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