Don’t Want to Get Fired? Best and Worst Cities for Firing Professional Coaches

Mike_Shanahan_RedskinsIt’s “Black Monday” in the NFL.  The Vikings, Redskins, Lions, and Bucs have already fired their coaches today, and more firings are possible before the day is done.  There are many variables that can affect the firing of a coach in professional sports.  Of course, three easily observable factors are the performance of the coach (winning percentage, playoff appearances, and championships), the investment by the ownership (team payroll), and the sports league (NFL, MLB, NBA, and NHL).   There are also intangible factors endemic to each city in America and Canada with a professional sports team that can influence the probability of a coach getting fired.

We decided to estimate a logistic regression model that could explain the probability of getting fired as a function of performance, investment by ownership, and professional league affiliation.  We looked at data from all four professional sports leagues over the last twelve years.  We then compared the predicted probability from our model of getting fired with the actual firings in each city.  In theory, cities with intangible characteristics that make it more likely for a coach to get fired would have actual firings at a higher probability than predicted through our model of performance and investment.  We tried several specifications of our model, and these rankings are robust.

Based on our study, the Top 8 Worst Cities (Highest probability for getting fired above predicted) are:

  1. Orlando
  2. San Francisco
  3. Montreal
  4. Sacramento
  5. Milwaukee
  6. Oklahoma City
  7. Jacksonville
  8. Miami

The Top 8 Best Cities (Lowest probability for getting fired below predicted) are:

  1. Winnipeg
  2. Nashville
  3. Salt Lake City
  4. Memphis
  5. Los Angeles
  6. Portland
  7. Buffalo
  8. Minneapolis

It’s interesting to note that the top 8 worst cities does not include big media markets like New York, LA or Chicago, where one might think there is large expectation for winning.

Mike Lewis & Manish Tripathi, Emory University 2013.

Twitter Analysis: The Seat is Warm for Philbin & Shanahan

During the NFL season, columnists & “insiders” provide their speculation on coaches that are on the proverbial “hot seat”.  It seems like coaches can be on the “hot seat” before the season even starts, and they can jump on and off the seat on a weekly basis.  We assume that the columnists & “insiders” are basing their speculation on institutional knowledge.  While Emory Sports Marketing Analytics does not have access to NFL team management, we do have the ability to gauge fan/customer opinion through Twitter.  We would like to present the NFL Coaching Hot Seat from the fan perspective.

The methodology for creating our “hot seat” is straightforward.  Using Topsy Pro, we collected all tweets from the last thirty days that mention a head coach.  Each tweet was then characterized as having positive, negative, or neutral sentiment based on its content.  We computed the ratio of negative to positive tweets for each coach (e.g. If the ratio is 2, the coach has twice as many negative tweets as positive).  We believe that this ratio can serve as a proxy for public sentiment towards a coach.

A quick scan of today’s sports news shows that most columnists & “insiders” believe that Greg Schiano (Tampa Bay) and Leslie Frazier (Minnesota) are receiving the most heat from their coaching seats.  Our analysis of public sentiment over the last thirty days shows that Joe Philbin (Miami) has the highest negative to positive tweet ratio (2.47).  At a distant second is Mike Shanahan (Washington), and Mike Tomlin (Pittsburgh) is in third.  Thus, it seems that if the public were making coaching decisions,  Philbin and Shanahan would be on the hottest seats!  We realize that much of the negative tweeting about Coach Philbin is probably connected to the Martin-Incognito incident, but ultimately this does reflect on Philbin’s job status.

It is interesting to note that in terms of sheer quantity of  tweets (number of mentions), Rex Ryan is the leader in the NFL over the last thirty days.  Schiano  and Philbin are second and third, respectively.

Mike Lewis & Manish Tripathi, Emory 2013

Who’s the “Best” College Football Coach in the Past Decade? We think he works for the Philadelphia Eagles.

As the title implies, we are about to go down a road that will inspire debate and we expect considerable hate.  As we suspected, and have since confirmed in our 3 months of publishing, there is no sport with more passionate fans than college football.  We know that as soon as we provide our ranking of college coaches that we will immediately be told that we are wrong (and in rare cases that we are right).

For our coaching analysis, the starting point is the idea that we should rank coaches’ performance relative to the resources that are at their disposal.  In other words, we can’t compare the coaches at the University of Illinois and the University of Florida simply based on win-loss records. For the analysis, we gathered data on results (winning percentage, major bowl participation), football expenditures, historical performance (won-lost records, major bowls, national championships, etc…), attendance and other factors.

We use this data to create models that predict team success based on financial resources, historical performance and market potential.  These factors can all contribute to on-field success.  For example, the logic of including historical performance is that a more storied program may be more attractive to both bowls and to potential recruits.  We use the models to predict the performance of each school for each of the last 10 years.  We then assess the contribution of the coach by comparing actual to predicted performance.

We analyzed coaches using the past 10 years of data in terms of two criteria: winning percentage and selection to play in a major bowl (Rose, Orange, Fiesta, Sugar, and National Championship).   As an aside, our performance models were both estimated using logistic regression.

In terms of incremental winning percentage effects, the top coach was Chris Petersen from Boise State. Coach Petersen has achieved a 91.3% winning percentage while at a school with only moderate football expenditures (even among non-BCS schools) and limited history.  In terms of specific numbers, we find that Petersen has achieved a winning percentage that is 37% higher than what a school of comparable resources and history achieves.  The top five also includes Urban Meyer, Brian Kelly, Bret Bielema and Bobby Petrino.  In positions six through ten we have Steve Spurrier, Bob Stoops, Gary Patterson and Frank Beamer.  Two other former coaches produced notable results on the winning percentage criterion.  Chip Kelly won 32% and Pete Carroll won 13.3% more games than expected.

Okay so who is missing?

We already anticipate complaints from Alabama fans along the lines of “The list is invalid because at Alabama we play for championships, not for winning an incremental game or two.”  Well, Coach Saban does finish 11th on the incremental winning list, and there is some merit to this argument.  It is more difficult to drive incremental wins at schools like Alabama than Boise State.

In part two of our analysis we looked at incremental participation rates in BCS bowl games (not just the BCS championship).  Our approach was similar as in the winning percentage analysis and used the same set of predictor variables.  On this metric, the top performer was Bret Bielema.  Bielema’s record includes taking Wisconsin to the last three Rose Bowls.  In terms of percentages, we find that with Bielema in charge, Wisconsin improved their rate of BCS bowl participation by 28%.  It looks like Arkansas made a great choice! In positions two through five we have Chris Petersen, Bob Stoops, Frank Beamer and Urban Meyer.  And where does Coach Saban fall?  Just behind Urban Meyer in 6th place.

If we also look at former college coaches one name really stands out.  Chip Kelly was by far the leader on the BCS bowl participation metric. Combined with the winning rate results, one can argue that Chip Kelly has been the most effective college coach over the past few years.

Returning to Coach Saban, first, it must be noted that he scores really well on our measures (11th for incremental wins and 6th for incremental BCS games).  And we definitely understand the argument that he should be number one.  In terms of winning championships, it is hard to argue that he is not the go-to coach.

Mike Lewis & Manish Tripathi, Emory University, 2013.

How Would Paying Players Change College Sports: O’Bannon vs the NCAA (Part 4)

In our series on the O’Bannon case and the associated issue of paying college athletes, we have focused on the value that athletes and universities provide to each other.  Another perspective that should be considered is how a shift to paying players might impact fans.  This is a tough issue to contemplate given that the ultimate impact on fans or customers would be a function of the specific system used to compensate athletes.

Our view is that the fan’s perspective should be considered in terms of how paying players would affect competitive balance levels across a mix of very different schools.  Perhaps the most frequent source of concern about competitive balance has been the New York Yankees in professional baseball.  The fear has always been that that large market teams like the Yankees will use their greater revenue bases to attract all the top talent, so that teams in small markets such as Kansas City or Milwaukee will be unable to field competitive teams.  The opening day payroll of the Yankees this year was $228 million while the Houston Astros lagged the field with a payroll of just $22 million.  However, concerns about competitive balance in MLB have faded in recent years as the teams such as the St. Louis Cardinals, Tampa Bay Rays, Colorado Rockies, and the Detroit Tigers have played in the World Series.  Notably, all major US professional leagues have adopted some form of revenue sharing or payroll constraints in order to maintain competitive balance and team profitability.

College sports have their own issues with competitive balance. The University of Texas athletic program is a $150+ million business while the 50th ranked (in terms of revenues) Northwestern program produced only $56 million.  This allows Texas to pay its football coach more than $5 million per year.  Some revenue sharing already occurs but it is at the conference level.  It must be noted that Northwestern’s spot in the top fifty is largely due to its membership in the Big Ten Conference (it has been reported that the Big Ten Network distributes more than $20 million per school).  Whether or not college sports operate with an acceptable level of balance (The SEC has won the last seven BCS Championships) is debatable, but the prohibition against paying athletes can be viewed as an incredibly rigid salary cap.  Paying players means that some other structure for maintaining competitive balance would be needed.

To a large degree, the conference structure of college sports increases the complexity of coming up with solutions for maintaining competitive balance.  Currently, conferences operate with extensive revenue sharing agreements.  But an extension to sharing revenue with non-members would require a paradigm shift.  In addition, Title IX regulations that strive to equalize expenditures on men’s and women’s sports are another source of complexity.  This means that revenue sharing is implicitly required within institutions.  If college football players receive salaries does that mean that women golfers would also need to be compensated?

All this is fine, but the question remains as to how big time college sports would evolve if college players could be paid and how might these changes affect the fans?  While considering the impact on the fans may seem a bit tangential, at the end of the day it is the fans that are the ultimate source of revenues and profits associated with college athletics. We, at Emory Sports Marketing Analytics view the entire situation as driven by marketing considerations.

The O’Bannon case began with a complaint about the embargo against athletes profiting from their own images.  A relatively minor change might allow athletes to market their own images to the highest bidders while still preventing direct compensation from colleges to players.  We would expect that such a change would have significant effects on recruiting, with the end result being an even greater concentration of elite recruits at high brand equity schools.  As high school athletes begin to make their college decision based on their personal brands, we expect that we would see many situations that are analogous to LeBron James’ decision to move to the high profile Miami market.  The potential would also exist for schools to gain recruiting advantages by more aggressively marketing their individual athletes.  While, we could argue that the situation described above already exists (e.g. Kentucky basketball) we expect that the trend would accelerate.   The preceding scenario would likely lead to a “rich getting richer” scenario.  The open question would be whether this increase in the advantages of more marketable schools would create dangerous levels of imbalance.

Allowing players to sign licensing deals would also mean that players would be able to sign with agents while still in school, since they would need representation when negotiating with video game, clothing and shoe companies.  Undoubtedly, shoe companies in particular would become even more powerful players in college basketball.  Shoe companies already sponsor AAU and college teams, and it’s not farfetched to imagine a scenario where a player such as Andrew Wiggins’ college choice would be made by a team of agents and other representatives working in conjunction with shoe companies.  A further question would then arise as to what schools could promise athletes in terms of marketing support?  Would high profile athletes insist on being featured on billboards or in other marketing communications?

A more extreme, and perhaps fairer, solution would be to allow athletes to participate in a free market system where they could sell their services to the highest bidder.  We say “fairer” since the college sports marketplace already includes many examples of coaches and athletic directors becoming extremely wealthy.

Moving to a totally free market would be a tremendously interesting experiment.  Just as in MLB, the college sports landscape is composed of schools that vary greatly in terms of market potential and current popularity.  Texas, Florida, Notre Dame, Ohio State and others have resources that would enable them to greatly outspend even other members of the power conferences.  Imagine a scenario where the power schools can outspend other institutions by a significant multiple.  We would also ask the question of what would happen to transfer rules.  How could the NCAA prohibit transfers or require athletes to sit a year when such a regulation would harm players earning capacities?  Would colleges need to negotiate compensation and contract length with prospective student athletes?  The real danger in moving to a free market system is that suddenly many schools would be entering a world of significant financial risk, where previously profitability was almost guaranteed (for examples of this look at the investments in programs made by Big Ten schools such as Northwestern and Illinois).

If our conjectures are true, a move to a free market could well have a negative effect on the capacity of the industry (and therefore on consumer welfare – which is a common consideration in anti-trust cases).  We expect that many schools would need to take a step back from competing at the highest level, unless some system of revenue sharing was put in place.  The challenge would be in creating a revenue sharing or salary cap system across a variety of conferences.  If anyone doubts the challenge this would involve, just consider the case of creating a college football playoff system.  For the last twenty years we have seen the College Bowl Coalition, The Bowl Alliance and multiple versions of the BCS.  Our guess is that this would lead to a system of four or so “super conferences”.  And even within these conferences we might evolve to a Harlem Globetrotters versus the Washington Generals model where perennial winners like Ohio State and Florida finance perennial losers like Illinois and Vanderbilt, so that they have someone to play.

In sum, our speculation is that any move towards paying players would essentially greatly reduce the incentives of many schools to play sports at the highest levels. Opportunities to leverage a school’s brand equity would shift the competitive balance while paying players directly would greatly increase school’s financial risks.  Absent strong revenue sharing mechanisms and some type of salary cap (would college players need belong to a union?) we would guess that a significant set of schools would move to lower levels of competition.  This would limit both consumer choice and, ironically, the choices of prospective student athletes.

Mike Lewis & Manish Tripathi, Emory University, 2013.

Winners, Losers, and Question Marks from the Men’s NCAA Basketball Tournament

Later tonight, the NCAA championship game between Michigan and Louisville will tipoff in the Georgia Dome.  Even though a champion has yet to be crowned, we can begin to make some judgments regarding the marketing winners, losers, and questions marks of this year’s tournament.  Before we provide our thoughts, please note that tournament success will usually result in greater publicity, fan loyalty, and all the spoils that come with brand equity (think Apple or BMW).

The two teams in the championship game are both interesting stories.  Louisville is a marketing monster, and enjoys the greatest “revenue premium” relative to on-court performance, but Michigan is another story.  Michigan performs poorly on our brand equity metric because history shows that Michigan needs to win consistently to keep the arena packed.  Anecdotally, we had to explain this poor brand equity finding to a distinguished University of Michigan business school professor, who pointed at this year’s excitement as an indicator of fan loyalty.  Given that this was a UM professor, we had to explain using small words, that true fan loyalty means that the fans even show up in down years.

For the two teams in the championship, Louisville is a clear brand equity winner, as they will continue to lengthen their lead on the competition; but the jury is still out on Michigan.  The only potential losers in the Louisville family are the Louisville fans that could be asked to pay higher prices.  As a frustrated University of Illinois fan, Professor Lewis would view this as a very small sacrifice for basketball success.

Michigan faces the challenge of all football schools: the year consists of the football season, spring football, and the remainder is perhaps a tossup between basketball season and football recruiting.  For Michigan to create true basketball brand equity, the school needs to sustain success.  While Coach Beilein’s history suggests this is likely, Michigan could lose multiple underclassmen to the NBA draft.

Two schools that didn’t make the NCAA Tournament also offer an education comparison.  Tubby Smith failed to make the tournament, and was replaced by Rick Patino’s son, Richard.  Given Minnesota’s high level of brand equity (2nd in the Big Ten), this was likely a decision to protect the brand by trying to bring in a dynamic young recruiter.  The most notable team to fail to make the tournament was last year’s winner, the Kentucky Wildcats.  The Emory Sports Marketing Science Initiative makes no pronouncements about Kentucky.  I think we can all agree that Kentucky and Coach Calipari have developed a new and unique business model.

March Madness is known for its Cinderellas.  This year’s top two Cinderella stories were the Wichita State Shockers and the Florida Gulf Coast Eagles.  Our assessment is that Wichita State was the BIG winner.  Not only did the Shockers reach the magical level of the Final Four, but also, at least as of now, Coach Marshall is sticking around.  For a mid-major to build equity, the school needs to sustain success beyond that achieved by an individual coach.  This last point brings us to FGCU.  By his hitting the exit for USC with amazing haste, it is likely that any fan excitement created by reaching the Sweet 16 has left the state of Florida with Andy Enfield.

 

 

Chris Collins headed to Northwestern, not Minnesota

Reports this morning have Chris Collins accepting the head coach position at Northwestern over the same position at Minnesota.  Based on our Big Ten Brand Equity Rankings, this seems to be a mistake.  Minnesota is ranked second in the Big 10, while Northwestern is ranked 8th.  Greater brand equity means higher fan loyalty and more revenue in the athletic department.  This money can be used for better facilities and for recruiting.  Chris Collins seems to be eschewing brand equity in order to return to his hometown.

 

NCAA Basketball Coaching Compensation

For many college basketball coaches, the NCAA tournament provides an opportunity for increasing their pay.  For instance, it has been reported that Tubby Smith could have received a $2.75 million bonus if the Golden Gophers had won the NCAA Title, while Shaka Smart could have earned an additional $350K if VCU had won the tournament.

The variation in incentive contracts of coaches suggests that the value of making and progressing in the NCAA tournament is not well understood.  In the analysis below, we report the one year projected value of reaching the tournament or the final four for schools and coaches.

For example, for the aforementioned Tubby Smith, we estimate that reaching the final four would result in $797,700 in brand equity (annual) while Minnesota’s cost in terms of bonus payments to coach Smith would have been $600,000.  In contrast, if VCU had progressed to the final four, the benefit to VCU is estimated to be about $1.1 million while the payout to Coach Smart is just $56,000.

 

We suspect that this analysis will provoke questions.  Several such questions are provided below:

1.  How was the analysis performed?

Elsewhere on this site we report an analysis focused on school’s and conference’s brand equity.  These estimates are computed using a revenue premium model.  Basically, this model examines single year revenues as a function of performance in a given year.  The excess revenues (the residual of the model) represent a form of brand equity.  Specifically, the revenue premium (or deficit) provides a measure of how the team’s brand influences fans to pay more (or less) for the school’s basketball product than is merited simply by the team’s on court success.

To understand how this brand equity is created, we then examined the relationship between brand equity and each school’s past NCAA success (Tournament participation and Final Fours) and conference membership (major or mid major).  The results from this statistical model then reveal how brand equity is created by reaching the tournament or the final four.  We also use a nonlinear specification for these terms to account for whether cumulative achievements yield diminishing returns.  Finally, we include terms that estimate separate effects for high and mid major conference members.

2.  Since Brand Equity is an enduring asset wouldn’t it make more sense to look at the Net Present Value (NPV) of the created brand equity?

This is a complicated issue.  On one hand, it is likely that an improved brand image will have at least medium term effects.  It is, however, hard to assess the dynamic impact, because coaches can often “harvest” a significant amount of the increased equity through higher salary levels.

3.  Why don’t colleges use greater incentives and perhaps less salary when negotiating a coach’s compensation package?

It could be argued that our analysis suggests that compensation should be more heavily skewed towards bonus payments.  The logic for this argument is that if brand equity creation can be measured then coaches should be paid for their actual results.  However, we must remember that the coaching hires occur in a competitive market.  It is likely that coaches are somewhat risk averse and may prefer fixed salaries over incentive-heavy contracts.

4.  Why doesn’t Louisville create brand equity from making the tournament?

In the case of schools’ like Louisville, the existing brand equity and fan expectations are so great that the impact of making the tournament is negligible.  It is more likely that making the tournament merely maintains the Louisville brand.  Failing to reach the tourney would likely hurt the brand, but Rick Pitino would need to take the Cardinals to the final four to improve the Louisville brand.