Sunday, January 4, 2015

Michigan, Harbaugh's Contract and Association Image

While University of Michigan fans excitedly applauded the hiring of Jim Harbaugh as the university’s new football coach, some questioned the mega million dollar contract he will be paid.

By the way, news reports say Harbaugh turned down $7 million a year in favor of a $5 million a year contract.

Social media lit up questioning the money and wondering if the University paid any of its professors that amount.

This side of the news and reaction represents potential blowback that associations should monitor. It could be about the salary the nonprofit pays a new CEO, the size of an outside contractor’s fee and the cost of a new program or building.

Reality: most people react to headlines and not the full story!

As a result, some make negative statements. Some say “the football team should be giving that money to pay for faculty salaries.” (I say “nuts.” We would not dream of taking some of a multi-million dollar grant for cancer research and giving it to an athletic team. Why do we think the reverse should be true?)

While I don’t know all the details of Harbaugh’s contract, I do know from experience that most major athletic departments are self funded and no university nor public funds are used to pay coaches or other costs. In fact, at these large universities the athletic department pays not only for coaches but for all athletic costs including construction and maintenance of facilities such as stadia and arenas.

While serving on the Ohio State University Alumni board more than 10 years ago, when meeting with the athletic director, I was startled when he said, “I just finished signing a check to the University for $26 million ... for room, board and tuition for 1,200 student athletes.”

In most large universities, the coach’s contract includes several funding sources:
  • athletic department
  • shoe and other endorsements
  • television and radio shows
  • public appearances
  • camps and clinics
The reality for some large universities is that athletic funds support athletic expenses. A few athletic departments actually “donate” some of their funds to academic endeavors. For example, a few years back, Ohio State’s athletic department donated $1 million of its funds to the expansion of the University’s main library.

Most of these funds would not exist without athletics.
But, perception is reality. Most people don’t make the distinction between university and non-university funds.

So, while coaching salaries are huge and while funding comes from a variety of non-public funds, the average person sees the name of the university, the name of the coach and the gross salary.

As a result, they protest against the use of the funds without knowing the details or non-university sources.

In the case of the Jim Harbaugh and University of Michigan, either the University failed to outline the source of funding or the media failed to provide it.

And, that can happen when associations pay huge salaries or contracts and members are not fully informed. So, when announcing such large expenditures, develop clear, consistent and transparent communications messages.

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