Thick ears ignored Otago rugby's cash crisis

Key players involved in the Otago Rugby Union rescue bid are in lock down mode as the clock counts down to the organisation's liquidation at 4pm today.

The axe was due to fall last Friday but the union was given a week's reprieve to allow some of its staunchest supporters to find a way of paying off debts of $2.35 million and a projected loss this year of more than $750,000.Otago rugby icon Laurie Mains, who has pledged to fork out some of his own money to bankroll the union, has been working behind the scenes trying to muster support from local businesses.

"I've already pledged a very significant amount of money towards this and along with (union president) Eion Edgar we have made ourselves available to the board of Otago rugby to go to the business community to be part of trying to get the funds," he said.

"We can't simply pack our bags and leave Otago rugby to die."

Mr Mains, who played over a hundred games for Otago and is an outgoing member of the union's board, blames the organisation's misfortunes on Carisbrook.

In his view the hallowed ground which became known as the House of Pain for so many visiting teams is now turning the screws on its owner and on the verge of squeezing the life out of it.

Mr Mains says Carisbrook has been "a mill around our neck in terms of rates, ongoing maintenance and upgrade work. It was a huge cost. We borrowed money against that asset to make ends meet and the debt just became too great."

"We hoped to sell it for a figure that would be sufficient to retire debt but that didn't prove to be the case," he said.

But some business commentators believe Otago's problems are much more fundamental than that and reflect bad business practice.

Business blogger Julian Smith says there's a pretty basic truth at the root of the union's troubles.

"Otago has been playing some truly woeful rugby. Convincing people to fork over money to watch their team get thrashed all the time is hardly a winning proposition. Any business that is consistently disappointing its customers with a poor product or service is going to start to lose market share and the Otago union is no different."

Mr Smith says the union was aware that it was paying its players too much for the results they were producing but was unwilling to look at changing its pay scales.

"Business needs to be able to adapt when the fundamental performance results are showing that costs don't line up with benefits."

Mr Smith also slams the union for not adopting a lot of advice contained in a PricewaterhouseCoopers management review that was instigated by the Dunedin City Council in 2010 when it agreed to underwrite the union's seasonal debt.

The review was designed to ensure that the union was following professional best practice.

"The goal of the review was to take the union's business practices out of the 80s and 90s and into the 21st Century. Sadly it looks like a lot of the advice in the review was not adopted," says Mr Smith.

"For business owners it can often be hard to hear that you aren't doing something right, but the most successful business people are the ones who adapt and refusing to take advice makes the change you need impossible."

In short, Mr Smith says the union was not listening to its fans, the city council, its creditors and its bank when it was warned of serious financial trouble.

"It's a real risk in any business to assume everything will work out by taking a "she'll be right" attitude. The union's experience shows that things don't always work out the way we hope."

"Making changes early, as soon as a potential problem is identified, is vital if your business is going to survive," he says.

His comments are echoed in part by sports lawyer Maria Clarke who says much sport in New Zealand is not being run as a business when quite clearly it is.

"We see business people coming on to these boards but then leaving their business protocols at the door. This is a nationwide issue, not just in rugby, and it's something that's not easily fixed."

Ms Clarke says in the case of the Otago union "one must question the governance."

"Were there the right people around the board table?" she asks.

So if they are correct the buck for Otago's imminent demise stops fairly and squarely at the boardroom door and some poor decision making.

And with that in mind what are the chances of the union staving off liquidation today?

Julian Smith is not holding his breath.

"I think the chances are slim at this stage but many businesses can turn themselves around if given the opportunity and financial backing. In this case a key component will be the confidence the creditors and any financial backers have in the current union leadership to learn from their mistakes and turn the business around."

"There is no doubt that Otago has some of the most passionate and loyal fans in provincial rugby - the question is can the union deliver a better value proposition for the fans moving forward, to drive revenues and at the same time get its debt and cost structure under control?"

"On that front I think the jury is still out."

For the moment the only glimmer of light in this sorry saga is yesterday's announcement by Speight's that it will continue its sponsorship of rugby in Otago, with or without the union.

National sponsorship manager Brent Robinson said the company would continue to provide a "substantial" financial package as it wants to see an Otago team in the ITM Cup.

"We have absolutely no intention of walking away from our commitment and we will do everything we can to maintain our level of financial support to Otago rugby," he said.

Mr Robinson would not say how much money Speight’s would provide.