Chelsea were left counting the cost last night as Steve Clarke completed his move from Stamford Bridge to Upton Park. Chelsea had hoped to receive £5 million in compensation for the loss of a valued member of their backroom staff, but settled for a sum in the region of £1 million.

Clarke has been appointed first-team coach to Gianfranco Zola, the new West Ham United manager, and is likely to start work today. Zola, who took charge of training for the first time yesterday after being appointed last week, had named Clarke as his preferred coach when he was interviewed for the job.

The Scot agreed a three-year contract, likely to be less than half the value of his deal at Stamford Bridge that was worth £600,000 a year, plus a possible £200,000 in bonuses, and had another two years to run. Chelsea are thought to have had a clause inserted in the settlement that prevents West Ham - the East London club will pay the compensation in instalments - from recruiting any other Chelsea staff for several months.

Clarke resigned as Chelsea’s assistant first-team coach on Thursday, but this was rejected by the club, who threatened to put him on gardening leave, as well as report West Ham to the Premier League for tapping-up their employee.

Clarke, 45, is believed to have wanted a new challenge after appearing to be marginalised this season. He made an important contribution as an assistant under José Mourinho, the former Chelsea manager, and was in charge of most of the training sessions under Avram Grant, the successor to the Portuguese, but has had less involvement under Luiz Felipe Scolari.

He was popular in the Chelsea dressing-room and the club have no imminent plans to replace the man who began his association with Chelsea as a player in 1987.

Kevin Keen, the reserve-team coach, who was in charge of West Ham’s 3-2 defeat away to West Bromwich Albion on Saturday, has been promoted to take on first-team duties, helped by Ludek Miklosko, the goalkeeping coach.

“Steve is rightly regarded as one of the top coaches in Europe and his experience will be a huge asset to us,” Scott Duxbury, the West Ham chief executive, said. “He recognises what we are trying to achieve and wants to be a part of that. We are confident we now have the perfect coaching team.”