Why does mediocrity get rewarded

There is more to being a football coach than the games. You are responsible for somewhere between 150 and 200 student athletes. There are places where this isn't considered very important, but Michigan is not one of them. Brady Hoke may have been "mediocre" at winning games, but there is no question about his leadership abilities. The unanimous tweets of the players prove this

It's simple, really. Michigan had to offer Hoke a really nice contract because he had so many job offers from high profile schools that we needed to give him incentive to come here.

Its similar to what you see in fortune 500 CEOs.  That is due to the culture of board of directors who are often CEOs of other companies.  We have a perverse incentive system in our public corporations where peers set your pay.

It would be like if you worked in IT at company A, and you had a peer group of IT workers at 5 competing companies set you pay.  And then you set their pay.  Of course salaries will skyrocket - this is why CEO pay which used to be something like 15x the average worker now is 400x.  And when you fail you get a golden parachute.  The board of directors are supposed to be some independent group of people who look out for the best interest of the company but often the chair is the CEO himself and it is often populated with people quite friendly to the CEO. 

Now why this is happening in sports management - I dont have an exact idea other than an arms race and there is so much money chasing so few assets that everything gets inflated.  The guaranteed contracts make no sense nor do the golden parachutes.  But once a system is in place you wont attract talent by going away from it.  And if the ceiling (Nick Saban) gets so inflated, the mediocre guys also get inflated in relation.  If Saban's salary was $3M that would be the market top, and the ho hum coach would get $1.4M.  But Saban's $6.9M now allows for ho hum guys to get $2.7M.  Then you have idiot contracts like Brandon gave out of $4M to a guy whose market was $2Mish.

Helfrich make $2.3M, Gary Anderson is in a similar range.  We overpaid big time for a similar product. 

The golden parachutes are needed for people who are in high risk jobs, where the probability of being fired for performance is high. Brady Hoke - as a head football coach and responsible for millions of revenue to the AD each year, is much more likely than the average IT professional (or many professions) to get fired. Accordingly he has clauses in his contract to accommodate such risk.

A few years ago a company I had an equity stake in got bought by another firm.  I was VP of sales and the aquiring company already had a VP of Sales in place so needless to say I knew I'd be out of a job soon.  But the new company needed me for at least six months for their guy to learn our system, our people and generally acclamate himself to this new firm.  But I knew I'd be out of job as soon as it was completed so what's the motivation for me to: A - stay and help this happen and B: not find another job as quickly as possible?  None.

So I negotiated an employment contract that in essence paid me for three years to stay six months.  My agreement (36 months) said if was let go, demoted, had comp changed - anything negative really - then I could consider myself terminated and trigger the clause in my contract that paid me, regardless of whether I was working there or not.  They needed me for those six months but because we BOTH knew I was toast when it was up they were willing to sign me to that contract.  Because if they hadnt I would've left almost immediately and they'd be screwed and they knew that too.

that makes a lot of sense is the extremely high risk of failure.  Anybody who takes the job is looking at massive criticism and a major career setback if he doesn't succeed. 

And a very high standard is expected. 

 

Take a look at Pellini.  Constant 9-3 seasons and they aren't good enough. 

Rich Rodriguez being driven out of town.  

I imagine coaches balk at taking jobs at places where the fan base can be relentless.  Cooper proved that if you can't beat Michigan even with national contenders you going to be made out to be some sort of pariah.  How would you like taking a job at a place like that?

So yeah, I could see at a negotiation, where an agent is saying "you're asking my client to go into a snake pit, what are you willing to compensate him for putting up with it if he doesn't succeed???"

 

 

The question and answer are not only very basic but already well covered. Here're the Cliff's Notes:

market value, competition, demand

I agree with much of the above - there is a market, and coaches get a lot of pay recently.  But Hoke agreed to work here without a contract, so when it came time to sign him up all the leverage was in Brandon's hand.  And rather than be cautious, Brandon showed what a BSD he was by giving Hoke a contract with great protections even if Hoke failed.

The other part to this, though, is that coaching positions are inherently volatile.  It is reasonable that there is some cushion for a coach given that so few excel over the course of time.  It's just that Brandon gave Hoke a really big cushion.  (At least Hoke's a good guy who kept the program clean, which alleviates some of the sting.)

During Carly Fiorina's six-year reign at Hewlett-Packard, HP's stock lost half its value. When she was let go, she got a $20 million parachute.

The buyouts happen because the candidate are risk-averse: you're taking a chance when you move, and if things don't work out, you'd be worse off. So you get a better quality candidate if you offer a buyout in the contract.

Over time this has become pretty standard in high-risk high-profile jobs, especially I think in sports, where so much of what happens is outside any one person's control. Any agent who failed to negotiate lucrative buyouts would not have a lot of clients.

Your job and my job: a) not subject to random fluctuations - if your coworker breaks his leg you won't be ineffective; b) bigger market with more candidates so the incentives aren't as good and c) no agents

Most of the comments above are the typical "CEO" BS.

The real reasons are simple:
- Coach is the head of an "important", multimillion dollar, very public thing
- There are very few jobs like it

The result is that people are willing to overpay a lot for someone in the role.

Honestly I think there are thousands of people who could probably do the job.

Janitors don't get buyouts, skills that are unique do. Would Harbaugh sign with us if he can get a guaranteed contract at another big university, or will he risk getting paid one year after leaving a job that is paying him?

was graded like a teacher's. In John Bacon's book Bo's Lasting Lessons, Bo Schembechler notes that when he was at Ohio State, Woody Hayes would regularly get pay raise offers  which he would subsequently turn down. He didn't do the job for the money and his staff knew this implicitly because it  suffered in silence under his belief system, with many needing second jobs outside their regular pay to support their families.

Just like TV made pro football, broadcast earnings, digital media growth and apparel licensing revenues along with mushrooming donations have altered the landscape of college football in collossal ways especially in coaching salaries.

And most of this is the result of demand for success. Winning football is an expensive proposition and the highest paid public position in many states is the head coach of that state university's football program. They get paid more than college presidents and governors who seemingly have more importance to the welfare of their school and state.

Lloyd Carr used to have to divide up a certain pay raise he would get for completing performance incentives just to give his assistants a better paycheck at the university. That changed dramatically in the last decade, in the latter stages of Lloyd's time at Michigan and then with the next two coaching transitions under Martin and Brandon.

But this is driven ultimately by marketplace economics for the job not by common sense or real economic value driven concerns. You pay to get the job done right or wrong these days, no matter what.

Feel free to negotiate a fair contract with your employer.

in coaches' case, both parties sign it, so they both chose it b/c it was fair in their minds.  Go get an AD job and propose a contract like the one you've suggested.  Good luck with that.

A kiss is not a contract

But it's very nice

It's very very nice

Brady Hoke was never a good hire, and there was never any shortage of evidence backing up that assertion.  Brian detailed it pretty well during "Profiles in Cronyism" in 2007, and went over it again three years later when it was obvious that RichRod was gone.  He was a bad hire in 2007, and he was still a bad hire in 2011.  What really stings about reading those old blog entries is not only that they were eventaully wrong about Hoke being hired, they were also wrong about what sort of an offer it would take to hire him.  Hoke basically gave up his negotiating leverage with that "I'd walk to Michigan" bit.

So Brandon hired him.

Unbelievably, he also severely overpaid to do it.

I don't blame Hoke for allowing Michigan to stuff a ton of money up his ass to coach there.  And I don't blame him for getting his contract written with the elements of security included to allow for him to get paid on the way out if he was to get fired; he knew damn well what his career coaching record was when he came here, and he knew as damn well too that those results wouldn't be good enough to remain hired here.  As Brian and others have said "Hoke's contract isn't his fault".

No, we can't blame Hoke for signing his contract, possibly in crayon. 

We blame David Brandon for ever believing that hiring someone like Brady Hoke was ever a good idea in the first place.  And then we blame Brandon for thinking that it was necessary to overpay someone like Brady Hoke to take the job.  Nothing about any of that makes sense, unless somehow Hoke was aware (though not completely aware) that there was no other sentient being with a pulse within six parsecs who was willing to take the job even at gunpoint for less than Hoke ended up signing for.

Bottom line:  If you're going to fire a good coach, you'd damn sure better have a good coach ready to replace him.  If you're going to hire a bad coach to replace a good coach that YOU fired, at least have the sense not to pay him as though he'd just won two of the last three BCS Championships in the bargain.

As much as "Three And Out" was cathartic in helping us all understand why RichRod went so wrong at Michigan, I really hope we have some sort of document, be it JUB-authored or otherwise, that sums up the Brandon Error at Michigan.  As bad as Hoke was, Brandon was infinitely worse.

Based on the voting of this thread I think this was a less than mediocre post.  You have not been rewarded for it.

Golden Parachutes are not as effective as the regular kind.  It's science.

Mediocrity gets rewarded because the California mentality has spread to the rest of the country.

This is one of the reasons I’m not thrilled with the idea of offering Jim Harbaugh 10 years and $100 million, like some have suggested. I’m all for Jim coming to Michigan to be our next head coach, but that would be a very questionable contract. I know it’s easy for us to talk about wanting Michigan to spend a huge amount of desperation money, because it’s not our money. Though lets hypothetically say Harbaugh comes to Michigan and struggles, and after four years it’s clear that he’s not the answer either. It's a tough thought, but possible. Michigan would still owe him $60 million dollars and a fair buyout would probably be at least $50 million. Jim would be making over $3 million a year more than Nick Saban, who is without question the best coach in college football, right now. NO college coach should really be earning even a half of a penny more than Nick Saban per year. Though I believe a contract similar to Saban’s should be about our limit, 6 years and $42 million. After four years, the buyout would probably be around $10 million. Maybe Michigan will offer Jim a $100 million contract, but imagine the talk about that buyout if things don’t work out.

The market for coaches, especially the NCAA type, calls for these clauses...

It's the adage of "everyone else does it, so you have to as well"

It's a fundamental concept of a free market system