Coming to Terms

As the market for head coaches continues its volatile trend, athletic directors need to be savvy, creative, and forward-thinking in negotiating (and renegotiating) coaching contracts.

By Dr. Thom Park

Thom Park, Ph.D., is a former college football coach with stops at Maryland, The Citadel, Connecticut, and West Chester. An adjunct faculty member in sport administration at Florida State University since 1980, Dr. Park serves as a consultant and financial advisor to the football industry and is a nationally recognized authority on sports business issues, contracts, and agency.

Athletic Management, 13.4, June/July 2001, http://www.momentummedia.com/articles/am/am1304/terms.htm

There is no good time to lose your head football coach. This is especially true if he just went 11-1, beat Florida in the Sugar Bowl, finished number two in the country, and is only a few days away from signing an incoming recruiting class.
Much has been said and written about Coach Butch Davis moving up to the NFL Cleveland Browns for a deal Sports Illustrated reported as being worth $15.7 million over five years. But, for athletic directors, like the jilted Paul Dee at the University of Miami, the real issue is how to negotiate and renegotiate contracts with revenue-sport coaches that keep them a solid fixture at your institution.

Given the trend toward high mobility for coaches in the revenue-sport marketplace, meaning primarily football and men’s and women’s basketball, athletic directors and their university attorneys have been burning the midnight oil looking for retention solutions. Of course, coaches have always been mobile, but the level of turnover has recently reached staggering levels. In NCAA Division I-A football, for example, over the past three years, 87 of 115 head positions have changed. This past season alone, 23 I-A jobs opened up.

A change in leadership affects any organization, and intercollegiate athletics is no exception. In most cases, changing the leader of one of your top sports is a negative situation. It is time consuming, expensive, and full of potholes and unknowns.

In addition, the rules for getting and keeping the best coach possible for your institution have changed over the past decade. Today’s athletic director must be savvy in his or her strategies and tactics for recruiting, rewarding, and retaining the best coaches. Such strategies must also take into account the changing economic climate.

A New Game
Whether you’re hiring a new coach or renegotiating a contract with a current one, the first thing to understand is that these transactions have evolved considerably in complexity over the past few years. As intercollegiate athletics has rapidly become more professionalized, more commercialized, more legalized, and surely more monetized, so have coaches’ contracts.

The first byproduct of these changes is that both sides have sought external help. Many coaches are seeking advocacy in the form of professional assistance from sports lawyers or agents. And many athletic departments are asking their own team of experts to get involved because the requisite expertise does not exist in-house.

A second change is that issues with contracts have become more complicated, at every level of play. For example, non-faculty coaches in the NCAA Division II Pennsylvania State Athletic Conference formed a union and last fall started talks with the state university system seeking a guaranteed pay structure, job security, benefits, and a grievance procedure. The union voted in September to authorize a strike, but negotiations are continuing, and the coaches are still at work. While a strike has been averted so far, these happenings illustrate the idea that coaches everywhere are evaluating and negotiating their status as employees.

Another emerging problem is the athletic director-coach relationship. As more and more athletic directors come in without a coaching background, but rather are former lawyers, accountants, sports information professionals, and marketing and business people, they are sometimes seen by coaches as bosses who don’t understand the coaching world. Coaches want their athletic directors to be their mentors and partners, but they are sometimes skeptical of a boss who has not walked in their shoes.

Understanding External Agents
While many athletic administrators and coaches reminisce about the days when a handshake and a person’s word were as good as a written contract, the truth is that intercollegiate athletics is not going back to those “good ol’ days.” Having lawyers and agents in on the discussions is a given, and the best strategy is to accept this as reality.

If you look at it from the coaches’ standpoint, their best interests dictate an external agent help them through this process. Between coaching, recruiting, strategizing, working with current athletes, and promoting their programs, most coaches simply don’t have time to become savvy about financial issues and the business world. So hiring someone to help them with negotiating a contract makes sense.

As Martin Greenberg, a leading expert on coaching contracts and Adjunct Professor at Marquette University, writes in the Marquette Sports Law Journal, “College coaches are an unprotected class of employees. They need representation. College coaches require a much more sophisticated form of contract negotiation than do professional athletes. Coaches do not have standardized contracts.”

Agents come in many forms. They can be sports lawyers, accountants, financial advisors, or other business people who act in an agency capacity. Agents enter a relationship on behalf of their client, who generally pays them a negotiated fee. Some agents do all the negotiating, some act as advisors only, while some coach the coach.

Whatever the case, you may wish to ask the coach up front about the exact role of his or her agent. This ensures everyone is on the same page as to how communications should proceed. Most important, you should be open to listening to all options as you seek the best candidate the marketplace has to offer. Don’t take a prospective coach off your list simply because he or she has an agent and you prefer dealing directly with the coach. The better coaches are seeking representation.

Also consider that the agent may remain in the picture after the initial contract is signed. Many coaches retain an agent or advocate on an ongoing basis to help them renegotiate or move to a higher-level program in the future. Progressive athletic directors work with these intermediaries and respect them as the coach’s advocate.

On the flip side, no athletic director should think twice about using lawyers and other professionals to help his or her cause in the negotiating process. In fact, university legal counsel must be conferred with from the very beginning. When the school’s lawyer is involved as the athletic director recruits a coach, makes institutional promises, and commits to specific terms, deals can be closed much more quickly. The late entry of the school’s lawyer can slow the process down.

In addition, “deal teams” are becoming the order of the day at schools with highly paid coaches. These teams normally involve an attorney, a financial person, a professional in insurance methodologies, and a compensation expert. Because of the complexity of these negotiations, these teams ensure all the expertise is brought to the table and nothing is overlooked.

But, with agents, lawyers, and financial consultants all in the picture, what is the athletic director’s role? It is the role he or she is usually best at: managing the process and making it a positive for both sides. Athletic directors must control the negotiation process and be the point person in managing the transaction. You don’t need a law degree or MBA to do this. You do need your excellent communication and organizational skills to ensure that the negotiations put your coach on the right track to become (or remain) a vital member of the athletic department. You must manage your own experts.

As the point person, the athletic director must also be sure that the experts he or she chooses are well-versed in working with coaching contracts. Ultimately, you, as the athletic director (sometimes in conjunction with the university president), will be the one answerable to what the contract says, so you’ll want to make sure your deal team is a good one. For example, if your university’s counsel has not worked on coaching contracts before, you may want to suggest that co-counsel in the form of external expertise is sought for these negotiations.

21st Century Contracts
How do you entice a coach to join your program? How do you retain a great coach? The quick answer, of course, is: pay him or her more money. But that simple answer is not always the best one. Everyone wants to make more money, but there are many other incentives that today’s coaches want to see in their contracts.

In fact, foremost in a good coach’s mind is generally not monetary compensation, nor contract terms, nor job security. It is winning—and having the capability to do so. Despite public perceptions to the contrary, coaches do not coach for the money nor for security because, for most, the profession offers neither. They want to succeed and this means to win. Therefore, most coaches are especially concerned about administrative and program resource support—and any other factors that impact winning.

So, while the lawyers and financial consultants dicker over the dollars and cents and terms of the contract, you can concentrate on speaking to the coach in his or her own language. Ask what resources and support services are important to him or her and find a way to provide these elements. For example, you can propose ideas on improving facilities, staff compensation, recruiting budgets, video support, and admissions policies. Then, include these important details in the negotiation or as an addendum memo to the contract.

Getting back to the money issue, understand that there are many ways to compensate a coach. So often, schools fail to procure the candidate they desire in a search because their dollar compensation package is not deemed competitive. People get stuck on a number.

But, by being creative in structuring all compensation incentives, you can often lure (or keep) that coach who initially seemed out of your price range. In other words, incentives should go well beyond gross pay. Qualitative perquisites such as club memberships, tuition reimbursement, performance bonuses, courtesy cars, camp income, endorsements, radio and TV packages, housing or mortgage assistance, moving allowances, spousal employment, expense allowances, non W-2 income, annuity and insurance benefits, retirement plan funding, medical and dental plans, and “golden handcuff” back-end arrangements are all ways to attract and retain coaching executives beyond dollar compensation.

Once a coach reaches a certain income level, additional after-tax benefits can be much more attractive than a pay raise. In many cases, deals die over a set compensation figure. But this does not have to happen if we think creatively about financial incentives. This is an area where deal teams can help immensely.

Make It a Partnership
The final discussion point on negotiating coaches’ contracts has little to do with the nuts and bolts of the written terms, but is the most important factor in luring and keeping a great coach. It involves forming a positive relationship and rapport with the coach from the very start.

If you are not a former coach (or haven’t coached in many years), this starts with overcoming the problem of never walking in his or her shoes. A good athletic director must fully understand the life, mind-set, needs, program requirements, and personal dimensions of his or her coaches if a successful tenure is to transpire. And the athletic director must demonstrate this understanding. Employees want to believe their boss fully comprehends their situation.

Herein lies a key issue and emerging problem. The escalating business and monetary pressures of intercollegiate athletics increasingly puts the athletic director and the coach in ever more adversarial roles. Athletic directors must recruit, hire, supervise, evaluate, compensate, reward, retain, reprimand, terminate, and replace their revenue sport coaches. Being a buddy with your coach is often not appropriate, nor as easy as it once was.

Instead, your leadership skills become critical. You must be perceived as even-handed, competent, fair, objective, and professional. Maintaining a professional relationship with all your coaches is very important. When work environments are highly competitive, stressful, and pressure filled, professionalism is critical.

A big part of these leadership and professional skills involves constant communication with and solid support for the coach. This starts with good personal skills, but also entails managerial integrity. Annual performance reviews, ongoing feedback on job performance, regular involvement, and proactive support are key. These items lead to cooperation and lessen the potential for adversarial roles to develop.

It is also important that you provide great athletic administrators with whom the coach can work. A good facilities manager, a successful development person, a creative sports information director, and a proactive administrative staff prove that your leadership skills carry over to the entire department—and ultimately help the coach to achieve his or her goals.

This all leads to something just as important as recruiting and signing the initial contract: retaining the successful coach. If the coach sees the athletic director as a business partner or mentor rather than an adversarial boss, he or she will be less enticed by new opportunities at other institutions. Good communication and ongoing support greatly reduce the likelihood of being bushwhacked by a surprise defection. You must trust each other.

In addition, maintaining a positive working climate sets the stage for a constructive negotiation when that time comes. Renegotiating with a sitting coach is clearly an art and not a science. And the development and maintenance of positive personal relationships within the athletic department are a crucial aspect of leadership that make this process easier.

Athletic directors must, like coaches, increasingly master a number of professional roles in order to competently do their jobs. Running a successful business enterprise, knowing the legal elements of contracts, and mastering the creative financial techniques that can be used to induce an employee to stay are skills the modern athletic director must borrow from business and industry. This requires professional education and development. But it also entails knowing your niche: the coach’s life and career.



Sidebar: Theory Y Contracts
Even with the best lawyers and business professionals helping you negotiate a new coach’s contract, you, as the athletic director, still will be making decisions about the nature of the contract. There should be a sound philosophy behind your coaching contracts and it should match the direction of your department and institution. You’ll most likely want to annually discuss this topic with senior-level administration.

For example, I believe in a Theory Y type of contract that rewards and motivates the coach. Theory Y refers to a management style in which employees are given direction, resources, and incentives to perform, with the freedom to tackle the job as they see fit. This is in opposition to Theory X, which espouses that workers need to be tightly controlled and not trusted.

A Theory Y strategy would produce a contract with lots of incentives, what is called a “golden handcuffs” approach. The idea is to offer the coach rewards for performance and for not moving on. For example, the contract can state that, if the coach remains at the institution for “X” number of years, there is a big pile of tax-deferred money waiting for him or her at the end. If the coach stays, he or she is financially secure.

This is in contrast to contracts that focus on requiring back-end buyouts by the coach if he or she does not want to stay. These type of contracts prevent the coach from leaving. Salary mitigation protects the university against continuing to pay the coach’s salary if he or she doesn’t work out. Smart agents will avoid such Theory X tactics for their coach clientele.