In 2000, the lead story in your college newspaper reports the details of the hiring of the new football coach. The old football coach was fired for failing to win games and attract fans. In his last season his record was 1 win and 11 losses. The news story states that the new coach’s contract provides for a base salary of $200,000 per year plus an annual bonus computed as follows:
|
Win less than 5 games |
$0 |
|
Win 5 to 7 games |
$25,000 |
|
Win 8 games or more |
75,000 |
|
Win 8 games and conference championship |
$95,000 |
|
Win 8 games, win conference, get a bowl bid |
150,000 |
The coach’s contract has essentially no other features or clauses. The first year after the new coach is hired, the football team wins 3 games and loses 8. The second year the team wins 6 games and loses 5. The third year the team wins 9 games, wins the conference championship, and is invited to a prestigious bowl. Shortly after the bowl game, articles appear on the front page of several national sports publications announcing your college’s football program has been cited by the National Collegiate Athletic Association (NCAA) for nine major rule violations including cash payoffs to players, playing academically ineligible players, illegal recruiting tactics, illegal involvement of alumni in recruiting, etc. All the national news publications agree that your college’s football program will be disbanded by the NCAA. One article also mentioned that during the past three years only 13 percent of senior football players managed to graduate on time. Additional speculation suggests the responsible parties including the coaching staff, athletic director, and college president will be dismissed by the board of trustees.
a. Compute the amount of compensation paid to the new coach in each of his first three years.
b. Did the performance measures in the coach’s contract foster goal congruence? Explain.
c. Would the coach’s actions have been different if other performance measures were added to the compensation contract? Explain. d. What performance measures should be considered for the next coach’s contract, assuming the football program is kept alive?