When overestimating the odds of success and passing the buck come together.
Buyouts have been a huge topic in recent weeks in college football, as many schools are considering making coaching changes. For instance, why in the hell does Ed Orgeron have a buyout of $12M? Or Bret Bielema, who is 10-23 in SEC play, having a buyout of $15M at Arkansas. Or Butch Jones having a buyout of about $8M at Tennessee. Or Kevin Sumlin’s $11M at Texas A&M.
To get out of a contract, a school or coach often must pay a buyout, an agreed-upon sum of money to release the other party from the contract.
A new coach typically wants a certain period of time to recruit and develop his players and see his vision come to fruition at the school. He wants to be assured that if things are going rocky at the beginning, or that if a school has a change in leadership, he will either get that time or be paid his money in the form of a buyout.
Conversely, schools want to make sure that the candidate they are hiring does not leave them for greener pastures, so attaching a buyout that the coach (or, in actuality, his new employer) must pay can help protect the school.
Some schools can benefit from a high buyout.
The prime examples are schools in mid-major conferences, like the AAC, MAC, or Sun Belt. These schools do not have the money to hold on to hot shot coaches who, after proving themselves, will look to jump to bigger jobs.
In this instance, the school can be helped financially, like Colorado State was with its $7.5M buyout price when Florida came calling. These type of programs are not trying to deter others from taking their coaches, but rather are trying to get paid out, like a bettor in a poker game who bets just small enough to keep other players in the pot, as opposed to betting huge and hoping others will fold.
There are also some very select instances in which a premier program has a coach whom it suspects might jump to the NFL, or perhaps to his alma mater. USC, back when it employed Pete Caroll, might have been a good example. Carroll had coached in the NFL and was an up-and-comer.
Sometimes, the cost for a school to fire a coach is not equal to the cost for the coach to break the contract and leave the school.
For example, the buyout for Florida State, if it wanted to fire Jimbo Fisher, would be close to $40M. This is one of the worst buyouts in sports.
But the buyout on Fisher’s side is nowhere close to that figure. If he wants to leave, all he must do is pay the school the remaining money owed on the existing contracts of his assistants. At a major program, that’s not a tiny sum, but it’s a pittance compared to what the school would have to pay.
But more often than not, athletic directors are getting taken to the cleaners by agents.
Routinely, agents are fleecing big school athletic directors who, once they have zeroed in on their man, drastically overestimate the chance that he is such a wild success that he would be hired away by one of a few programs, while drastically underestimating the chance that the coach fails and will need to be fired.
In addition to the pressure to get the hire made and being far too overconfident in it, athletic directors often have little incentive to push back on large buyout numbers. Why? A football hire is the most important hire an AD will make. And if it fails, the chance that the AD is himself fired is quite high. At that point, the huge buyout is the problem of the next AD.
Additionally, agents are typically much better at negotiating than athletic directors. A select few agencies rep almost all of the major coaches in the sport. ADs almost certainly could get these coaching candidates to sign on for much less guaranteed money, since the elite jobs are so scarce.
There is also the comparative fallacy, in which an agent will say, “Coach A has a buyout of $$, so shouldn’t Coach B, especially because you think he is better?”
Where on earth did LSU AD Joe Alleva believe Orgeron would jump to?
His Cajun style fits perfectly at LSU and almost nowhere else. Nobody in the NFL is coming after Orgeron, nor are any other big-time schools. The chance that LSU is the best job Orgeron could possibly get is 100 percent. Orgeron should have agreed to take that job for a buyout equal to one season of salary, regardless of contract length.
What jobs could these athletic directors possibly have been worrying about these coaches leaving for? The answer might be that they didn’t have to think, because if their huge hires fail, they’ll be fired along with them. More than likely, it won’t be their problem.
Without someone overseeing the AD’s contract negotiation, agents are like foxes in the hen house.