Observations on Sports Managers

Regional ReviewSummer 1997
by Chris Kaegi

Matchmaking

All of Boston's major sports teams changed coaches this past year. Bill Parcells left after four years with the Patriots, replaced by Pete Carroll. The Celtics fired M.L. Carr after two years of coaching to make room for Rick Pitino. After two years with the Red Sox, Kevin Kennedy was succeeded by Jimy Williams.

While such a clean sweep is atypical, the tenures of Boston's ex-coaches is close to the norm. Coaches, on average, stay 4.6 years in the NFL, 3 years in the NBA, and 2.7 years in MLB (Major League Baseball®).

Underlying this difference could well be the relative importance of "matching" in the different sports. Economists Kenneth Chapman of Cal State-Northridge and Lawrence Southwick of SUNY-Buffalo found that baseball managers tend to be more successful with teams they "match." Some are better with less talented teams, others with young teams.

Matching seems less important in baseball, however, than in football or basketball. In these other sports, "team production" is far more important, so players change teams less frequently. Because the makeup of a baseball team changes more often, a good match with a manager is harder to sustain.

As the "matching" theory predicts, the turnover of both players and coaches is highest in MLB and lowest in the NFL. Players with over two years of experience average 2.4 years in MLB versus 2.8 years in the NBA and 3 years in the NFL.

Baseball analyst Bill James suggests that we "dismiss the notion that managers are simply 'good' or 'bad.'" Jimy Williams, who was fired for doing a poor job with the Blue Jays in 1989, might thus be a good match for the Red Sox now. Just not for very long.

Share the Wealth

The coach makes the largest contribution to the success of a team in football. They call every play, make frequent substitutions, and design intricate offenses and defenses. That the New York Jets lured Bill Parcells away from the Patriots with a six-year, $20 million deal certainly attests to this notion.

Parcells, however, is the exception. Despite a football coach's inordinate importance to success on the field, the average NFL coach earns about $1 million, what Parcells' replacement, Pete Carroll, makes. Compare this to NBA coaches, who make twice as much, and MLB managers, who make about the same amount.

This apparent undercompensation of football coaches is probably due to the egalitarian division of revenues in the NFL. Two-thirds of total league revenue is shared equally, compared to only one-third in both MLB and the NBA. This sharply diminishes the financial payoff for winning.

Economist John Vrooman, of Rice University, estimates that the financial incentive to win is five to six times greater in the NBA and MLB than in the NFL. The Celtics, for example, are willing to pay Rick Pitino $5 million a year because if he produces a winning team, he will generate tremendous profits.

Contrast this with the NFL. "Making it to the Super Bowl can actually have a negative impact on a team's operating profit," observes lawyer James Quinn, who worked with the league, "because the added cost of travel often exceeds playoff revenues."

The Patriots' total revenue thus increased just $19 million from 1995 to 1996, when they made the Super Bowl, only modestly more than the $16 million gain recorded by the average NFL team. No wonder they refused to pay big bucks to keep Parcells.

In a League of Their Own

Professional athletes are among the few workers who earn more than their managers. In that sense, players in the two new women's professional basketball leagues are unusual. The typical coach in both the American Basketball League and the Women's National Basketball Association earns around $95,000 per year, while the average player makes about $80,000 in the ABL and $40,000 in the WNBA.

The earnings of most pro athletes and coaches are based on their ability "to put fannies in the seats," as George Steinbrenner put it. Salaries are bid up to this level by competition among the individual teams; so wages are determined primarily by value within the leagues.

The ABL and WNBA, however, are each single entities (i.e., all the teams, within each league, are jointly owned). So salaries are largely set by outside opportunities.

Ex-Celtics coach K.C. Jones heads the New England Blizzard of the ABL. Since ABL teams are jointly owned, Jones cannot expect a competitive offer from another team in the league. His wages are set by what he could earn were he to return to the NBA.

Most coaches, though, come from the ranks of college basketball, where they can earn about $80,000. The ABL and WNBA must offer at least this much, but do not have to offer much more.

The players, of course, cannot go back to college (and in college they were not paid). They must go overseas to play professionally. Blizzard guard Jennifer Rizzotti actually sees graduate school as her alternative to playing. Thus, her bargaining power is substantially diminished. Rizzotti will probably need a player's union, and more fannies in the seats, to be paid more as her peers in other sports are.

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