Thursday, March 11, 2010

The Salary Dilemma: A Major Investment in College Athletics


This posting was authored by Tony Weaver, Assistant Professor of Leisure and Sport Management at Elon University. Tony has agreed to occasionally provide research summaries. Prior to teaching at Elon, Dr. Weaver was an athletic administrator at Iona College, Siena College and the University of North Carolina at Greensboro.

It seems every year during and after football and basketball season, coaching salaries at “major” Division I schools become an issue, and this year appears to be no different. In January, Dr. Andrew Zimbalist recently brought up the point again during the NCAA Scholarly Colloquium on College Sports, asking the NCAA to pursue an antitrust exemption to regulate salaries, which would put limits on the amount of money a coach can receive. The greatest benefit of such a move would allow the NCAA to control an expense that appears to be unregulated by individual schools due to “market demands” and the need to attract and retain highly successful coaches. Ideally, this would provide a level playing field among schools eliminating the need to outbid each other for the next high profile coach. If this were to work, coaches may be more apt to stay in one school and eliminate the quick exits that have become all too familiar. However, this option does not appear to be a valid possibility due to legal issues. Jim Isch, the NCAA's interim president, and Jeff Orleans, former Ivy League executive director, feels that it would not be in the best interest of college athletics or higher education to pursue legal action limiting salaries. The NCAA history of restricting salaries cost the association dearly in the late 1990’s when it tried to restrict assistant coaches’ salaries. Implementing control over how universities spend money can be incredibly difficult due to restraint-of-trade laws and the competitive environment of higher education and college athletics.

Past scholars have attempted to address this issue but have had little to no success of making any significant impact (at least based on the continuous rise of coaching salaries). Even during a recession, attempts to control salaries have been limited to a select few positions at schools that have seen across the board salary reductions. More common has been the continued practice of pay increases, contract extensions or hiring new coaches at a higher salary than their predecessor. The decision to invest in a coach is based on the expectation that your program will win, and in some cases win big, resulting in an increase in revenue for the program and the institution. Such was the case in January of 2007 when the University of Alabama hired Nick Saban to a staggering eight year, $32 million guaranteed contract. At the time the record breaking contract created a large public outcry to control coaches’ salaries. Since then, Alabama went on to win 2010 BCS National Championship Game, and Saban received a contract extension. Another article connects the Saban contract to perhaps the most important bottom line for measuring a coach’s contract: an increase in revenue. In 2008, the University of Alabama football recorded a profit of $38 million. And, according to the USA Today, head coaching salaries for Division I football coaches continued to rise.

Why? Sandy Barbour, athletics director at the University of California at Berkeley, captured the essence of the salary dilemma within the context of college athletics while discussing the contract of Cal head football coach, Jeff Tedford and his $2.8 million a year contract:

"If we let him go because we're not willing to pay market, we'll pay a huge price. Because I don't know that we can go out and find another coach with that combination of skills and (academic) emphasis."

However, not every coach hired brings championships or winning seasons to their respective institutions; meaning some critics could view the large contract as a poor investment. For every Alabama, there are hundreds of schools that have invested in a program that does not produce championships and increased revenue. Administrators seem to be reacting quicker to the “mistake” by firing coaches before their contract expires and now more frequently during the middle of the season.

Finally, with the recession hitting higher education hard over the last 2 years, it appears the salary issue is receiving media attention for other athletic department jobs as well. Recently, media attention has been given to the increase salaries for assistant coaches and athletic administrators, positions that in the past may have escaped the focus of the public and the media. Most constituents have come to realize that the head coaches of major football and basketball programs get paid very well. However, other positions in athletic departments have started to come under scrutiny for their high salaries and large contracts. Higher education administrators, especially athletic directors, will continue to have to make tough salary decisions and determine the market value of their employees. It appears now more than ever the decision to hire and fire will be judged with a high level of public scrutiny. In some cases, the failure to higher the right coach could lead to the demise of the athletic director and president. Perhaps that is why more schools are paying good money to search firms to help find the ideal candidate. Without question the salary debate will continue well beyond March Madness as basketball coaches are fired and hired, contracts are extended and terminated, and maybe we will crown a new coach as the “highest paid basketball coach”. I guess we will then have to wait and see if he or she was worth the investment…many people are watching.

Case Study: The University of Arizona

Last season, Sean Miller left Xavier University after a successful 5 year run to become head men’s basketball coach at the University of Arizona. Similar to many other successful “mid-major” programs, Xavier lost Miller to a BCS school that could afford to pay him more money and provide more resources. Miller, who had signed a 10 year, $850,000/year contract with Xavier in 2007-2008, was offered a 5 year contract with an annual salary of $2 million. The contact made Miller the highest paid employee at the school and thus caught the attention of the Arizona State Board of Regents. In June of 2009, Ernest Calderon, President of the Arizona Board of Regents, commissioned a special committee to examine not just Coach Miller’s contract but review the cost associated with intercollegiate athletics, specifically the Division I programs at the University of Arizona, Arizona State University, and Northern Arizona University.

In this video clip, President Calderon speaks candidly about the present condition of athletics and in particular the escalation of coaches’ salaries. Note: the discussion about athletics occurs from 1:05-4:52 of the video.


Quick links:

Mid-season dismissals:

UNC Wilmington fires coach; AD takes responsibility for the decision

Andy Katz of ESPN captures the current practice of firing basketball coaches mid-season

Evaluating a coach:

Saban hiring impacts more than just Alabama football

The financial implications of firing Penn State’s basketball coach

The job security of the Rutgers basketball coach

Auburn basketball struggles

Eastern Illinois invests in their basketball coach

University of Toledo’s basketball coach: Highest paid departmental employee, losing season

Division I Head Coaches Salaries:

http://www.usatoday.com/sports/college/football/2009-coaches-contracts-database.htm

Assistant coaches salaries:

Paying Tennessee assistant football coaches

Alabama assistant football coach gets big pay raise

Atlantic Coast Conference assistant football coaches are well paid

Athletic director salaries:

Georgia athletic director gets pay increase

Athletic Director database from 2009 Bloomberg

2 comments:

Kevin Barefoot said...

Great article! I just wanted to share one more video that compliments your piece:

http://www.kval.com/news/local/84154262.html

Kevin
Kevin@WinthropIntelligence.com
www.WinthropIntelligence.com

mike said...

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