Incentives Just Part of the Game for Modern Coaches

The University of Arkansas football program has its sights set on winning the Southeastern Conference championship and BCS national title this season. Doing so would likely help football recruiting, provide additional athletic department revenue and boost national exposure to the athletic department and the UA at large.

A championship also would bump the compensation of Coach Bobby Petrino to more than $3 million.

Petrino, as is the trend with college coaches across the country in all sports, has performance-based incentive clauses built into his already substantial contract.

Winning a national championship and the SEC title in the same year would net Petrino a $250,000 supplement to his $2.7 million annual compensation package. (he also can receive $150,000 per year in deferred compensation as an incentive not to leave before the end of his contract.) obtained through the state’s Freedom of information Act.

Bonuses built into Petrino’s contract are among the most lucrative of those offered to UA coaches, according to documents obtained through the state’s Freedom of Information Act. Possible incentives range from a $500 attendance-based payout for women’s basketball coach Tom Collen to the $1 million bonus men’s basketball coach John Pelphrey would collect for winning conference and national championships in the same season.

Proponents of such a system argue that remaining competitive in college athletics today calls for more than six- or seven-figure salaries when compensating coaches. Incentive-laden contracts are the norm in the increasingly competitive world of major college athletics. Schools in a power conference like the SEC, where the average operating budget tops $75 million each year and the demands of coaching are at an all-time high, are required to pay handsomely for coaches.

College athletic departments have adopted additional forms of compensation for top employees much like more traditional businesses. On top of a base salary coaches have a number of bonus tiers and other moneymaking opportunities built into their contracts. Arkansas athletic director Jeff Long said schools must offer more than salary to attract top-level coaches.

“That’s part of that evolution,” Long said “You know, as the market changed, we deal in a marketplace for coaches and as that has changed and gotten more competitive there are different pieces that come along with contracts.

“It really has been an evolution. If you look elsewhere there have been evolutions in compensation packages, so we’re not a whole lot different than in a lot of [businesses].”

The University of Arkansas football program has its sights set on winning the southeastern Conference championship and BCS national title this season. Doing so would likely help football recruiting, provide additional athletic department revenue and boost national exposure to the athletic department and the UA at large.

Economic Impact
Arkansas paid out more than $117,000 in athletic achievement bonuses for 2009-10. That figure could easily reach seven figures if Razorback programs begin to consistently compete for national championships.

Petrino wasn’t even the highest-earner in 2009-10 at $25,000 for guiding the team to a Liberty Bowl appearance. He got no additional money for winning that game.

Baseball coach Dave Van Horn realized $27,751 in bonuses for advancing to the NCAA Regional and Super Regional tournaments. Mark and Rene Cook, the married couple who are co-head coaches of the UA’s gymnastics program, guided the team to the NCAA Super Six and collected a combined $20,168.

Other notable payments include $16,990 to Women’s Track Coach Lance Harter for a Top 15 finish at the NCAA Indoor meet. Men’s Track Coach Chris Bucknam earned $10,000 for a Top 5 cross country finish and Brad McMackin netted $10,833.33 for a NCAA Regional appearance.

Women’s Tennis Coach Michael Hegarty got $4,000 for overseeing a team that advanced to the second round of the NCAA Tournament.

Gone are the days that salary bumps from fundraising arms such as the Razorback Foundation and a courtesy car are enough to entice top-flight coaches. Once perks likes football or basketball tickets, golf and athletic club memberships became industry standard, high-profile coaches began asking for more. And athletic directors seem more than willing to comply, especially in revenue-producing sports of football and basketball.

Jon Pritchett, CEO of the sports and media investment firm Club 9 Sports and who contributes articles on the business of athletics Forbes.com, said the biggest increases in incentives have come the last five years. Not coincidentally, the money invested and generated through college athletics is in the billions.

“I think for the programs that have the most at stake, and that’s pretty much all the SEC schools, there is a cost to being competitive,” Pritchett said. “The customers – boosters, season ticketholders, alumni – require a certain amount of competitiveness.

“There’s obviously lots of pressure. There’s a high likelihood of getting fired if you’re not successful. Or if you’re successful for a sustained period of time, that is a significant amount of economic impact to the university.”

Arkansas operated with a $65 million athletic department budget in 2010. More successful programs mean additional revenue for the athletic department.

Academic Achievement
Coaches at Arkansas can earn performance bonuses for both academic and athletic achievement. Incentives are paid to some coaches for maintaining favorable graduation and academic progress rates and Arkansas cut checks for $112,950 in academic bonuses for 2009-10.

The NCAA began publicly releasing Academic Progress Rate data in 2005. Schools are asked to maintain at least a 925 on a 1,000-point scale. Failure to do so can result in losses of scholarships and practice time.

Both could have a direct impact on a team’s on-field performance, which is often tied into the money a sport can generate. Poor performance leads to fewer paying customers and less revenue opportunities.

Therefore there is more focus on academics than ever before, and that’s led to schools adding incentives for classroom performance as well.

Academic bonuses have only recently become a staple of contracts. Jeff Long, who has worked in administration at schools in the Big 12 and Big 10 conferences, said scholastic achievement payments are a natural byproduct of the NCAA’s evolving focus.

“It hasn’t been out there nearly as long, but I think it comes right along with the emphasis on graduation rates and APR and all those things,” Long said.

Potential academic payouts built into Arkansas contracts range from $500 for some non-revenue-producing sports to $200,000 for Pelphrey and Petrino if certain graduation success rates and APR scores are realized. Pelphrey needs a 950 APR and 70 percent graduation rate to earn $100,000, while Petrino’s goals are a bit higher at 990 and 75 percent.

Sometimes achieving the bare minimum isn’t even required to generate additional income. Take Pelphrey and men’s basketball, for example.

Pelphrey inherited a program on the brink of APR disaster and has said 12 of 13 players were academically ineligible when he was hired. Part of Pelphrey’s deal – negotiated in 2007 – makes him eligible for a $25,000 bonus if the program gets to a 920 APR score, a mark that is five points below the NCAA minimum.

Responsible Spending
Questions arise about how responsible the current business model for college athletics is. With coaches at Arkansas already making an average of nearly $280,000, do they really need additional incentive? Isn’t rewarding a coach for postseason or academic achievement essentially paying him twice for the same job?

Pritchett said one solution for changing the system would be decreasing base salaries and building in “more meaningful” bonuses. Such a system would add more incentive for coaches, who earn six-figure base salaries before they ever accomplish anything.

“What has to happen to make this all a little more fair, there needs to be some give-back on the base,” Pritchett said. “These incentives should be larger. There are meaningful dollars at stake. The bonuses ought to be meaningful.”

Arkansas could conceivably buck the national trends, but it could be detrimental to attracting coaches. Long stressed the importance of remaining competitive in the marketplace of coaching talent.

That holds especially true for the revenue-producing sports. Arkansas football revenue provides 45 percent of the operating budget for the entire athletic department. So the more successful Petrino is, the better the funding for the rest of the sports programs in Fayetteville

“It is true we don’t have to do it,” Long said. “But to get a high-level, high-profile coach with a track record of success, that’s where you are going to need to be to compete.

“It is very competitive.”