- Joined
- Nov 3, 2008
- Messages
- 5,172
- Reaction score
- 1,386
- Points
- 113
Made To Be Broken: Tubby Smith and Coaching Contracts (Part I of II)
By J.B. Bauer
Four More Years?
What really matters in the contract negotiations between head coach Tubby Smith and the University of Minnesota?
http://www.gopherhole.com/news_article/show/148022?referrer_id=388419
Reports of an imminent contract extension between the University of Minnesota and head basketball coach Tubby Smith seem to occur every few months and recently the reports are as strong as ever. Whether or not an extension is agreed to by the parties this summer isn't necessarily a significant matter, however if an extension is agreed to, the specific terms of the agreement could be very important. Most headlines will emphasize a salary figure and contract length, but don’t sweat those. In the grand scheme of things, they matter very little.
This is a two-part article which explores men's basketball coaching contracts with an emphasis on University of Minnesota head coach Tubby Smith's contract and ongoing negotiations between him and the school.
Numbers aren't standalone facts. They must be understood.
You'll often see reports that include comparative compensation of NCAA men's basketball coaches, but there is no data bank that correctly captures the intricacies of college coaching contracts. These contracts include widely varying components of compensation and other terms. In addition, despite the relatively high dollar amounts involved, many contracts are poorly written and ambiguous.
The total price tag for a men's basketball coach continues to rise and that trend will continue into the foreseeable future. Unless you want to review contracts in great detail, my suggestion when deciding if a coach's pay is reasonable is to simply determine if it appears to be in the same ballpark as the pay of his peers. Most comparisons that attempt to rank the compensation of coaches against one another are flawed because they result from a quick data mining exercise of key terms from contracts, rather than the comprehensive review of the legal documents and understanding of various factors that are required to make meaningful comparisons.
The truth is that the compensation of most coaches falls within a reasonable range for the job. Whether basketball coaches in general are paid too much is a separate discussion, as is whether or not a particular coach is doing a good job. At the end of the day, I'm judging a coach by what the program is doing on the court and in the classroom. You don't get a pass to lose a few more games just because you're making $1.4 million a year instead of $1.9 million.
When it comes to the U and Tubby Smith, the focus should be on one area. That subject will be examined in Part II of this article; however, here in Part I we'll discuss some of the components that are frequently seen in contracts, including their relevance for an institution like the U.
Guaranteed Income
Base salary - Often times the base salary is a relatively small part of the overall compensation package for a men's basketball coach This may be for any number of reasons, but usually it's political in nature (i.e., fair pay practices). Tubby's current contract set his beginning base salary at $600,000 and provided for a minimum increase of 5% on May 1 each year (beginning in 2008). Therefore, Smith's current base salary is at least $766,000 under the terms of his current agreement.
Supplemental income - Loading most of a coach's salary here helps from a legal and political perspective. This component relates to pay in exchange for the revenue generated by the coach for the institution through working with the media, endorsements, fundraising, etc. Usually the payments related to the coach’s supplemental work are received directly by the institution and in return the coach is paid an agreed to amount each year.
Tubby receives $1,150,000 per year of "supplemental income". When comparing the compensation of a men's basketball coach to a women's basketball coach, the stance of having fair pay practices is bolstered if much of the difference in pay is related to outside revenues that are specific to the men's basketball program.
Supplemental retirement contribution - The age and family situation of a coach can be a factor in whether or not there is interest in this type of component and many coaches do not receive such a payment from their employer. In the case of Smith's current contract, beginning in 2011 he receives a $250,000 contribution each April 30.
The three components above bring Tubby's current pay to a minimum guaranteed amount of $2,166,000 (this excludes the value of typical fringe benefits received by most full-time employees of the U). It's not a small number and there is an argument that on court performance has not been in line with that figure, but based on a multitude of factors which include Smith's experience and reputation, the amount is not out of whack with the rest of the college basketball world. If terms under a new agreement place the guaranteed figure in the $2 million to $2.5 million range, I think the U would be paying fair market value for what they are expecting. Now, if an extension increases the amount of guaranteed money to $3.0 million or more, then there would be reason for additional criticism and questions.
Other Income, Excluding Incentives
Common perquisites include travel for spouse and family, moving expenses, automobile, tickets to athletic events, use of facilities for summer camps and clothing. Smith's agreement is fairly vanilla in this area, although it included $50,000 for "each summer period" he ran a basketball camp during the first four years of his contract. While Tubby received guaranteed money for these camps, more often a school will allow use of its facilities for a summer camp, but the coach will be required to reimburse the school for use of the facilities, including dorm rooms, cafeteria, etc.
Incentives
Most every contract includes incentives, but the components of incentive plans vary greatly. It's an important point to remember that some bonuses are paying a coach for a job well done, whereas others are effectively putting pay at risk by setting the bar of achievement very low. Overall, incentives tend to be a small part of a coach's compensation and there is significant room for the pay of coaches to be more aligned with performance on the court, in the classroom and at the ticket gate. Nonetheless, the market has not forced a shift in pay practices. With any contract negotiation, an institution has an opportunity be an innovator, but I'm not expecting anything interesting coming from the desks at the U.
Incentives types can be broken down as follows:
Athletic - The most common of incentives, a majority of men's basketball coaching contracts include bonuses based on team performance (based on numerous research papers, it appears more than 90% of contracts include athletic incentives).
Tubby's incentive for making the tournament is relatively generous compared to some other big name coaches ($100,000 per year), but until reaching the Final Four the cumulative amounts are not large (Smith receives an additional $50k for a Sweet Sixteen appearance, $75k Elite Eight, $250k Final Four and $500k for a national championship victory).
As a supporter of a program, would you rather see a lower guaranteed amount and a higher incentive for making the tournament? Many would, but that's not the norm.
Academic - I estimate somewhere in the ball park of two-thirds of D-1 programs include some sort of academic incentive, but even for those that do the amounts involved are usually lower than the athletic incentives of the same school. In Tubby's case, his academic incentives are outdated and the graduation rate component which provides for a $100,000 bonus each year is almost a freebie (50% graduation rate required). In addition, Smith receives an annual bonus based on his team's APR starting at $25,000 for a 930 score (which is the new cutoff level for remaining eligible to compete in NCAA postseason play) and increasing up to $100,000 for a mediocre score of 950 or better.
It could be argued that Smith's contract gives him $200,000 in "academic incentives" as long as his kids don't have a horrible year in the classroom. It's specifics like this that highlight why comparing compensation between coaches without knowing the details of the contracts is flawed -- you're playing with semantics by saying Smith is getting $2.166 million, but could add $200k with academic incentives as opposed to saying Smith should get $2.366 million, but $200k of that is at risk and will be taken away if the team has serious issues in the classroom.
There can be good reasons why a contract may use incentives to put pay at risk as opposed to be used for excellent performance. Such arrangements can be good for all parties involved, but the details must be understood to make relevant comparisons between coaches.
Other - The possibilities are endless, but there's nothing interesting in Smith's current contract. Some schools, including Big Ten members, have included innovative incentives such as bonus opportunity based on crowd attendance. Minnesota's regular season victories against RPI top-50 teams have decreased in each of the last two years (from 5 in 2009-10, to 3 in 2010-11, to just 2 in 2011-12), their non-conference strength of schedule this year was better than only Nebraska and Iowa when compared to all other Big Ten schools and average attendance figures dropped more than 10% this season. By my count, the Gophers had 2 sellouts all season in 2011-12, compared to 8 in 2010-11 and 9 in 2009-10.
Playing great basketball and scheduling good opponents will bring fans to Williams Arena and both of those are largely in control of the head coach and his staff. How about a little less guaranteed money, replacing it with an incentive based on crowd attendance? For example, you could pay a coach nothing if attendance is 12,500 or lower. Average between 12,500-13,000 and the coach receives $25,000, and so on.
What really matters?
With respect to Tubby Smith's contract, none of this matters much. The above is all small stuff. Later this week, Part II of this article will look at other considerations including the length of contract, facilities and then get to what really matters if there is a new deal between the University of Minnesota and Tubby Smith: the termination clause.
By J.B. Bauer
Four More Years?
What really matters in the contract negotiations between head coach Tubby Smith and the University of Minnesota?
http://www.gopherhole.com/news_article/show/148022?referrer_id=388419
Reports of an imminent contract extension between the University of Minnesota and head basketball coach Tubby Smith seem to occur every few months and recently the reports are as strong as ever. Whether or not an extension is agreed to by the parties this summer isn't necessarily a significant matter, however if an extension is agreed to, the specific terms of the agreement could be very important. Most headlines will emphasize a salary figure and contract length, but don’t sweat those. In the grand scheme of things, they matter very little.
This is a two-part article which explores men's basketball coaching contracts with an emphasis on University of Minnesota head coach Tubby Smith's contract and ongoing negotiations between him and the school.
Numbers aren't standalone facts. They must be understood.
You'll often see reports that include comparative compensation of NCAA men's basketball coaches, but there is no data bank that correctly captures the intricacies of college coaching contracts. These contracts include widely varying components of compensation and other terms. In addition, despite the relatively high dollar amounts involved, many contracts are poorly written and ambiguous.
The total price tag for a men's basketball coach continues to rise and that trend will continue into the foreseeable future. Unless you want to review contracts in great detail, my suggestion when deciding if a coach's pay is reasonable is to simply determine if it appears to be in the same ballpark as the pay of his peers. Most comparisons that attempt to rank the compensation of coaches against one another are flawed because they result from a quick data mining exercise of key terms from contracts, rather than the comprehensive review of the legal documents and understanding of various factors that are required to make meaningful comparisons.
The truth is that the compensation of most coaches falls within a reasonable range for the job. Whether basketball coaches in general are paid too much is a separate discussion, as is whether or not a particular coach is doing a good job. At the end of the day, I'm judging a coach by what the program is doing on the court and in the classroom. You don't get a pass to lose a few more games just because you're making $1.4 million a year instead of $1.9 million.
When it comes to the U and Tubby Smith, the focus should be on one area. That subject will be examined in Part II of this article; however, here in Part I we'll discuss some of the components that are frequently seen in contracts, including their relevance for an institution like the U.
Guaranteed Income
Base salary - Often times the base salary is a relatively small part of the overall compensation package for a men's basketball coach This may be for any number of reasons, but usually it's political in nature (i.e., fair pay practices). Tubby's current contract set his beginning base salary at $600,000 and provided for a minimum increase of 5% on May 1 each year (beginning in 2008). Therefore, Smith's current base salary is at least $766,000 under the terms of his current agreement.
Supplemental income - Loading most of a coach's salary here helps from a legal and political perspective. This component relates to pay in exchange for the revenue generated by the coach for the institution through working with the media, endorsements, fundraising, etc. Usually the payments related to the coach’s supplemental work are received directly by the institution and in return the coach is paid an agreed to amount each year.
Tubby receives $1,150,000 per year of "supplemental income". When comparing the compensation of a men's basketball coach to a women's basketball coach, the stance of having fair pay practices is bolstered if much of the difference in pay is related to outside revenues that are specific to the men's basketball program.
Supplemental retirement contribution - The age and family situation of a coach can be a factor in whether or not there is interest in this type of component and many coaches do not receive such a payment from their employer. In the case of Smith's current contract, beginning in 2011 he receives a $250,000 contribution each April 30.
The three components above bring Tubby's current pay to a minimum guaranteed amount of $2,166,000 (this excludes the value of typical fringe benefits received by most full-time employees of the U). It's not a small number and there is an argument that on court performance has not been in line with that figure, but based on a multitude of factors which include Smith's experience and reputation, the amount is not out of whack with the rest of the college basketball world. If terms under a new agreement place the guaranteed figure in the $2 million to $2.5 million range, I think the U would be paying fair market value for what they are expecting. Now, if an extension increases the amount of guaranteed money to $3.0 million or more, then there would be reason for additional criticism and questions.
Other Income, Excluding Incentives
Common perquisites include travel for spouse and family, moving expenses, automobile, tickets to athletic events, use of facilities for summer camps and clothing. Smith's agreement is fairly vanilla in this area, although it included $50,000 for "each summer period" he ran a basketball camp during the first four years of his contract. While Tubby received guaranteed money for these camps, more often a school will allow use of its facilities for a summer camp, but the coach will be required to reimburse the school for use of the facilities, including dorm rooms, cafeteria, etc.
Incentives
Most every contract includes incentives, but the components of incentive plans vary greatly. It's an important point to remember that some bonuses are paying a coach for a job well done, whereas others are effectively putting pay at risk by setting the bar of achievement very low. Overall, incentives tend to be a small part of a coach's compensation and there is significant room for the pay of coaches to be more aligned with performance on the court, in the classroom and at the ticket gate. Nonetheless, the market has not forced a shift in pay practices. With any contract negotiation, an institution has an opportunity be an innovator, but I'm not expecting anything interesting coming from the desks at the U.
Incentives types can be broken down as follows:
Athletic - The most common of incentives, a majority of men's basketball coaching contracts include bonuses based on team performance (based on numerous research papers, it appears more than 90% of contracts include athletic incentives).
Tubby's incentive for making the tournament is relatively generous compared to some other big name coaches ($100,000 per year), but until reaching the Final Four the cumulative amounts are not large (Smith receives an additional $50k for a Sweet Sixteen appearance, $75k Elite Eight, $250k Final Four and $500k for a national championship victory).
As a supporter of a program, would you rather see a lower guaranteed amount and a higher incentive for making the tournament? Many would, but that's not the norm.
Academic - I estimate somewhere in the ball park of two-thirds of D-1 programs include some sort of academic incentive, but even for those that do the amounts involved are usually lower than the athletic incentives of the same school. In Tubby's case, his academic incentives are outdated and the graduation rate component which provides for a $100,000 bonus each year is almost a freebie (50% graduation rate required). In addition, Smith receives an annual bonus based on his team's APR starting at $25,000 for a 930 score (which is the new cutoff level for remaining eligible to compete in NCAA postseason play) and increasing up to $100,000 for a mediocre score of 950 or better.
It could be argued that Smith's contract gives him $200,000 in "academic incentives" as long as his kids don't have a horrible year in the classroom. It's specifics like this that highlight why comparing compensation between coaches without knowing the details of the contracts is flawed -- you're playing with semantics by saying Smith is getting $2.166 million, but could add $200k with academic incentives as opposed to saying Smith should get $2.366 million, but $200k of that is at risk and will be taken away if the team has serious issues in the classroom.
There can be good reasons why a contract may use incentives to put pay at risk as opposed to be used for excellent performance. Such arrangements can be good for all parties involved, but the details must be understood to make relevant comparisons between coaches.
Other - The possibilities are endless, but there's nothing interesting in Smith's current contract. Some schools, including Big Ten members, have included innovative incentives such as bonus opportunity based on crowd attendance. Minnesota's regular season victories against RPI top-50 teams have decreased in each of the last two years (from 5 in 2009-10, to 3 in 2010-11, to just 2 in 2011-12), their non-conference strength of schedule this year was better than only Nebraska and Iowa when compared to all other Big Ten schools and average attendance figures dropped more than 10% this season. By my count, the Gophers had 2 sellouts all season in 2011-12, compared to 8 in 2010-11 and 9 in 2009-10.
Playing great basketball and scheduling good opponents will bring fans to Williams Arena and both of those are largely in control of the head coach and his staff. How about a little less guaranteed money, replacing it with an incentive based on crowd attendance? For example, you could pay a coach nothing if attendance is 12,500 or lower. Average between 12,500-13,000 and the coach receives $25,000, and so on.
What really matters?
With respect to Tubby Smith's contract, none of this matters much. The above is all small stuff. Later this week, Part II of this article will look at other considerations including the length of contract, facilities and then get to what really matters if there is a new deal between the University of Minnesota and Tubby Smith: the termination clause.
of GH posters and I will not give a dime to the site as long as he is staff/contributer. 
