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OM in the News: Incentive Systems and NCAA Football Coaches

December 2, 2012

gene chizikHow things have changed for Auburn University’s football coach Gene Chizik! Just under 2 years ago, we blogged about the incentives that school offered him as his Tigers won the national championship. In addition to his $2.1 million base salary, Chizik was awarded about $1.25 million in bonuses for reaching specific targets. (As we note in Chapter 10, incentive systems are used in half the manufacturing firms in the U.S.). So The New York Times (Nov.29 ,2102) front page article announcing that Chizik had just been fired, (shortly after losing to rival Alabama 49-0) creates an interesting class discussion.

Chizik was awarded $7.5 million in severance on the 2 remaining years in his contract– to be paid out at $208,334 per month for the next 36 months!  As The Times writes: “For an especially lucrative occupation, one might consider becoming a fired college football coach.” Still, college presidents appear willing to pay the coaches handsomely to go away and make room for new hires — despite little evidence that coaching changes generally result in better teams.

A new study in Social Science Quarterly may provide sobering news to Auburn and other universities that have fired their coaches. It compared the performance of major college teams that replaced their coach with teams with similar records that kept their coach.  The lowliest teams subsequently performed about the same as other struggling teams that did not replace their coach. Mediocre teams, like Auburn, performed worse than similar teams that did not replace their coach. Statistically speaking, the study concludes: “There’s not much to be said for every few years dumping a coach who’s had a couple bad seasons. In the long run, you are about in the same situation down the road if you had done nothing and ridden out the storm.”

But universities view football as a kind of front porch to their campuses, drawing attention in a way that no other endeavor can. At the college sports level, writes The Times, “you can’t fire the players,” so the coach takes the fall for a lack of success.

Discussion questions:

1. How would this strategy of changing leaders work in manufacturing, banking, or healthcare ?

2. What are the ethical implications of the salaries and the buyouts such as that at Auburn?

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