We’re in an age of employer uncertainty. For the last few years, that uncertainty has been fueled by a difficult economy. And while it appears as though that’s improving, it’s making way for a new problem. The talent you’ve employed was happy just to hold onto their jobs the past few years, but now they’re restless and ready to move up. This poses a bothersome question in the minds of the bosses: How do we deliver a quality service/product with sustainable consistency in this changing climate?
Employers want to retain their best talent, recruit great new talent that will hopefully stay for the long-term, and don’t want to bust their payroll department to do it. Well, being a lifelong fan of a small-market club like the Milwaukee Brewers, this scenario is all-too familiar to me. And you can call me a nut all you want, but there’s probably a thing or two to learn from making employee salaries look more like sports contracts.
Every clause, option, and consideration in modern sports contracts materialized for a reason. Widespread concerns about injury, trading, and performance all evolved into contractual safety nets. Nearly every worrying variable that a team could fathom is addressed in the contract and has a price tag slapped right on top of it.
But, if instead of injury, trading, and performance, we substitute in terms like sick leave, workers comp, and quitting, we’re looking at employer concerns instead of a ball club’s. In the rest of this article, I’ll cover roughly a dozen sports contract concepts that may have some translation to the rest of the business world. Now, sure, some of these things might not be legal, ethical, or moral, but maybe a few will get you thinking about how to build a winning team.
Whenever a player is signed to a multi-year deal,
their salary goes up incrementally. Take, for example, the contract of Kobe Bryant (by far the highest-paid NBA player right now). He has a three-year deal for $83.5 million that he gets in installments of roughly $25m, $28m, and $30m per year. In the regular business world, this tells a good employee that you not only want to keep them, but that you want to reward them for staying by giving them more than the standard 3% raise.
This money is guaranteed to a new player regardless of their performance/status, usually as a way to sweeten the deal in the short-term (though some players have prorated signing bonuses that are accounted every year). This incentive-based concept has already been adopted by the business world, as evidenced by new employee bonuses that cover their relocation costs.
Being worried about paying someone a high salary
before they even enter the game isn’t unique. The sports world deals with it all the time. The way they deal with it is through performance bonuses, which basically just means “if x happens, you get y.” Rather than pay an egregious salary, they offer a moderate one and promise more if they meet certain output benchmarks. Alex Rodriguez’s infamously insane salary includes additional money if he hits home run milestones, gets various league awards, makes the All-Star team, or even comes close to an MVP. It’s a little like sales people making commissions.
This is a simple concept tacked onto a player contract, to be considered at the end of the contract term. With the player option, they have the opportunity to stay for an additional year. The club option gives the employer the option to keep the player for an added year. (The only difference is who has the power to make this decision.) In a similar way, some business models make their employees re-apply for their jobs annually. It’s probably not great for morale, but if you’re always worried about slackers, it’s one way to go …
This is a system of economic checks and balances that, when exercised, dictates a player must be paid based on their statistical worth compared to their peers. If your business has a rubric or metrics to evaluate employee performance that you use to dictate raises, it’s a pretty similar concept.
This is money promised to a player provided they participate in team training during the off-season. Because some training is optional and veterans with egos might not think they need it, this bonus helps guarantee that they’ll stay in shape in addition to mentoring others. Employers that have discounts for extra certification/classes or offer regular training are hinting at this method.
Just like some employers avoid hiring smokers
or obese people, in the sports world they don’t like taking risks on aging or injury-prone players. Peyton Manning’s $96m contract, for instance, includes clauses that prevent him from getting full payment if he fails to pass a physical, sustains another neck injury, or isn’t on the active roster at the end of the season. I doubt this translates to bereavement, sick, or maternity/paternity leave, but it’s something to think about. The incentives some companies give to promote healthy workers (like gym memberships) are similar to this.
No-Trade & No-Move Clauses
These added bonuses guarantee players won’t be traded, moved, or waived without their consent. So this isn’t as close a translation to the business world as the others, but maybe it’s helpful to assure employees you won’t give them added duties or make them relocate.
In the event that a player is traded, they are given an automatic (and pre-determined) pay boost. The business translation might be that, in the event that you give an employee more to do, you have to pay them for it.
Sometimes when a high-paid player is traded to another team, part of the trade agreement includes the former team covering some of their salary. If you figured out a way to do employee trades with competitors (it’s probably not that ridiculous), imagine how awesome this would be.
These can be damn near anything. Some players have it written into their contracts that they get to stay in hotel suites during road games, take private jets, get luxury box seats for loved ones, etc. Lots of employers already have perks to offer their employees, but probably none as awesome as private jet rides for the daily commute.