The Perfect Storm and the USTA By Javier Palenque

The perfect storm is a term used when a few concurrent events have dire consequences, the term came to the American lingo after a book by author Sebastian Junger called the “Perfect Storm” hit the bookshelves and movie theaters of America in 1997.?The ‘perfect storm’ is a once-in-a-hundred-year combination: a high-pressure system from the Great Lakes, running into storm winds over an Atlantic Island – Sable Island – and colliding with a weather system from the Caribbean: Hurricane Grace. The movie is worth watching and I encourage you to do so.

What does that have to do with tennis Javier? Well, if you are like me, a global consultant who can see the congruence of events that are about to hit our sport and the need to help the governing body see to what seems so clear to me:

?????????????????The US Open’s existence is under threat

and if we allow the US open to be under threat, then the sport is under a threat as well. Let me show you evidence of a few major events and situations that I foresee that the USTA leadership is not considering.

The executive team of the USTA has not gotten together and asked themselves “How did we get like this?” and wonder at the emerging signs that the culture and engagement strategies are simply not working. Now there is no one to make them think, have out-of-the-box solutions, and question the business model that as we speak is at risk. From an outsider’s point of view, in my experience what organizations often find in situations like this is that the company has no clear value system, the staff is hardly engaged, and the culture has devolved to something more akin to a “safety net” group that creates value for no one. This must be immediately addressed to avoid a major catastrophe.

Please consider if this sounds familiar.?

Unfortunately, many organizations find themselves in the perfect storm of their creation – poor culture, low engagement, and poor performance.?They are too busy thrashing about trying to weather the storm to focus on what is important and lead their organizations to a different alternative.?When people are in this storm, it takes a lot to encourage them to change – and for any change to stick. It takes an outsider like me who is not afraid to speak the truth for the benefit of the game. A truth serum with solutions is what is needed now. In the past decade, the USTA has never been better funded, yet it has helped too few kids, proof of this is the low participation numbers and high attrition rates. It has also accumulated losses of $220M (excluding 2021) is in debt for the next decade for a staggering $710M. This is a major burden on the finances of the organization, and it needs to be addressed with the proper logical solutions, but with the truth as a counterbalance to save the sport and the US Open. The sport still has so few people playing and of the wrong demographic groups, high-income kids with 75% attrition rates, and the oldest adults in the country. These demographic groups are not attractive for advertisers, manufacturers, or broadcasters. This is a threat to the future income of the USTA. ?The people within the organization are locked into survival mode evidenced by patterns and habits of poor performance, often cemented by fear of doing anything different. ‘Safety first’ can mean taking no risks, and every change, even a small one, may feel like a massive risk to someone operating defensively. The opposite is what is needed to embark on changing what does not work, I know how to do this, I have done it many times before.

When the dynamics are as described above, leadership often descends into ‘pretend management’- where they initiate all sorts of projects to re-establish a feeling of control (Net Generation, Deloitte, QuickStart, Club Spark, Laver Cup, Serve Tennis, etc.)?Each project is started with great fanfare – offering the leaders the illusion of ‘doing something’ and feeling in control, however so many of these projects are never allowed to fully run their course because completion means things can be judged and measured, which can be risky business when things are not going so well (and we have another ‘new idea’ that we want to follow that we feel positive about…) USTA always is doing what is needed at the precise time someone asks why don’t they do “X”? This management process benefits no one.

Isn’t it better to intervene before it gets to this radial point of concern? rather than just wonder “how did it get this bad”??When culture and engagement are ignored and no clear purpose is used to guide the business, things can get quite bad before anyone is brave enough to approach the subject. I have been writing for four and a half years and highlighting what is wrong, the board rather than inviting me to enlighten them sends memos out to not read my articles to staff and sections. This is a mistake; I intend to save the game and by doing so save the US Open from becoming irrelevant in our sports world. How often are culture and engagement the ‘elephant in the room’ USTA? Yet they still collectively do not see it.

Below are some of the reasons organizations find themselves in this perfect storm, maybe this list can help the board members see the issues from an outsider’s point of view:

Legacy – the nature of the business has changed, but not the culture and engagement of the USTA.?Businesses that built their successes in different eras have a culture of production efficiency and effectiveness that worked before but fail to see that they no longer work. Times have changed, and now in a world gone social and highly customer-centric, the ‘old’ approach is out of step with what customers and the marketplace will accept.?Often the senior leadership is (unfortunately) part of the dying legacy.?New fresh blood must enter the organization, but if the ‘old guard’ keeps doing what they have always done, even when everything has changed around them, it only means failure. This will create a wedge in the organization which exacerbates the differences, creating the conditions for the emergence of the perfect storm of poor culture, low engagement, and poor results. If the explanation of the situation is still not crystal clear, let me try this: The whole ground where the USTA sits has been shaken and changed and yet the USTA fails to see the need to change. Please board members come to terms that everything has changed and the USTA needs to change as well.

Focusing on the ‘what’ and ‘how’, failing to connect deeply to the purpose.?When a company’s purpose is to find a community and to serve a deeper purpose that they have, this company will always have customers.?Growing the game is a higher goal, the US Open is not, has not, and will never be a higher goal. It is the same with the logic of looking for an American star and funding player development $23M per year when the results are obvious for anyone to see, nothing of value is produced with so many resources allocated to a non-working effort. Organizations can believe that their ‘what’ or their ‘how’ is most important, and remain fixated upon this, even though the customers’ needs and purposes can now be served through other means (UTR, Pickleball, Cardio Tennis).

Fear – Power and fear are staples in many organizations.?When the culture runs on a need for political savviness, not intellect, or desire to serve, but simply plain old politicking, then the staff as they are not held accountable from the top think “creating ‘safety’ is the primary objective of the staff, then the culture and engagement will suffer greatly. Unfortunately, just like it currently does at the USTA.?A lot of this comes down to the top leadership and what do they do. When the leaders of the USTA work for the US Open alone as the real mission and claim that growing the game is the mission, this false logic all does is validate that nothing will change, it also means that the perfect storm is brewing inside the very organization.

Great communication and living demonstration of values is what is needed in these cases, but it is the actions and attitudes of the leaders creating uncertainty and fear which can have a massive negative impact upon culture and engagement.?Habit patterns that entrench poor culture, engagement, and performance will maintain the perfect storm against the very organization that supports them. This needs to be reverted as quickly as is humanly possible.

Poor standards – when it is OK for one standard to be broken, people unconsciously ask what else is flexible.?When people are not held accountable for their behaviors by their peers, when people are not called out for breaking standards or acting against the culture, then this becomes acceptable and opens the floodgates for others to test where the rules apply.?Having everyone accountable (yes, everyone, including the leaders!) to set standards of behavior, and having a culture of calling misbehavior to account protects an organization from descending into an established culture of selfish, non-accountable behaviors.?When people are not clear on what the standards are it makes it difficult to hold them accountable to them.?People then operate in self-interest which destroys culture and engagement. USTA has many examples of this precise observation happening every year.

Not responsive and not responsible.?When an organization is not responsive to what needs to be done, rather than being responsible for making the right choices and responses to changes in the market, engagement, culture, and performance can all suffer this lack of accepting responsibility. This creates a culture of continuous destabilization and perpetuates exactly what needs to be changed, the poor culture. Mr. Dowse has learned that the hard way, and now the board is scrambling to find a solution when the problem is them and the governance structure that got them to that board position. This cannot be ignored if a solution to the bigger problems is what is needed.

As you think about my suggestions for the USTA, which of the above is already affecting the culture, engagement, and performance? or which could be the area where things could start to turn bad? Think about it. Let me just describe the facts that are piling up to create the perfect storm that will sink the USTA. I am going to separate the category of upcoming events so you can have a better grasp of simply how immediate this is and how irresponsible it has been of the directors to let this get to this point and still not use the resources in a better way.

Cash and Financing (approximately $1,000,000,000.00 one Billion Dollars)

- Very low reserves after Covid.

- Principal payment of $71M due this year excluding interest charges.

- $220M losses excluding 2021, expect another $30M loss added to that for 2021.

- $710M long-term debt, $200M due in 9 years as a principal payment.

- No stock market gains to hide poor operation performance of last five years.

- Bloated payroll with no real ability to fix the problems.

Broadcasting rights and Sponsorships (approximately $70,000,000.00 - 150,000,000.00 per year)

- ESPN lost last year 10M subscribers, this year expect another 10M.

- ESPN is losing money yearly approximately $3B. Walt Disney will sell it soon.

- With ESPN+ the real number of tennis fans will materialize, it is not the numbers USTA claims, it is much less.

- There is no way ESPN will pay the same yearly rates as it did in 2015. Expect a 50% drop in revenue from broadcasting rights.

- The moment ESPN new broadcasting rights is announced and since the reach will be reduced significantly expect to lose 30% - 50% of sponsorship or non-renewals.

Country Changes / Marketplace shifts (approximately $10,000,000.00 - $45,000,000.00 per year)

- Demographics have shifted and USTA has never paid attention (please watch my video explaining this issue)

- Psychographics change of consumers and USTA has ignored them for decades.

- Pickleball is picking up older adults and taking real estate away from tennis.

- Average age of a tennis coach is 58 years old. They have 6-7 years at best left, this is a major problem.

- Most common age of a white person in America is today 58 years old, this is the base of the tennis market, it is too old.

- Millennials and Gen Z have no idea what tennis is or have a relatable person to introduce the sport to them. (this is half of the working population in the years to come)

- Poor competition system, is a pay-to-play system that discourages many parents from adopting the sport. What the sport needs is to add competitors and competitions, the current system does the exact opposite.

USTA Board of directors, executives, and sections

- All operate under a failed governance model that they do not wish or even consider to change.

- Sections spend 96% or more of grant money on payroll and overhead, no money for programs.

- USTA passes the cost of learning the sport to a marketplace that does not know tennis.

- Player Development still gets $64K per day or $23M per year and no results.

- Lake Nona loses money yearly.

- No American stars are worth watching.

- No results in Davis Cup.

- Executives refuse to show how poor participation numbers are, putting the entire US Operation at risk.

- 70% of tennis is played in parks and there are no park programs from the board or budget for that matter.

- The executives that created the storm are still employed and have no means to solve the problems.

- Losses of all programs: Net Generation, Deloitte, Laver ?Cup, Lake Nona, QuickStart, Serve tennis, US Open.

- US Open loses money every year even with $485M revenues, this needs to be fixed.

- There have never been fewer tennis players as now ever in the country.

- Participation reports that are not reflective of the tennis reality. This practice must end.

Tennis Superstars Retiring

-?????????When the top players are above 34 or thereabouts, this is an entertainment problem for the whole industry. No Williams Sisters, Nadal, Federer, or Djokovic is a major setback to the event.

Understanding what may cause issues is useful in diagnosing the problem and suggesting where to start to weather – then recover from – the perfect storm.?It is critical to start doing something to make a difference to the way the organization operates to break the perfect storm as soon as possible. The problem starts at the top, and the leader must see the problems from the outside. This is serious, there is no time to waste. As you can see, unless the board understands that the problem tennis faces is like that of an ill-conceived supply chain, it will be impossible to save the US Open or the sport. The economics are simply not there anymore. I have twenty years’ experience addressing these kinds of problems in many industries, let me help the game.

So, what is the solution to all this?

Watch my 60-minute video presentation, read the 46-page solutions booklet. and come to your conclusions.

Finally, a very important point. All the USTA people fail to see this problem from this perspective just described. Michael Dowse failed to see it, then the rest of the team rather solve the conundrum, keep quiet, and unfortunately continue wasting resources that can be better used saving the game over the long term. The storm is coming and no one from the established network can solve the problem they do not see. If they saw the problems, as I do, we would not be in the situation we are in today.

I want to be the next CEO of the USTA, these problems cannot be fixed internally, they were created by the status quo. It is time to change the guard and to grow the game. There is simply no other choice.

I can be reached at [email protected]

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