Tag Archives: contracts

Shaka Smart & the Minnesota Gophers

March 24, 2013
Shaka Smart & the Minnesota Gophers

  • Relationships are Key
  • Under a reasonable hypothetical scenario, Tubby Smith’s compensation is nearly 90% higher than Shaka Smart’s.

I tend to stay away from public discussions on the college coaching carousel. They are usually outlandish and unreasonable. The discussions of traditional media today include Shaka Smart or Buzz Williams heading to UCLA and/or USC. I don’t really see any of those combinations working well and don’t want to even entertain more than 30 seconds of thought on it. However, with traditional media completely discounting the notion of Shaka Smart being agreeable to coaching at Minnesota, I’ll offer some thoughts on that possibility.

There are two major reasons why I believe Shaka Smart becoming head coach at Minnesota is a reasonable possibility. One is money and I’ll offer some thoughts and compare Tubby Smith’s compensation package with that of Smart’s. Many schools can offer a relatively good compensation package though.

The other reason is what sets Minnesota apart from any other job opportunity that may arise for Coach Smart.

Shaka Smart at VCU

He’s been at VCU for four years despite offers from bigger programs. What has kept him there? Shaka, who has lived in the upper Midwest, is said to be a fan of living in the Richmond area. An upgrade to the Atlantic 10 conference last year was exciting, although the news of Butler and Xavier leaving the conference in a few months has to damper the mood a bit.

Like Minnesota, VCU’s practice facilities leave a lot to be desired. There’s been much talk about a new basketball practice facility and recently some decent donations received, but there is still money to be raised and it could be a long time before one is built for the Rams. If Smart were to head to the Twin Cities he wouldn’t be looking at a downgrade in practice facilities.

The money at VCU isn’t as great as some other schools would offer, but the administration has worked with him. In his four years at VCU he has worked under a different agreement each and every year.

Some will claim there’s a select few elite jobs that Smart would cherish. That may be so, but I think Smart simply enjoys coaching at VCU and that’s a reason why has he passed up more money, better facilities, a higher profile job, etc.

The Reason that is Unique to Minnesota

Minnesota fans love to remind each other that the grass isn’t always greener on the other side when the topic of a coaching change is brought up. That’s true for schools, but it’s also true for coaches and most of us who are working Americans when it comes to a job change.

I believe a significant reason Shaka Smart has stayed at VCU is because he enjoyed who he was working for and with. This brings us to what Minnesota has that no one else can offer: the administration that Shaka Smart has stuck with for four years.

The administration who has sat down with Smart four years in a row to work out changes to his employment agreement. The administration that has kept him in Richmond despite bigger programs rolling out the red carpet (for the record, I do not believe Illinois offered Smart $2.5 million per year as was common reported, but I do believe they offered a relatively impressive compensation package). Yes, also the same group that retained his services despite the school’s less-than-desirable practice facilities.

Before Norwood Teague announced he would be leaving for Minnesota last spring, Smart had verbally agreed to return to VCU. Some changes were made to his compensation, but nothing too significant. The new arrangement was not memorialized until late June 2012. Teague had already started working at Minnesota and therefore wasn’t a legal party to the contract.

The signatories for VCU in that June 2012 agreement were David Benedict (Interim AD) and Mike Ellis (Deputy AD). Both of these gentlemen have since left VCU and are working with Teague at the University of Minnesota.

People regularly change jobs to reunite with their former bosses, subordinates and peers.  In the case of college basketball coaching jobs, circumstances of an athletic director and former coach usually don’t align with respect to timing as well as they appear to with Shaka Smart and the former VCU AD and other former members of the administration.

If you accept that relationships with Teague, Ellis and Benedict were a deciding factor in Smart’s decision to remain at VCU, it becomes reasonable to envision the young coach being interested in joining them in the Twin Cities.

Teague became VCU’s athletic director at essentially the same time Anthony Grant became the school’s coach. Smart was Teague’s big hire. VCU was Smart’s first head coaching job. I wouldn’t be so quick to disregard their history.

Compensation

I’m not going to get deep into details here, but any questions can be sent to latenighthoops@latenighthoops.com. The main point is that most people do not understand how well compensated Tubby Smith is under his current deal. The U could offer a lot more money to Smart and still pay considerably less than what it’s paying Smith.

The specifics regarding Tubby Smith’s buyout has been covered HERE (although there are other possibilities if the two parties were to separate). The buyout costs would be approximately $3.25 million. This includes the $2.5 million termination fee (which could only fall below $2.5 million after the 2014-15 season, and still would be at least $2.1 million) and other costs.

A few people in the traditional media have grossly overstated that costs associated with a buyout of Coach Smith would be $6 million or more. In reality they would be approximately $3.25 million. Those people have also implied that there are substantial costs associated with Coach Smith’s staff. However, the assistant coaches are not under contract. Any separation costs would be minimal.

So, after four different deals in four years, how much does Shaka Smart make? His guaranteed pay this year is approximately $1.3 million. Tubby Smith’s is $2.2 million. “Guaranteed pay” includes base salary + supplement income + retirement/deferred compensation.

Forbes recently (although they got the details wrong) noted that Tubby Smith’s bonus potential for performance in the NCAA tournament was very high compared to other coaches. That’s true, but the big money would only come if the Gophers were very successful on the court.

However, there are non-tourney related incentives that are easily attainable for Smith. If we take hypothetical example, let’s see how some of the incentive pay of Smart and Smith would work out:

We’ll assume both VCU and Minnesota won 20 games and finished 3rd place in their respective conferences. They didn’t win their conference tournament (although Smith does receive $250k in any year Minnesota wins the Big Ten tournament – and another $250k in any year they win the regular season conference title). Students post a solid 2.9 GPA, but only a 930 APR (cutline for a postseason ban under the new APR rules) and only a 50% graduation rate. We’ll also assume both teams won a game in the NCAA tournament before being bounced out.

Using the example above, Shaka Smart would add another $118k to his pay. Tubby Smith’s incentives would be $475k. That would mean Smith’s compensation for the season would be nearly $1.3 million more and 90% higher than Shaka Smart’s.

Indeed, the U could provide a nice boost in pay to Smart and still pay out less than it would to Smith.

Smart’s Current Agreement with VCU

Obviously not all coaching hires require the hiring school to pay the former school for an early termination of the coach’s contract. When fees are paid they should generally be considered a cost of the new coach and accordingly included in compensation negotiations with that new coach.

In the case of Smart, he or the U would be on the hook for the $700,000 due VCU for early termination of the contract. That amount could be saved in a year or two just from a lower compensation package as compared to Smith’s.

An interesting clause in Shaka’s deal also would require his new school to schedule a home and home with the Rams. The fans at Williams Arena would gladly welcome a VCU and one road game isn’t much to ask. However, Minnesota would have the option of buying out this requirement for $250,000.

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Battle of the Buyouts: UCLA vs. Minnesota

March 22, 2013
Battle of the Buyouts: UCLA vs. Minnesota

LNH clears up some misinformation on Howland’s buyout costs

It’s been reported multiple times over the past week that Howland’s contract runs through 2015 and that a buyout of his contract would cost the school $2.3 million. Both of these are claims are inaccurate.

SHORT VERSION
Ben Howland is under contract as head coach for UCLA through the 2016-17 season. If the agreement was terminated in the next week and a half, the buyout costs for the school would be $3.2 million. That amount could be reduced in the future depending on the future employment of Howland.

ENHANCED VERSION
The expectations of Ben Howland and Tubby Smith could not be more different. A review of their respective employment agreements makes it clear from the employers’ perspective. The media and fan bases of these two programs leave no question about who must deliver more.

The results demanded from Ben Howland are far higher than Tubby Smith. However, any reasonable financial valuation model will conclude that the value of Tubby Smith’s contract is higher than that of Ben Howland’s.

If interested in how the termination provisions in Howland’s contract compare to that of Minnesota Gophers head coach Tubby Smith’s, see our February 2013 article “Tubby Smith’s Buyout: Approximately $3.25 Million.

Let’s now narrow the focus to UCLA’s costs if they were to terminate Ben Howland without cause.

Components of the $3.2 million are:
(1) Base pay for the remainder of the contract – $1.2 million ($300,000 per year X 4 years                          remaining on contract); and
(2) Guaranteed fee for one year – $2.0 million.

The guaranteed fee is effectively what is commonly called supplemental compensation. UCLA is on the hook for the remainder of the fee in the year that a termination is made plus one additional year. The $3.2 million assumes a scenario under which a termination would occur just before April 2, 2013.

Contract years begin on April 3 and therefore April 2 becomes an important date. If UCLA fired Howland on or before April 2, 2013, component (2) would be approximately $2.0 million. If they terminated his employment on April 3, 2013, component (2) would be $4.0 million.

Unlike many coaching contracts, the school would not immediately pay out the $3.2 million. Rather, UCLA would continue to pay certain amounts in equal monthly installments, similar to as how they would pay the amounts if Howland were still employed.

A key provision is that if Howland found other employment, the payments from UCLA would be reduced by his income from the other source(s). The contract wording could be firmed up and might be open for legal challenge, but the intent is that in year one after termination Howland would receive $2.3 million and in years two through four he’d receive $300,000 per year.

That said, if Howland were fired in the next week and a half you might expect him to take a year off from working in basketball (includes not only coaching, but promotional/endorsement work, consulting, etc.). If he went to another school to coach next month, his new income will reduce what he’d be receiving from UCLA. (i.e., if the new school pays him $1.8 million, UCLA’s cost in year one would be only $500,000 and in future years – assuming he’s still employed – $0.)

In summary, Ben Howland is under contract through the 2016-17 season and his current buyout would be $3.2 million. However, that amount could be reduced by as much as 100%.

NOTE: Certain financial information and legal interpretations above provided by the consulting firm Pleasant Avenue Athletics.

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