The Anatomy of a Coach\'s Deal

by: Thom Park, Ph.D.
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Reading the transactions column in the daily sports page, studying the waiver wire and reviewing the latest sports deal on the Internet have become habits of mine.

To the uninitiated, what a good head football coach should be awarded in his contract might translate only into dollar compensation. Let me suggest, rather, that the deal's design and structure, the performance incentives, roll-over provisions, outside income, retirement benefits, split-dollar collateral assignment cash-value life insurance, settlement options, termination provisions, clear definitions of just cause, and the lack of a coach buy-out clause to the university's benefit are all critical elements far more important than money.

All too often universities do not appreciate the difficulties in the life of the football coach, nor do they value just what it takes for the coach to make the program a winner. Those schools that do are fair to their coach and his family. Make your employer do this with an excellent contract and compensation package.

First, dispense with and refute the false premise that football coaches are overpaid. By any measure, the top 10 football coaches in the world - men like Bobby Bowden, Lavell Edwards, Steve Spurrier, Joe Paterno, Bill Snyder, John Robinson and Lou Holtz - earn far less than the top 100 physicians, the top 200 lawyers, top 200 bankers, top 300 CEOs or the top 100 engineers. Set the money issue aside and do not apologize for asking for it, you've earned it.

The only career more hazardous than coaching is an infantry officer in combat, so you deserve to be well paid. Plus, few professionals work so hard and neglect every other aspect of their lives as much as coaches must do. Few men are as focused and as time-consumed as football coaches. Researching this question from every angle, coaches deserve the money - particularly as a career-risk premium. Working 105 hours a week in-season should count for something.

The deal structure, the contract term, the terms of control and responsibility, the definition of resources and the lines of authority are very important. Language needs to be clear. You need enough time to recruit and to win, so the contract term is key. If you do something extraordinary, you should be rewarded for it through appropriate performance bonuses. Rolling your contract over annually should signal to the upcoming recruits that they have you for four more years or else it should tell you to look elsewhere if your term is running out. Athletic directors should understand this. Rollover provisions are very important for program stability and recruiting.

Paying a coach at current market rates is only fair. Determining just what these rates are by conference, level of play and geography can be a complex research task. Moreover, the higher- level packages get complicated with salary, CPI escalators, qualitative perquisites, non-W-2 outside income, appropriate retirement packages, life insurance, annuities and severance compensation, making a five-year, $3 million deal a composition of many parts.

Assembling these in a manner that suits the coach's personal financial situation while hitting market compensation and being fair to the school is more art than science. It takes a skilled team of experts to put one of these transactions together. Often a good deal takes many months or even more than a year to do and it requires a coordinated and highly competent deal team.

It is axiomatic to business that you never enter any transaction unless you have an exit strategy. The determination of what constitutes just cause for termination is also crucial, followed by the resultant liquidated damages provisions, which must be very clear. You never want to have your settlement negotiated after being fired. Coaches who have to pay their university for the right to change jobs should never agree to such a provision unless they have an incredibly strong financial offset to remain. The use of tax-deferred annuities, or better yet, non-qualified deferred compensation in the form of split-dollar collateral assignment cash-value life insurance can be structured to keep a coach in place, fund his retirement, pay his widow, accrue wealth in a tax-deferred way, and avoid current taxation on compensation that is intelligently structured. This is a win-win paradigm for the coach and his family, and the school and the program. Such cutting-edge financial techniques in coaching contracts are the means to deal with the voraciously competitive nature of modern football business.

Coaching is far too difficult to ever allow yourself to be obligated to pay your employer if you wish to move to a better opportunity. This is where athletic directors who recognize the value of a fine coach need to be knowledgeable enough and fair enough to put together a package to keep their coach. So often athletic directors fail to do this, then lose or fire a coach, and subsequently pay significantly more to start over with a new coach who takes a couple of years to get back to where the last coach left off.

Athletic directors need to put together deals that enable themselves to hold their critical, wealthy alumni at bay every time the coach has an off season. That is why strong deals are a must for recruiting and program continuity.

The business world of football today has made the anatomy of a coach's deal a lot more complex than ever before. Be sure when you take a job that you have an arrangement that is both fair and intelligent. Your career deserves it and so do you and your family. A former college football coach with stops at Maryland, Citadel and UConn, Thom Park, Ph.D., is a successful financial planner and one of the nation's foremost authorities on sports contracts, agents and negotiations. Park has been a featured speaker at a multitude of coaching clinics, including the AFMA convention, and is a regular contributor to AFM.

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