Physical culture and sport industry development management: financial perspective

Фотографии: 

ˑ: 

Associate Professor, PhD T.V. Kalashnikova1
Associate Professor, PhD I.V. Krakovetskaya2
N.E. Danilova1
1National Research Tomsk Polytechnic University, Tomsk
2National Research Tomsk State University, Tomsk

Keywords: sport management, management approaches, idealized design, management of physical culture and sport industry development, financial perspective, sport industry.

Introduction. Increased interest in the sport industry from the business sector and various social institutions make demands for the quality of management. The rapidly changing conditions of sport and business interaction require the competences and skills from administrative staff, which are necessary for the successful industry development. Advanced foreign management approaches can be of use to lay the groundwork of the national school of sport industry management.

Research objective was to underline issues of the sport industry management in order to elaborate recommendations for the management system in the sport industry improvement in general and from the financial perspective in particular.

Methods and researches. Different approaches in the field of management were introduced at the end of the XIX century and developed throughout the XX century. In the early XXI century Russell Lincoln Ackoff (American organizational theorist, consultant, and Anheuser-Busch Professor Emeritus of Management Science at the Wharton School, University of Pennsylvania) introduced a new approach to management in his book titled Idealized Design: How to Dissolve Tomorrow's crisis… Today: Creating an Organization's Future. Felix Tarasenko (professor of National Research Tomsk State University) conducts researches in the framework of idealized design and system analysis in Russia. Authors of the paper suggest using the idealized design in sport industry management as well as statistical evaluation methods of the secondary information obtained from official sources.

Results and discussions: The authors of the paper identify the key issues of the sports industry management in Russia and provide the recommendations for its improvement. The recommendations were discussed at the legislative bodies level of the Tomsk region (within the framework of the Youth Parliament projects of the Tomsk region) and were highly commended.

The fundamental task of the Russian government social state policy is the arrangement of conditions for the social welfare and national morale increase as well as maintenance of the long-term social stability. The creation and improvement of conditions for physical and mental health of citizens contribute significantly to achieving this objective. At the same time, a significant factor in determining the health of the population is to maintain citizens’ optimal physical activity throughout the life. The experience of many countries shows that this challenge could be approached through implementing comprehensive programs.

Physical culture and sport services have a special place among the intangible benefits. These services do not create any new, previously non-existent tangible product, but change the goods quality in the form of useful effects. These effects are being produced and consumed simultaneously. The functionality of spot services goes at the same level as products and goods usefulness. This diversity as a whole affects the political, economic and social processes in the society. Physical culture and sport as social sectors are not involved in the establishment of the gross national product and national income directly. However, physical culture and sport have their own sources of funding and sources of accumulation of funds.

The sport industry has the following sources of funding:

  • sport equipment produced by physical culture organizations sales revenue;
  • sport literature sales revenue;
  • provision of commercial sports services;
  • running and broadcasting of the competitions;
  • membership fees;
  • monetary and other lotteries.

However, these resources are not enough to cover expenditure on the organization of sport activities, maintenance and development of infrastructure, training and remuneration of labor of specialists. The existing gap between revenues and expenditures of the physical culture and sport industry can be accounted by a) rapidly growing costs; b) large amount of finance required for elite athletes training; c) part of the physical training and sports services are provided free of charge or at low costs. Therefore, there is a need to transfer part of the budget raised from the material goods production and realization to the sport industry budget as an additional source of funding. Such sources include: state budget funds and bank credits; own funds of state industrial associations that are on the self-supporting basis; deductions from the income of non-state enterprises; means of the trade unions and social organizations.

Sources of funding can be also divided into two categories: centralized and decentralized. An example of a centralized source of financing can be the state budget of the Republic of Belarus, which consists of three levels - national, regional and municipal. Each of them has an item in a budget for the physical culture and sport industry and provisions for the industry development. Such financing is supposed to be "direct" one. "Indirect" budget financing of physical culture and sports is produced under other items of the state budget (for example, Ministry of Health provides spending on sport medicine, the Ministry of Education on student sports, etc.). Amounts intended for sport organizations, are referred to as budget credits or budget allocations. However, the decentralized sources of funding for Physical Culture and Sports have growing importance, i.e. the contributions of local housing and utilities infrastructures are used as well as contributions of trade, transport, communications structures, etc. The decentralized sources of the sport industry financing highlight the importance of personal funds of citizens in the industry. For example, the European system of the sport industry funding falls on the personal funds of citizens (for example, in Switzerland it is 212 times more than funds available for the sport industry from the state budget). The local government finances take the second place regarding the size of the financial support of the physical culture and Sport industry in Europe (communes, municipalities, land, etc.). The state budget as an additional source of funding for sports activity in developed European countries takes usually only the third place. Consumption of personal funds of citizens in Europe consists of: a) sport devices and equipment purchases; b) subscription fee for sport facilities. Another example of the citizens involvement in the sport industry development is introduced in Germany where citizens work on the volunteer basis in sport organizations that saves public money. Also of interest is the system of municipal finance support of the sport clubs.

The Physical Culture and Sport Industry is designed to solve many social and economic problems, such as the nation union, bad habits of young people elimination, diseases prevention, the average life expectancy and quality of life increases. Regarding high social significance of sport and physical culture it is required to provide the stable funding with the active government participation.

"Physical culture and sport" federal budget expenditures are shown in Figure 1.

Figure 1. Dynamics of the federal budget allocations for the Russian Physical Culture and Sport industry finance over the period of 2014-2016, ths. Rub.

The Russian Federation reforms the social and economic unit, which implies direct influence and changes with relation to physical culture and sports. The changes affect the system of management at all levels: federal, regional and municipal. This system is in need of updating and improvement according to the current changing market conditions. To improve the functioning of the system, the government needs to look for new approaches to the management of the national system of sport. Besides, there is an increase in the degree of commercialization of the physical culture and sports industry. On the one hand, this is caused by insufficient funding from budgetary sources, and on the other by changes in the legislation, which enabled the state sport organizations to commercialize part of the provided services. The modern tendency to increase the level of technological sport facilities require substantial financial investment in the sport industry, increasing the importance of good governance and highlights the need for new approaches to management.

The level of the physical culture and sports industry organization is one of the main indicators of socio-economic development of the country. In this regard, all countries have implemented measures to develop this sector. The work usually goes in two ways: firstly, increasing the image of the nation by winning international sport competitions by training top of the most talented athletes, and secondly, systematic work with the population of the country, where high achieving professional Sports are based on mass physical culture. Obvious advantages of the second way consist in the fact that it helps solve a number of important social issues final results and have the positive impact on the quality of people's lives. Thus, the good financing scheme is necessary for its successful development. Previous experience shows that the determination of the financing scale is not always taken into account at all levels of governance.

Sport organizations have to actively use the internal reserves not only to promote the qualitative services but also to attract people to their consumption. This issue relates both the development of sport organizations and the entire industry. The extra-budgetary sources take even bigger share in the physical culture and sports industry financing. Therefore, there is a need for a new type of management, aimed at the economic, managerial and marketing activities improvement in order to attract additional funds to sport organizations.

Currently, the investment system in the physical culture and sports industry is extremely unstable in terms of economic relations. This is due to the fact that an object of investment is not well defined in this area. Investment policy in the field of physical culture and sports, and investment performance depends on the orientation of the innovation infrastructure, taking into account the development consistency of these components. The management system in the field of physical culture and sports has changed regarding the functions of implications. The trend to apply the experience of international organizations in Russia can be perceived as necessary action with regard to global changes in the sport industry. This experience has brought major changes in the methodological and organizational approach to the management of the Olympic reserve sport organizations. In recent years, innovations, forms and methods of economic work of sport organizations and funding issues have become more urgent. They require immediate resolution as recent budget cuts led to the question of finding investors as well as building a new marketing policy. These issues should be solved in a short time for the further successful functioning of the entire system of physical culture and sports in the Russian Federation. The population motivation to consume produced services should be formed first to make investments in the sector more attractive. The sport organizations should offer a various physical culture and sport services as a way of additional education and leisure activities. This raises the issue of qualified personnel training for the sport industry that can effectively deal with new challenges. The speciality of competition in the field of physical culture and sports is the production of similar services. Growing instability in the external environment, the acceleration of the speed of changes greatly exceeds the rate of responses of the sport organizations management system which requires a change in the principles and methods of the organizational strategic management.

Sport facilities in the last decade are characterized by high rates of development in all countries as well as the development of the entire sport industry. The government has mobilized its role in this area. The federal target program Physical culture and Sport Development in the Russian Federation over the period of 2016-2020 is developed and implemented. The experience of the Program for 2006-2015 showed that the program-target method is most effective for the resource management and provision of a comprehensive solution to the issue. Therefore, the inertial way to solve the issue  is proposed, which implies the extension of the already approved measures. However, this method is not of high efficiency, as the further increase in the values of the targets will be achieved only in case of a linear growth of financial resources. One of the risks is the reduction of the budget financing of the program during its implementation (financial risk). The financial risks are exacerbated by the lack of separation of the infrastructure development of mass sports and the sports reserve that leads to the creation of imbalances in the equally important social objects because of the limited funding. The total funding of the Programme for the inertial variant is 80 589 million rubles (in prices of corresponding years), including:

federal budget sources - 64 575,00 mln. rubles;

the budgets of the Russian Federation regions - 14 139 mln. rubles;

extra-budgetary sources - 1 875 mln. rubles.

Since the inertial variant is based on the continuation of the activities carried out under the Programme for 2006-2015, without taking into account the new directions, the amount of funding for this variant is 75% of the funding of intensive option.

Whilst implementing the program it is planned to provide the necessary minimum of infrastructure to achieve the targets of the Strategy of physical culture and sports industry development in the Russian Federation for the period up to 2020. Namely the goal is to bring to physical training and sports:

  • Up to 40% of the citizens of the Russian Federation,
  • Up to 20% of persons with impairments,
  • Up to 80% of students.

The following things will be provided:

- construction of low-budget sport facilities for mass sports with the construction cost not exceeding 100 mln. rubles eventually, and having an aggregate one-time capacity of at least 27.74 ths. people.

Certainly, the financial crisis has made adjustments in the volume and structure of financial flows from the state budget and other sources. Also, the lack of effective forms of investment financing deterrents the positive impact on the physical culture and sport development in Russia in general and on the organization of new sources of financing in particular. The is a specific feature of the sports infrastructure development and financing in Western Europe when its landlords become local communities, land and municipal power structure. These historical trends are believed to contribute to high impact of sport. This funding sources sector actively finances sports and physical education directly from budgetary funds and helps attract private capital and sponsorship funds. The motivation of these processes is quite clear. These facts explain the wide representation of club forms of the sports the European countries municipal structures both on the public and on a commercial basis.

There is a different trend in Russia. For example, in the Moscow region, in terms of differentiation of sport facilities by ownership, statistics reports it as following: out of the 20 stadiums with bleachers for 1,500 seats 1 unit belongs to municipal property and 5 units are in private property. Planar sport facilities of more than 7,000 units and with an area of about 6 million square meters, approximately 33% is the municipal property. Less than 5% of the swimming pools belongs to the municipal property while in private ownership it is up to 30% (most of the services, "fitness"). Sport halls of one million square - municipal property - 10%, private - 5%. Therefore, the challenge for the development of sport club form is correct, but the potential is owned by local entities need to be developed. Analysis of the regions and municipalities budgetary resources shows a decrease of volumes of financing in the current period.

Despite the increased interest of the public authorities and management for the sport development, as a result of the crisis processes in the economy and culture in Russia there is some deterioration of the physical well-being of the population. Statistics show that the Russian Federation is far behind of the developed countries in terms of regular physical training, in which 40-50% of the population are constantly doing sports, while in Russia this number is only about 11%.

The current state of the Russian economy and the distribution of budget funds for 2014-2016 years does not allow to add new wave in the current program financing (FTP). Taking into account these facts the following recommendations can be suggested:

  • it is necessary to create organizational and tax systems for the active funds raising in such forms as the contract of public-private partnership, PPP lifecycle contract, LCC, a concession contract. These forms are successfully used in the sport facilities construction in the municipal structures of European countries.
  • To simplify the permitting procedure for the organization of the club form on a commercial basis in various sports in educational institutions as the basis of student sports.
  • to expand tax exemptions of direct (targeted) actions for investors and sponsors.

These measures may facilitate the implementation of the federal program on physical culture and sport in our country.

Based on the conducted analysis it is revealed that the Russian management system needs the approach, which would help solve some of the most urgent issues and optimize the system as a whole. The scientific approach to the management called idealized design is suggested to apply in order to improve the management of sports organizations. After the in-depth study of sport industry, its peculiarities and issues it can be confirmed that this approach is possible and fully consistent with the declared field. The idealized design approach can be a key to success for the sport organizations management, which require not only the standard leadership skills, but also a creative approach to business due to the specificity of the area. It may not only reform the system in a positive way, but also increase the level of quality management and comply with the trends of the sport industry in future.

Conclusion. In conclusion, a number of recommendations to solve presented issues and improve the prospects for the development of the sport industry in Russia are suggested:

• The government should participate in the financing of sport organizations to ensure the necessary level of development of the industry and to attract people to the sport;

• The principle of transparency should become the basis for the sport organizations funding, teams financing and promising athletes;

• It is important to create the necessary legal framework and the system of preferential tax treatment for sport organizations, as well as their investors and sponsors;

• Apply a new science-based effective management system - idealized design to solve problems, both at the state level and on the local ones;

• Implement a new technological base, scientific and methodological knowledge to achieve the highest sport results;

• Provide facilities for the athletes personality development and their skills improvement;

• Develop such a social sector as volunteer sevices;

• Pay attention to non-profit sport;

• Vest regional authorities the right to determine promising areas of their region for the development of mass sports;

• Provide the transition to a new, decentralized and democratic instrument for the interconnection of the regional sport committees;

It should be noted that first of all the reform of the management structure is necessary because other issues can not be solved without modernizing the control system. The current system is outdated and needs major changes. Centralized management system exists from the time of the Soviet period, so there is a necessity of changes that could optimize the entire system and meet the rapidly growing demands of the modern economy. As a result of the successful management reforms in the Russian Federation there should be a system that will enable Russian athletes to achieve the highest results, and will create a developed infrastructure of sport for the masses.

References

  1. Ackoff Russell L. Idealized Design: How to Dissolve Tomorrow's crisis… Today: Creating an Organization's Future. – Wharton School Publishing, 2007. – 290 p.
  2. John A. Davis. The Olympic Games Effect. How Sports Marketing Builds Strong Brands. – Wiley, 2013. – 360 p.
  3. Federal'naya tselevaya programma «Razvitie fizicheskoy kul'tury i sporta v Rossiyskoy Federatsii na 2016–2020 gody» (The federal target program "Development of physical culture and sports in Russia for 2016-2020") // http://government.ru/media/files/x7uHn4HpRIM.pdf.
  4. Hoye Russell. Sport Management. Principles and applications. - Butterworth-Heinemann, 2013. – 288 p.
  5. Karvunis J.A., Kapilevich, L.V. State and prospects of development of active youth tourism in Tomsk region // Teoriya i Praktika Fizicheskoy Kultury. Issue 10, 2014, P. 62-65.

Corresponding author: tvkalash@tpu.ru

Abstract
The development of the infrastructure and technological advances require considerable investments in sport facilities renovation. However, the sufficient financing level is not the only key factor to successful development of sport and physical culture. The management of the entire system in general and every organization in particular has also a great impact. Analysis of the best international practices shows the importance of smart management and continuous innovations for successful industry development. The paper illustrates current challenges of the Russian sport industry development and its financing specific nature as well as potential growth area. Peculiarities of the federal target program Physical culture and Sport Development in the Russian Federation over the period of 2016-2020 are represented. The researches of financial schemes, scope and its influence on sport development are conducted and funding sources are classified. The examples of successful international practices of capital raising are illustrated. The effective management system at the governmental regional and municipal levels makes this program happen. On the basis of researches authors provide recommendations for further Russian physical culture and sport management system improvement. A new approach to sport industry management called idealized design is introduced. The approach allows to extend standard managerial skills, to unlock creative potential of managers and improve the quality of management decisions. The approach is proved to be efficient for the Russian system of sport industry governing and applicable for further system renovation.