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Teaching Tip: Incentive Systems Work in Sports Too!

January 4, 2011

If you are over 30 and have followed the NBA along the way, you probably remember one of the most colorful players of the game—Dennis Rodman. Green hair, difficult team player, a pattern of not showing up for games, Chicago Bulls NBA championship, and one of the most unusual incentive systems set up outside the C-suite….those are my memories. Rodman’s base was $4.5 million, with another $5.95 million (which he actually collected!) for completing each of the following: playing every game, leading the league in rebounding, having a 1.5 to 1 assist-to-turnover ratio, and hitting over 66% from the free-throw line. (Details from USA Today, Nov.26,1997, p.12).

Since we cover incentive systems in Ch.10, I am always looking for more current examples to use in class that will be of interest to our sports-oriented students–and I found one.  ESPN.com just reported (Dec. 28, 2010) that NY Jets QB Mark Sanchez and Baltimore Ravens QB Joe Flacco stand to make  millions in post-season contract incentives in early 2011.

Sanchez can pick up $1.875 million if he leads the Jets to a Super Bowl XLV victory on Feb.6 in Texas, and also lands the Lombardi Trophy. He  gets $250,000 for every playoff win even if the final victory is elusive.

Flacco will be paid $200,000 per post-season win by the Ravens. This means a maximum of $800,000 for leading his team to the a Superbowl title.

One could question the need for such incentive systems in general. After all,  they are already paid a small fortune to do their jobs. Maybe  it only bothers me because my dean never gave out such bonuses in the B-school!

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5 Comments leave one →
  1. January 4, 2011 2:01 am

    This is an interesting study of human nature. No matter how much we get paid on a job, no matter how low or how high, we feel that a bonus is justified. The same thing happened on Wall Street, even in the face of calamitous decisions and performances. No matter how high the base salary, it is still viewed as a “base” – the minimum amount we are paid.

    I remember my first $1,000,000 base salary as a professor. Unfortunately, it was spread out over 25 years of teaching – and I got nothing more if I taught in the post season. Okay, I did get to keep the money I made from autographs and merchandise licensing, but oddly enough, no one wanted a “Quain Edition Mini Van” Instead, they all opted for the Eddie Bauer edition.

  2. January 4, 2011 3:45 pm

    Incentives may make sense if they’re necessary to align individual performance with organizational goals, which in sports would seem to mean getting the player to do whatever the team needs in order to win rather than pad their own stats (or take an approach that minimizes risk of injury). I’m skeptical whether they’re really necessary in pro football, though. (I can see them more in baseball, where you might want a free swinger to take pitches or a power hitter to bunt or hit behind the runner.)

    @Bill: Your experience may not be typical. I don’t know that I hit the $1M target any sooner, but at least I got bonus pay for teaching in the post-season (summer) … and I didn’t even have to be a winner to do it! (Ask my former students.)

  3. January 4, 2011 4:51 pm

    Hi Paul,
    I suppose our summer is the post season. However, I prefer to view it as a sort of “exhibition game” like the tennis stars do, or the Ice Capades for no-longer-able-to-jump figure skaters. If I think of it as the post season, it puts too much pressure on me!

    Just one more point, as we enter into the post season for the NFL, I hope they give huge incentives to everyone on the Philadelphia Eagles team, and that they deserve it!

  4. Stephen Wolf permalink
    January 15, 2011 8:00 pm

    Dennis Rodman had much tougher incentives to meet than any modern quarterback, but he made them, despite his mental condition.

    Modern NFL QBs shouldn’t need incentives like that- they know that if they win a SuperBowl, their endorsement contracts alone will make them more than these incentives (ask Michael Jordan or Tiger Woods). I think it would be more beneficial for the TEAM to write FUTURE contract improvement into the current contract- that keeps the player motivated and with the team. Win the SuperBowl, get $1M+ and THEN what?? I’d rather tell them that they get an additional % raise if they win X-number of games.

Trackbacks

  1. OM in the News: Incentives at Auburn U.’s Football Program « Jay and Barry's OM Blog

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