SEC's New Reality: Pay the Coaches Or Lose

The football and men’s basketball coach are the two most important representatives of any university. A good coach in either sport is worth his weight in gold. That means good coaches can command premium salaries. This is not rocket science, it’s a concept that exists across the spectrum of highly trained professionals in our globalized society — if you’re outstanding at something, the top of your class as a doctor, rock star, writer, or singer — you deserve a premium over the merely good or, certainly, the mediocre or unproven.

Some SEC schools have grasped the reality of this present day economic system and reaped the value of paying top dollar for performances by way of championships. Others, amazingly, have not, and their mediocre performances on the field and the court are the result. Before we dive into the numbers, let me reiterate my thesis so it’s perfectly clear: there is no more important expenditure on an athletic department’s budget than the amount spent for football and men’s basketball head coach.

Not facilities, not recruiting budgets, not car allowances, not athletic department personnel, not good public relations staff, not the history of a program, not campus location or climate, not even good fundraising. Nothing, and I mean nothing, moves the revenue needle like winning. If you win, the dollars follow.

Now, that doesn’t mean that some SEC athletic departments aren’t naturally advantaged. After all, everyone doesn’t have a 90k plus-seat stadium or a huge basketball arena or a large stable of wealthy alumni in a populous state. So before we dive into the numbers to a great degree, I want to go ahead and rank the size of the SEC athletic departments for y’all to review. Here goes, biggest to smallest. (Note, for purposes of this analysis I’m using ESPN’s 2010 data on all colleges that you can review here. These data may differ somewhat with other posted numbers, but they appear to be the most recent and I’m taking them as approximately accurate. Also, to forestall the emails, these are revenue numbers and not profit figures. But most athletic departments are budgeted to return little, if any, positive profit. If schools do profit from athletics, and only about half the SEC schools do, it will be a tiny fraction of the budget of the top programs.)

So here are the athletic department sizes as ranked by revenue:

1. Alabama $123 million

2. Florida $106 million

3. Tennessee $102 million

4. Auburn $89 million

5. LSU $85 million

6. Georgia $85 million

7. Kentucky $71 million

8. South Carolina $67 million

9. Arkansas $66 million

10.Vanderbilt $45 million

11. Ole Miss $35 million

12. Mississippi State $30 million

Looking at these numbers you can see that there are systemic advantages for the largest schools on this list. For instance, the Mississippi schools’ athletic departments are barely 1/4th as large as Alabama’s. This means that Alabama should have substantial advantages in SEC competition. By a large margin Bama can afford to pay more for coaches, have better facilities, spend more on recruiting, and the like. This also means that if, say, Alabama decides it wants a coach it really can’t be outbid. Certainly not, anyway, by the bottom half of SEC schools.

Given its competitive advantage and my previously advanced thesis that paying coaches is the most important single expenditure that a school can make, you’d expect for Alabama to spend more money on coaches than any other SEC school.

You’d expect that, and you’d be correct.

For this upcoming year here is an analysis, based on the most recent data I could find, of a ranking of SEC schools based on the money they’re spending for head coaches in football and men’s basketball. (I did my best to find the most current salary numbers. If you believe me to be in error, email me).

1. Alabama– $7.8 million

Nick Saban $6 million (a million of this was a bonus)

Anthony Grant 1.8 million

2. Arkansas – $6.0 million

Bobby Petrino – $3.5 million

Mike Anderson – $2.5 million

3. Kentucky – $5.7 million

Joker Phillips – $1.7 million

John Calipari – $4 million

4. Florida – $5.5 million

Will Muschamp – $2 million (It should be noted that Urban Meyer was making $4 million last season)

Billy Donovan – $3.5 million

5. LSU – $5.2 million

Les Miles – $4 million

Trent Johnson – $1.2 million

6. Auburn – $$4.2 million

Gene Chizik – $2.7 million

Tony Barbee – $1.5 million

7. Georgia $4.1 million

Mark Richt – $2.8 million

Mark Fox – $1.3 million

8. Mississippi State – $3.85 million

Dan Mullen – $2.65 million

Rick Stansbury – $1.2 million

9. Ole Miss – $3.3 million

Houston Nutt – $2.5 million

Andy Kennedy – $800k

10. (tie) Tennessee $3.2 million

Derek Dooley – $1.9 million

Cuonzo Martin – $1.3 million

10. (tie) South Carolina – $3.2 million

Steve Spurrier – $2 million

Darrin Horn – $1.2 million

12. Vanderbilt – $2.6 million (These are good estimates since the private school salaries aren’t public)

Kevin Stallings -$1.3 million

James Franklin – $1.3 million

Looking at these numbers in comparison to the size of the athletic departments you can already see that the size of the athletic department doesn’t directly correlate to the money spent on coaching salaries. Nor does the money paid to coaches necessarily reflect the success that those coaches have had at that particular school. In fact, looking at this list, Florida’s Billy Donovan is the only coach who is making a salary over $2.8 million that you can say he “earned” at the school paying him now. That is, Donovan arrived at Florida from Marshall as a relatively unknown coach who was not making a substantial salary already and has since earned his pay based on his success at Florida.

That was the traditional way that SEC coaches become highly paid. They went to a school as an unproven head coach and were paid for their resulting success. Steve Spurrier at Florida is, perhaps, the best modern example of this phenomenon.

Those days are past.

Now the Urban Meyer’s, John Calipari’s, Bobby Petrino’s, and Nick Saban’s of the world arrive as bona fide successes already. They require the athletic departments to show them the money before they’ve even won a game at their current school.

Now, and this is where it gets interesting, what if we break down these top coaching salaries even further as a percentage of the overall revenues?

The rankings change:

1. Mississippi State – 12.8%

2. Ole Miss – 9.4%

3. Arkansas – 9.1%

4. Kentucky – 8.0%

5. Alabama – 6.3%

6. LSU – 6.1%

7. Vanderbilt- 5.7%

8. Florida – 5.2%

9. Georgia- 4.8%

10. Auburn – 4.7%

11. South Carolina – 4.5%

12. Tennessee- 3.1%

What jumps out at us from this data?

1. You can still buy championships at an affordable cost.

That’s what Alabama effectively did with Nick Saban. Sure, Saban is well compensated, but he’s a tremendous bargain when you consider what he produces, titles, for that cost. What’s more, as a percentage of revenue spent on coaches, Alabama only ranks in the middle of the SEC.

If it wished, Bama could pay its football and men’s basketball coach $15.6 million combined, over twice what it pays now, and still not be paying the highest salaries as a percentage of revenue in the SEC.

2. Top revenue schools should be outpricing their competitors for top coaching talent.

These schools should think of themselves as the New York Yankees or Boston Red Sox do in baseball, as big market teams capable of exploiting systemic advantages that lead to a sustained competitive advantage. Does that mean these teams will win big every year?

Of course not.

Smaller schools can discover unproven, cheaper coaches and less desirable players and ride them to success as well. But over time the winning percentages should favor the big programs, those with the money to deliver the single most important factor for winning — proven head coaches.

Is this fair?

Probably not.

But in something as competitive as sports — or business — you have to exploit your advantages.

If you’re in the top half of the SEC you are able to pay much more for coaches than your lesser six competitors. What’s more, you should want to pay more because paying more at the top lifts the costs for everyone. That means that your competitors have to exhaust their resources trying to keep up with you. If they match your offer in one sport, then they have to lower their spending in another sport.

What’s more, you pay a premium for great coaches and they provide a minor leagues from which you can pluck established coaching prospects that they can no longer afford.

It’s a field that should be perpetually slanted in your favor.

3. There should be no such thing as “basketball schools” or “football schools” for any program capable of bringing in over a $100 million in revenue.

That figure makes you a powerhouse program.

Per the ESPN study that I linked above, only five schools broke $100 million in revenue in 2009: Alabama, Texas, Ohio State, Florida, and Tennessee.

These schools should be systematically exploiting their revenue advantages. Four of these schools are. Guess which one isn’t? (Scroll ahead to number six if you want to know).

In an age when the best coaches command top dollar, only the top programs can provide that top dollar.

4. The Mississippi schools are already straining to keep up.

Credit to Mississippi State for being willing to pay Dan Mullen, but as you can see by the revenue numbers, the Mississippi schools are already being priced out of the big name coaches. Neither school is paying much money overall, and already coaching salaries are consuming a staggering portion of the bottom line — nearly 13 percent of overall revenue for State.

(Again, I’m using 2011 salaries and 2010 numbers so these figures aren’t completely accurate, but the relative positions are).

5. The SEC’s mid-tier revenue schools will have to choose a sport to focus expenditures upon.

Eventually the top programs are going to catch on, and drive their spending up on top coaches because that spending gives them a competitive advantage. Then these mid-tier SEC programs will have to decide whether to be a “basketball school” or a “football school” in this new era.

At least to compete at the top level.

Kentucky is a good example.

By paying John Calipari $4 million a year, the Wildcats are paying a basketball coach alone more than nearly six of the SEC schools do both a football coach and basketball coach combined. Put it this way, Kentucky pays John Calipari nearly a million dollars more than Tennessee pays Derek Dooley and Cuonzo Martin.

If the Wildcats made this same expenditure in football as well, they couldn’t afford it.

But, credit to Kentucky, they paid the most money in the sport their fan base cares the most about. And if John Calipari eventually wins a national title, it will be the best $4 million ever spent in the history of the Bluegrass state.

6. Arkansas is at the forefront of the new coaching age and will be rewarded for being ahead of the curve.

The Razorback athletic department gets it. They are spending big money in football and basketball. Already, Bobby Petrino has paid off, taking the Razorbacks to a BCS bowl in just his third season.

Soon Mike Anderson, a proven winner, will be paying off as well.

Can the Razorback athletic department keep up this spending binge in the next decade if other SEC schools that bring in much more revenue start to press the accelerator on coaching salaries?

We’ll see.

But for the next 5-7 years the Razorback brain trust has beaten the market and will reap the benefits of its intelligence.

Well done, Arkansas.

7. Tennessee is clueless when it comes to the new world order of coaching salaries.

Some UT fans have been upset at me for ripping the Cuonzo Martin hire on the radio and Twitter. But most of those fans have missed my critique. It’s not that I think Martin is destined to fail, it’s that he’s not a proven success. And an athletic department as big as Tennessee should be in the business of only hiring proven successes.

How do they do that?

By paying more for talent than their competitors can afford.

Put it this way, if you’re a Tennessee fan, how can you justify spending $98 million on something other than football and men’s basketball coaching salaries? Yet, that’s what Tennessee is doing. (By the way, it’s actually much more money than this, since we’re using older data on revenues to utilize for present expenditures. That means Tennessee’s coaching expenditures is actually even worse than the chart suggests). The days of finding up and coming talent and rewarding it for paying off have passed.

Only Tennessee hasn’t noticed yet.

The result is two coaches, Derek Dooley and Cuonzo Martin, who are, as a duo, the least accomplished coaches in the entirety of the SEC. Between them they have one bowl win and no NCAA tourney appearances. So, to forestall the emails from people who don’t get my point, I’m not saying that Tennessee should be paying Dooley and Martin more money or that Dooley and Martin are foredoomed to fail. I’m simply saying that Tennessee should have been capable of pricing itself out of the Dooley and Martin market to begin with.

The Vols should have hired proven successes and paid them for it.

8. “Good” program and “bad” program talk is for idiots.

Good programs, going forward, are the ones with money. Bad programs, going forward, are the ones without money.

Don’t fall for the tired cliche of program analysis that is regularly trotted out by talking heads, just go to the money instead. It’s much more effective. Now, if someone is deciding between two good programs offering similar money — that is top ten revenue programs, for instance — then the respective strength of the programs comes into play. But otherwise program analysis is for people who are talking out of their asses.

Money talks.

Remember the golden rule, he with the gold rules.

9. Spend the money on coaches or else…

This is the final lesson from the data. If you aren’t spending money  on coachign salaries then you probably aren’t winning. At least not consistently. And if you’re not winning then your revenue is going to fall. Tennessee, for one, is going to find that out in a hurry with Cuonzo Martin in basketball.

Bruce Pearl increased attendance from 12k to 20k during his six-year tenure. That means he made millions a year for Tennessee over and above his salary. In his first season Martin is going to see attendance drop by at least 4k. That’s going to be additional millions in losses for UT athletics. So it’s not just that Tennessee didn’t spend money on Pearl’s replacement, it’s that not spending money is going to cost more in the long run than spending money up front.

Yep, the Volunteer athletic department is about to become a cautionary tale for other SEC schools at the top. Even systemic advantages can be bungled through poor management. On the flip side, Arkansas is set to be the big winner over the next 5-7 years.

Being ahead of the curve pays.

And paying coaches in football and men’s basketball is the best possible expenditure that any program can make. If anything, and this is provocative and against the curve, top college coaches are drastically underpaid given their worth.

Don’t believe me?

Jersey Shore's The Situation made more than Nick Saban last year.