Real Madrid want to sign a Director of Football who would take care of the signings and transfer policy in general. Apparently, Fernando Hierro and Pedja Mijatovic are the ones on Florentino Pérez's shortlist for that spot.
Hierro was the assistant coach last season and left the team shortly after Carlo Ancelotti was fired. However, he was Málaga's Director of Football after his retirement so this could be a good spot for him. On the other hand, Pedja Mijatovic did a good job when he was the Director of Football during the Ramón Calderón era as the President of Real Madrid. He signed players like Marcelo or Higuaín.
Real Madrid probably need someone to take care of the signings. Mourinho was in charge after Valdano was fired in 2011 and nobody has been signed as the Director of Football ever since, meaning that the coaches and the President have been responsible for the signings.