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Coaching Salary Disparity and Team Performance: Evidence from the Football Bowl Subdivision

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Coaching Salary Disparity and Team Performance: Evidence from the Football Bowl Subdivision Coaching Salary Disparity and Team Performance: Evidence from the Football Bowl Subdivision Alexander Traugutt Fontbonne University Alan L. Morse University of Northern Colorado Daniel A. Rascher University of San Francisco Brian Fowler University of Northern Colorado Salary disparities and their impact on performance have long been a topic of research and debate in both the business and sport sectors. However, no studies to date have examined the impact these disparities have in the collegiate football setting within coaching staffs specifically. The purpose of this study was to determine how intra-staff salary disparity impacts team success, using salary data for the years 2010- 2017 and the Gini index as the measure of dispersion. Results indicated that pay disparity had no impact on wins. Rather, on-field metrics were found to be the primary drivers of success. Keywords: coaches, salary, wages, disparity, NCAA INTRODUCTION The salaries paid to college football coaches at the Division I level have become a major topic of conversation. This issue becomes even more captivating when one considers the amount of money universities invest in athletics and the fact that the National Collegiate Athletic Association (NCAA) prohibits college football players from receiving a fair market salary for the product they produce. Those issues aside, in examining the salaries paid to Football Bowl Subdivision (FBS) coaches over the past 10- 15 years a scenario unfolds that should garner significant attention. In 2006, eight head coaches made over $1 million, while only two earned over $2 million. Fast forward to the start of the 2019 season, 83 head coaches will earn over $1 million and 67 will receive over $2 million. Moreover, the top 10 head coaches, will all earn over $6 million in school pay alone for the 2019 season, not factoring in bonuses and endorsements. Similarly, during this time the salaries of assistant coaches have also been on the rise. In 2015, 57 assistants at public schools in the Power Five conferences (Big Ten, Big 12, Southeastern Conference [SEC], Atlantic Coast Conference [ACC], Pac-12) made more than the average head coach in Journal of Applied Business and Economics Vol. 22(1) 2020 11 either the Sun Belt or Conference USA. During the same season, the average salary for an assistant coach in the SEC was $449,000, a number that surpassed 12 FBS head coaches (Wolken, Berkowitz, & Schnaars, 2015). For the 2019 season, 21 assistant coaches will receive over $1 million, surpassing 38 head coaches all from Group of 5 (American Athletic Conference [AAC], Conference USA [C-USA], Mid-American Conference [MAC], Mountain West Conference [MWC], Sun Belt) conferences (Berkowitz et al., 2019). Related to these spending patterns, Orzag and Israel (2009) found no evidence to link higher spending patterns with increased on-field success. In their comprehensive analysis of athletic department finances, however, they did find that an extra million dollars of operating expenditures in football could increase a team’s winning percentage by 1.8 points and subsequently, their chances of ending the season in the top 25 of the Associated Press (AP) poll. A more in-depth analysis, however, uncovered that there was no significant relationship between coaches’ salaries and team success. (Orzag & Israel, 2009). Much of the previous salary disparity literature has been grounded in the business sector or focused on professional sport and players’ salaries specifically. While some may opt to apply these findings to college sport, such generalizations should not be considered valid. Collegiate sport, and football specifically, is a unique construct and as such requires its own analysis. Therefore, the primary contribution of this study is to provide an understanding of how intra-staff salary disparities affect team performance. To test this interaction, the Gini index was utilized as the dispersion metric while the models also accounted for factors related to coach, team, and player quality. LITERATURE REVIEW Research that has examined the impact of intra-staff salary disparity on team performance at the Division I FBS level has yet to be completed. The business/economic literature provides a wealth of information, however, regarding the impact of pay disparity on performance, productivity and product quality in the workplace. This strand of literature can be segmented into two distinct groups focused on either compressed or hierarchical pay structures. To briefly summarize, a compressed wage structure is one in which pay is less dispersed and spread more equally across jobs within a firm. Those that favor pay compression advocate that wage equality increases firm performance and teamwork (Akerlof & Yellen, 1990; Lazear, 1991; Levine, 1991). Employees who feel underpaid, relative to their coworkers, may reduce their overall effort, sabotage their employer, and be more absent from work on a consistent basis (Cowherd & Levine, 1992). Conversely, a hierarchical wage structure features pay that is concentrated near the top of the organization, resulting in a greater degree of dispersion (Bloom, 1999; Lazear & Rosen, 1981; Ramaswamy & Rowthorn, 1991). Proponents of a hierarchical pay structure rationalize that the larger the disparity the more likely that firm performance will increase as employees will be more motivated by external factors (e.g., pay raises and advancement opportunities). Sport-specific studies concentrated on pay disparities have focused primarily on players’ salaries in the four major North American sports leagues. Results have largely concluded that higher levels of salary dispersion have a negative impact on team performance, thus advocating, whether directly or indirectly, for a more compressed wage structure. (Depken, 2000; Harder, 1992; Sommers, 1998). More specifically, DeBrock, Hendricks, and Koenker (2004) in their examination of Major League Baseball (MLB) players’ salaries found that teams with greater degrees of dispersion performed more poorly. This may imply that compressed wage distributions would equate to a more successful on-field product as opposed to having a few high-salary players and an abundance of lower salary players. Further, Annala and Winfree (2011) and Mondello and Maxcy (2009) evaluated the effects of players’ salary dispersion on team performance in professional leagues in North America using the Gini index as their measure of inequality. In both studies, a larger salary dispersion (higher Gini coefficient) had a negative impact on team performance. Frick, Prinz, and Winkelmann (2003) found conflicting results, however, citing that a greater degree of inequality can either be positive or negative based on the level of cooperation needed among the players 12 Journal of Applied Business and Economics Vol. 22(1) 2020 in that sport (Frick et al., 2003). In all situations, however, the authors emphasized that player quality is also an important determinant of on-field success. Within the realm of college sport, research related to salary inequality has primarily focused on the ethical concerns surrounding the high dollar figures attached to compensation packages. Zimbalist (2010a) argued that the most egregious waste of money in college athletics is the salaries paid to head football coaches. He goes on to make similar statements regarding assistant coaches’ salaries before pointing out that highly paid coaches do not necessarily produce better performance outcomes (Zimbalist, 2010b). Empirically, two studies have provided insights into the Division I FBS context. Tsitsos and Nixon (2012) found that institutions that were paying large salaries to their head football coaches were not assured short-term or long-term success as measured by their entrance/exit into the USA Today Top 25 rankings. In their analysis which spanned three seasons from 2003-2007, only five teams with coaches who ranked in the top 25 in terms of compensation remained ranked in the Top 25 each season while six never entered into the ranks (Tsitsos & Nixon, 2012, p. 78). Tsitsos and Nixon characterize the former schools as members of the “established football elite” and the latter as “elite seekers” (p. 78). These elite seekers can be characterized as schools that offer their head coaches large compensation packages with the hopes that they will either return to national prominence or rise to the level of the elites for the first time. No mention, however, is made of the assistant coaches and how their compensation tied into these performance measures. In contrast, Colbert and Eckard (2015) found that coaches pay had a positive effect on team performance. With the Sagarin rating as their measure of performance, the researchers found a positive correlation between coach pay and team performance, leading the authors to assert that programs get what they pay for. The results did indicate, however, that there are diminishing returns to these investments and that at the highest levels, universities tend to overpay for results. Once again, no direct measurement of assistant coaches’ salaries was included. Colbert and Eckard (2015) did utilize a net expenditures variable and assert that higher expenditures will permit the hiring of better assistant coaches, but they do not assess the salaries independently. SALARY DETERMINANTS IN COLLEGE FOOTBALL The question that this research sought to answer is how intra-staff salary disparity impacts team performance. Previous studies focused on college football have generally assessed the influence
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