We have just concluded the most wonderful and exciting time of the year in college sports — March Madness! As the NCAA progressed through the final stages of the annual men’s and women’s Division I basketball tournaments, some Cinderella stories were born, hearts were broken and many brackets were busted. While fans endured a roller coaster of emotions, head coaches were accumulating bonus payments tied to their teams’ performances as they progressed further into the tournament. While incentives for the legendary post-season tournament are just one of the many elements that universities use to reward their coaches for leading their programs, they tend to be among the most variable parts of a typical coach’s performance-based pay components and can prove to be quite lucrative.
Tournament incentives can provide a significant amount of compensation for a head coach, with amounts varying with each post-season win. The variances among annual bonus structures demonstrate how much universities value the success of individual coaches and the prestige that comes hand in hand with additional revenue for the athletic program. This article highlights major findings from WTW’s recent analysis of March Madness incentives for 59 men’s basketball head coaches across nine major athletic conferences (Figure 1).
| Analysis sample breakdown | ||
|---|---|---|
| Element | Count | |
| Total | 59 | |
| Men's basketball program revenue | ||
| $0 to $10 million | 33 | |
| $10 million to $20 million | 20 | |
| $20 million+ | 6 | |
| Conference* | ||
| Big 12 | 6 | |
| Big Ten | 9 | |
| Pac-12 | 8 | |
| ACC | 6 | |
| SEC | 5 | |
| CUSA | 8 | |
| Other conferences** | 5 | |
Incentives for qualifying and advancing through the NCAA post-season tournament are highly prevalent among nearly all of the studied sample: 58 of the 59 universities studied (98%) provide a bonus to coaches during some stage of March Madness if their team is selected for the tournament. A minority of schools analyzed also reward their coach for qualifying and/or winning the post-season NCAA National Invitation Tournament (NIT): 26 of the 59 universities (44%) provide a bonus to coaches during at least one stage of the NIT, inclusive of qualification.
| March Madness | NIT | ||||||
|---|---|---|---|---|---|---|---|
| Program revenue | Total count | Count of schools providing any March Madness bonus | Prevalence of schools providing any March Madness bonus | Count of schools providing any NIT bonus | Prevalence of schools providing any NIT bonus | ||
| All | 59 | 58 | 98% | 26 | 44% | ||
| $0 to $10 million | 33 | 33 | 100% | 24 | 73% | ||
| $10 million to $20 million | 20 | 10 | 100% | 1 | 5% | ||
| $20 million+ | 6 | 5 | 83% | 1 | 17% | ||
As shown in Figure 2, men’s basketball programs with revenue of less than $10 million are more likely to award their coaches a bonus for qualifying and/or winning games in the NIT. The data suggests that schools with a smaller program revenue recognize the impact that making a post-season tournament (be it the NCAA Tournament or the NIT) can have on the program and want to incentivize this to the coaches.
*Amounts shown for each round are incremental and independently arrayed to derive median statistics.
The analysis also showed that certain conferences reward coaches differently for winning the NCAA March Madness Tournament. Among all of the conferences included in our study, universities in the ACC pay their coaches the highest bonus if the team wins the tournament championship ($250,000 at median), followed by the SEC ($200,000 at median) and the Pac-12 ($175,000 at median); however, the most common tournament championship win bonus is $100,000 at median among all of the included conferences (Figure 3).
Additionally, the total incentive opportunity for the March Madness Tournament varies significantly by conference. The Pac-12 and ACC have the highest incentive opportunity ($587,500 at median), while the Big Ten, CUSA and schools from other conferences have relatively lesser tournament incentive opportunities (Figure 4).
The relationship between athletic program revenue and coach incentives provides university management with another interesting perspective to benchmark coaching pay elements. Our analytics show that smaller-sized men’s basketball programs tend to pay a higher percentage of the total program revenue via March Madness incentives to head coaches compared with larger programs (Figure 5). This implies that even if the quantum of tournament incentives is less for smaller-sized basketball programs, it still represents a greater relative portion of their team’s overall revenue. Smaller schools that advance within the tournament tend to draw extra attention and bring additional funding to the programs.
The maximum total March Madness incentive opportunity (i.e., sum of all bonuses that the head coach can earn at any stage of the tournament) as a percentage of program revenue is more balanced compared with the championship win bonuses. Contracts at larger programs also often include several other athletic, academic and individual performance indicators incentives, meaning NCAA tournament awards may comprise relatively smaller portions of total variable opportunities. The Big Ten, Big 12 and SEC spend smaller portions of their program revenues on March Madness incentives, while the PAC-12, ACC and CUSA allocate larger portions of revenue (Figure 6).
Incentive opportunities do not directly correlate to success in the tournament. The past few years have shown us that smaller schools in non-Power Five conferences with smaller budgets have taken down Goliath programs with budgets near the top of the range; however, universities can use incentives to improve competitive pay positioning for their coaches and help strengthen their athletics departments by a) retaining the right leadership, or b) attracting the best coaching talent to their program.
To better understand the components of total compensation for coaches, we also examine the value of variable March Madness Tournament incentives expressed as a percentage of base salary, which can be a useful frame of reference when determining pay levels. Under this lens, it is clear that universities in the ACC, Big 12 and SEC place a heavy emphasis on March Madness with incentives eclipsing base salary if they win the championship. On the other end of the spectrum, the Big Ten pays the least in tournament incentives relative to base salary (Figure 7).
If you manage compensation for coaches or athletic directors at an academic institution, you may be asking yourself, what does this mean for me? More specifically, how can universities leverage market data to position themselves favorably to attract, retain and motivate top coaching talent? What role can compensation and incentive design play in achieving these objectives, and what tangible actions can managers take to improve programs under their purview?
WTW can help provide the data and consulting solutions needed to answer these important questions. Please do not hesitate to contact one of our professionals listed below with any questions about the data contained herein, or to assist your university in determining the most appropriate and competitive contract terms for any lead coaching and athletic director positions.
