The Coaching Carousel Economy

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As the regular college football season draws to a close, the coaching carousel heats up. So far in 2021, 28 of the 130 FBS programs have undergone coaching changes. Coaching decisions illustrate certain elements of economic and business decisions in general. Perhaps unexpectedly, the imagination plays an inordinate role.

I will focus on coaching vacancies as a result of layoff, not retirements or successful coaches leaving for other jobs. And I will consider the dismissals linked to the performance of the team, and not to personal fault.

DAs fire the coaches because they decide the program would work better with new leadership. To come to this conclusion, an DA must consider the performance of the program with another coach; we’ll never see what Florida or LSU or Troy could have achieved in 2021 with a different coach. Likewise, economists compare economic performance to alternatives that we never see. Imagination is crucial in all of these comparisons.

Two justifications are often put forward to justify the dismissal: the team did not win enough or it is unlikely that the coach will deliver in the future. Economists call these retrospective and prospective evaluations, respectively. All job performance can be assessed retrospectively or prospectively. In my work, we might hear when a professor comes forward for tenure, “Smith’s case deserves tenure” (retrospective) or “Smith will contribute to the University for years to come” (prospective).

Imagining a perfect world – a world where our team remains undefeated every year – is easy. Yet unrealistic expectations can doom a football program, as not even Nick Saban can achieve such perfection. Economists call this the Nirvana fallacy. Our imaginations must be realistic. Economists build models – and discuss their details at length among ourselves – to discipline our imaginations.

Entrepreneurs create new businesses and are a source of the imagination. They have to imagine a new product or service and how people are going to use it. Preparing business plans for startups is the discipline of the imagination of entrepreneurs.

In business, profit prompts entrepreneurs, managers, and investors to engage and act with disciplined imaginations. Profits are a residue: it is the remaining dollars (if any) of sales after paying all the bills. Here’s a difference between college football and business; football universities are all non-profit. In addition, athletics departments are part of a university. Football income increases when the team wins but the DA will not keep this additional income.

Economists recognize that the absence of a profit motive – or residual demander – significantly affects an organization’s performance. The lack of profit does not, however, prevent football coaches from being made redundant.

In college football and sports in general, winning is a motive. And it’s powerful: Coaches work late at night, and players spend more hours training and practicing than students studying. Failure to hire a winning coach can result in the termination of an AD. Gain adequate substitutes for profit.

Economists distinguish between the “hard” budget constraints of private companies and the soft budget constraints of public companies, such as the US Postal Service. Businesses have to pay for labor, materials, and tools from sales revenue. Public enterprises can always turn to taxes. Moderate budget constraints contribute to the inefficiency of public enterprises.

Yet, as the Coaching Carousel suggests, the constraints are never as tough as some economists believe. A coach who goes 1-11 can get another year (or two). Businesses can continue to operate even if they lose money. Suppose the partners put in $ 500,000 to open a restaurant. If the restaurant has spent $ 500,000 and is still struggling, the partners can always invest more.

Therefore, a dismissal or a business closure is always the result of a decision. And the decision can still be criticized as overly harsh. We must respect the exercise of such responsibility.

And remember, a disciplined imagination can sometimes advise retaining a coach. Many believed Michigan’s Jim Harbaugh would be fired after a 2-4 season in 2020 and not win the Big Ten East in six seasons. Coach Harbaugh has been selected and Michigan has made the college football playoffs this year. Sometimes our best moves are the ones we never make.

Daniel Sutter is Charles G. Koch Professor of Economics at the Manuel H. Johnson Center for Political Economy at the University of Troy and host of Econversations on TrojanVision. The opinions expressed in this column are those of the author and do not necessarily reflect the views of the University of Troy.


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