Coach Leach's Dismissal: It Wasn't About the Money

Coach Leach’s firing was not due to financial constraints facing the Texas Tech football program. 

I realize that is a controversial statement for many people following this issue.  In spite of comments to the contrary, Texas Tech’s athletic department was more than capable of absorbing Mike Leach’s renegotiated contract. 

In my previous post, I tried to point out major holes in the player mistreatment argument which have been claimed by the University.

Having dismissed the concussion distraction, I wanted to explore the next possible motive for Leach’s dismissal.  Like all of us, I have read many assertions that this was a case about money (and of course of it is, but only somewhat).  Gerald Myers, Jim Sowell and others have argued that Coach Leach’s demands were too high and that his demands would place too much undue hardship on the athletic department.  However, in researching this angle further, I determined -  the arguments for which I lay out below – that

1. It is highly improbable that Texas Tech was unable to absorb Coach Leach's new contract due to its financial limitations.
2. Coach Leach’s demands were justified by existing coaching salary benchmarks
3. Sadly, once you eliminate the financial angle and the concussion farce, this matter in all liklihood comes down to nothing more than the members of the Administration placing their personal egos above the interests of the school. 

In 2008 (the most recent available data), Texas Tech’s football program generated $23.6 million in revenue against $14.0 million in expenses.  This performance enabled the football program to earn a profit of $9.6 million, or a healthy operating margin of 69%.   (Source:  US Department of Education)

Assuming the football program replicated its financial performance in 2009, Leach’s raise would have increased operating expenses to $14.8 million, which would have decreased the operating margin to 59% - still, a very healthy margin.

The chart below compares the financial performance of Texas Tech’s football program to other schools in the Big 12.

2008 Big 12 Football Revenue and Expenses by School (Source: US Department of Education)

Some comments are in order (I’ll pause while you reposition your jaw after seeing the UT figures):

1.  Texas Tech’s operating performance puts us right in the middle of the Big 12.  We are number six.
2. When you look at our total operating expenses – again -  we are ranked at number six in the Big 12.
3. When you look at our total revenue figures, we rank number 7 in the Big 12, generating $1 million less than Missouri.
4. Note, in Texas Tech's and Texas' respective expense budgets, I included adjusted figures for Mike Leach and Mack Brown despite the fact that these costs were not absorbed in 2008.

In other words, in terms of financial performance, the Texas Tech football program’s position is, well, average.

In terms of the size of the football budget, for Texas Tech to increase one spot from 6^th highest to 5^th highest in the Big 12 as result of Leach's contract increase, Leach would have had to receive an additional $900,000 per annum – a figure which would have equalled that of Urban Meyer's $3.4 million salary at Florida.   

Agreeing to Mike Leach’s new contract at $2.54 million per year, contrary to Gerald Meyers’ disingenuous pleas, did not significantly alter the football budget.  Texas Tech’s football budget was ranked 6^th in the Big 12 before the raise and remained in 6^th place after the raise.

A point of order

Before proceeding further, let me bore you with a little bit of administrative vernacular, which is relevant to our understanding of how athletic departments function and how coaches are paid.   

The Athletic Department falls under the University’s auxiliary budget whereby "funds used to provide services for students, faculty, and staff which generally charge a fee directly related to the cost of the service provided (e.g. athletics, residence halls, hospitality services, traffic & parking, etc.). No state funds can be used to support auxiliary operations." Source:  Texas Tech Summary Operating Budget 2009.

In other words, the athletic department is supposed to be self funding and carry its own weight.

So the head coach’s salary and all other football related expenses get funded out of the football program’s operating budget. 

I am not clear as to whether or not financial supporters provide additional subsidies to pay the head coach’s salary at Texas Tech.  Perhaps, one of the forum members can enlighten us, but it does not appear that additional funds beyond the athletic department are utilized.  These comparisons assume (although such might not be the case in other Big 12 universities) that all salaries are self funding by football operations.

Falsehood 2:  Mike Leach’s contract demands were too high

Here, I examine Coach Leach’s contract in terms of cost and value.

Mike Leach’s contract was not expensive.

We all know, that as the Big 12 head coach with the third highest winning percentage (against the fourth most difficult strength of schedule) over a ten year period, Coach Leach’s demands to receive what amounted to the third highest salary amongst Big 12 coaches made imminent, logical sense.   This is America.  In America we are rewarded for performance.

Let’s see if we can dig a little deeper to see if there is more to this story and try to determine why the Board of Regents seemed so reticent to comply with Leach’s demands.

To better assess the cost of Coach Leach’s salary, let’s examine the chart below.

2008 Big 12 Football Coaches Salary Relative to Football Revenues and Expenses

(Source:  US Department of Education;  Coaches’ salaries derived from Coacheshotseat.com and updated press reports).

A few things to point out.

In finance (I’m a finance guy), we love to use ratios to make better sense of numbers.  One tactic we use to compare information is to standardize values.  For example, $100 to you and me probably means something very different than it does to, say, Bill Gates.  Similarly, Mack Brown’s $5 million contract, the highest in college football, seems large, but relative to UT’s football revenues, it comes to a rather small fraction of that amount.

The same cannot be said quite as easily about Coach Leach’s contract.  Coach Leach’s $2.54 million contract may be half the cost of Mack Brown’s contract, but relative to Texas Tech’s smaller revenue figure, Leach’s salary is somewhat high - although  not that high.  In fact, when you compare Big 12 schools, you see that Coach Leach’s salary is about 11% of revenues – making it the third highest.  Similarly, when you examine Coach Leach’s salary relative to operating expenses, his salary also equates to about 17% of total expenses which is roughly fourth to fifth highest in the Big 12.

Perhaps then you still believe that  Mr. Sowell had a valid argument about Leach’s demands being too excessive for Texas Tech?  To quote, one ESPN personality, "not so fast my friend."

Texas Tech’s basketball coach, Pat Knight, makes $1.2 million a year (yes, I am as shocked as you are).    In 2008 the men’s basketball program generated about $6.5 million per year against $3.8 million in expenses (Source:  US Department of Education).  So, as we did above, when we standardize Pat Knight’s salary, his earnings come to 18% of revenue, higher than any of the football coaches in the Big 12 (by 20%), and – get this – a whopping 32% of the total men’s basketball budget.

If we apply Mike Leach’s salary ratios -considered too excessive for the Board of Regents and Mr. Sowell – to Coach Knight’s salary, then by extension Knight should not be paid any more than $700,000 per year (and that’s for a first year guy with no proven track record). 

Are we to understand that Pat Knight deserves a salary that is roughly double the value of Mike Leach in terms of relative importance to the university and the athletics department? 

Can someone explain to me what is fiscally, morally, common sensibly responsible about Pat Knight’s compensation package?

On this point alone, Gerald Meyers’ and the Board of Regents’ competence deserves scrutiny.  I think they owe us all an explanation.  Knight’s current contract stipulates that he receives the average salary of other Big 12 coaches.  On what grounds is this even plausible? Is Knight the sixth best coach in the Big 12?  What is his track record? I could go on.  I won’t.  You probably get the point. Knight’s contract makes no sense.

The short answer here is obvious. Coach Leach’s contract was not too expensive for Texas Tech.  Gerald Meyers and the Board of Regents cannot plead poverty when it comes to compensating its best performer on the one hand, while filling the pockets of the Athletic Director’s best pal’s inexperienced son for running a downtrodden basketball program. It – as they say - does not add up. 

Coach Leach’s contract was a bargain (i.e. he generated tremendous value)

In terms of value, Coach Leach’s salary is a bargain.  In the following chart, we look at how much it costs to pay a Big 12 coach for a single victory based on 2009 results.

Big 12 Cost per Victory (based on 2009 results)

Coach Leach earned about $280,000 per victory making him the fourth least expensive coach in the Big 12.   In contrast, a victory by Bob Stoops set OU back $475,000. 

On a side note, to further call Meyers’ and the Board of Regents’ competence into questions, a victory by Pat Knight cost about $85,000 – the same amount that UT pays its head basketball coach, Rick Barnes, per win.   

I’ll pause while you light something on fire.

Stadium Expansion

Based on my conversations with friends and other alumni, I explored the notion that perhaps the school’s stadium expansion plans might have something to do with Leach’s firing.  For stadium and other football infrastructure projects, the school has recently relied on issuing bonds and alumni donations to meet its funding obligations.  I am not convinced, however, that the stadium expansion plans would be a reason to get rid of Leach.

I’m still piecing the actual facts about this together, and will try to devote another post to it.  I am unable to assemble the information together just yet.

From what I understand, the school spent $84 million from 1999 to 2008 for ongoing renovation and expansion to the stadium and the football program.  (Source:  http://www.texastech.com/facilities/text-facilities.html)

In doing so, seating capacity increased by about 10,000 seats to its current capacity of 61,000 seats. 

My understanding is that over the next 10 years, the school wishes to further increase capacity to 85,000 seats – the equivalent to Texas A&M’s current capacity. (Source:  http://www.redraiders.com/2009/05/10/jones-takes-next-steps-in-expansion)

(My initial reaction is skeptical. Due its geographic remoteness, I just don’t see how Texas Tech and Lubbock can support 25,000 more fans.  Increased enrollment will fill some of those seats, but what about the rest?  I would want to see the data before commenting further.)

In terms of cost, a 25,000 seat expansion will be a colossal expense.  Based on the 1999 -2009 expenditures alone, each seat cost about $8,400 each (based on an extremely rough back of the napkin calculation - hat tip Let's Go Tech) .  If we apply the same cost per seat figure to the additional 25,000 seats, we are looking at an expansion budget of over $200 million (not including inflation).

Perhaps the Administration felt that Leach was not the right coach to deliver $200 million in donations from alumni and bond issuances from investors.  But then again, even if you think that the expansion plan is plausible, which coach in the country has that capability?  Ruffin McNeil?

As the saying goes, I think the Administration’s eyes may be bigger than the University’s stomach. 

Of course, then again, who am I to question the ingeniousness of this Administration?

For the record, I am not a conspiracy theorist, and given the likely implausibility of this project, I doubt that this story has legs.  I would be interested if there were other opinions.

What does this all mean?

To paraphrase a certain Captain, "I can’t even stand for this administration to stumble around, exhibiting a poor effort- as if it has accomplished something."

It is no wonder that Coach Leach felt bitter about the contract discussions.  His side presented a reasonable demand to the Administration which was met with an irrational response.  For those of you who believe Leach burned his bridges during the contract negotations, I ask you to re-examine your assessment.  The arguments for increasing Leach's contract fall firmly on Leach's side.  What facts were the admininstration basing their reluctance on?   I don't know about you, but the more I learn, the more I realize that the facts exonerate Leach's actions in this whole affair.

The football program has the money.  It was more than able to meet its contractual obligations to Coach Leach. The administration’s and the Board of Regent’s disingenuous public comments and negotiation position are laughable a) considering Coach Leach’s success, b) his relative low cost to the program; c)incalculable intangibles which he has brought to the program in terms of awareness, notoriety and national interest; and of course d) given the Administration’s willingness to open the vaults to a certain ex-Coach’s son.

Having dismissed the concussion angle, and refuted the cost perspective, I’ve only got one place left to go in terms of trying to establish the underlying motive for Leach’s dismissal.

As I have stated previously, this discussion further establishes in my mind that the dispute with Leach really did come down to personalities and nothing more than that.  The implications of this conclusion, of course, are enormous. 

Are we to accept that the Administration and Board of Regents – who are supposedly the wise stewards of our University -  placed their personal differences with Coach Leach over their responsibilities to the school, and as a result:

• exposed the program to undue legal risk
• fabricated a laughable story about a single player’s treatment
• created a huge public embarrassment to the institution 
•  likely destroyed our football program for the foreseeable future (look no further than Texas A&M, Nebraska, Kansas State, Texas post Darrell Royal for case studies of Big 12 programs which fail to recover after the dismissal of a successful coach)
• will most certainly lead to lost revenues and alumni support

If this is indeed the case, then the Administration’s and the Board of Regent’s reckless actions require them to step down.  Our university deserves a competent administration which will place the needs of the university ahead of the petty disputes of its members (and the interests of sons of high profile people - an emerging sub-theme).

Leach may have been a contentious employee, but let’s face it.  He wasn’t that contentious.  What he wouldn’t do is kiss ass, play golf, press the flesh or go to the boosters’ parties.  He certainly wasn't willing to play Craig James' son. What he did do was win games, put Texas Tech football on the map, generate revenue, and bring that special something to the program which we will not replace. 

While Leach raised the profile of the program to a Major League level, the Mayberry Machiavellis in the Administration and the Board of Regents were still playing Single A ball.

Oh yeah, and about that $800,000 bonus.  What can I say. It seems like nothing more than an F-U gesture by the Administration.  Well handled gentlemen. 

When Tom Osborne gave Nebraska head coach Bo Pelini a raise last year, he wisely noted "if you start having empty seats, you've got huge problems compared to someone getting a $700,000 raise."

If only Texas Tech’s administration possessed such wisdom.

 Updated January 6, 2010