When big businesses dump their CEOs (who then get rewarded with millions of dollars in severance), I often wonder whether things will really get any better for shareholders or if the maneuvers are just to convince us that action is being taken.
Change doesn’t guarantee success. Yesterday’s brilliant hire is often tomorrow’s didn’t-pan-out-like-we-planned.
Which brings us to the likely hiring of Alabama defensive coordinator Kirby Smart to replace fired University of Georgia football coach Mark Richt as the CEO of a business that generates nearly $87 million a year in revenue, an astounding 70 percent of which is essentially profit used to fund other UGA sports programs.
Is changing bosses really likely to make a difference in profits or, in the case of UGA football, more wins?
I asked a business professor who specializes on CEO shifts and their impact on company performance. It turns out Tim Quigley is a bit of a college football fan as a former Penn Stater and now an assistant professor at the University of Georgia.
He and a co-author recently crunched 20 years worth of data on the track record of thousands of chief executives. He concluded that rather than being largely figureheads, CEOs have more impact on the profits of companies than most researchers think.
“CEO’s matter. They matter a lot,” he told me.
Yes, economic variables, company (team) history and industry (athletic conference) differences have an impact on how successful a business is. But Quigley’s work suggests that CEOs have more impact – for good and ill – than all those proceeding things combined.
By the way, if head coaches are so important, isn’t it kind of weird that succession planning seems so rare in college football? Why is it so haphazard? In big business, grooming a clear bench of replacements is often considered one of a CEO’s most crucial duties. Unplanned leadership changes tend to be extra costly, inject uncertainty (hello, UGA recruits?) and lead to weak results, according to a PricewaterhouseCoopers report.
Anyway, the challenge for Kirby Smart if he becomes the next CEO/head coach of Georgia football is that there’s such a high bar to avoid firing. Richt had the highest winning percentage in the UGA program’s history, according to my AJC sports colleagues. But Richt generally didn’t win the biggest games in recent years. He never captured a national championship. And a decade has slipped by since his last SEC conference title.
I liken the pressures to the different ways people approach the stock market.
With time, investors often make good, healthy profits with indexed funds that essentially ride the market’s waves.
But a lot of people want to do better than the Joneses. They make edgier bets by looking for something others haven’t fully capitalized on yet. Georgia looks like it is preparing to do that now with a new coach.
Quigley, the business professor who I spoke with before talk of Smart solidified, thinks change is a good call, at least if the goal is to win more football games.
A stats guy at heart, he contrasts Richt’s stellar recruiting classes (aka a top workforce) with the team’s less-than-stellar national rankings.
“There is room for improvement,” Quigley said. “If we can recruit at the same level, we ought to do better.”
But, like hiring a new CEO, we ought to be clear about what we mean by better.
Want a national championship? We might get that. Like all things in business, it comes at a price.
We’ll be getting off easy if it’s just that a top coach wants top pay.
“With those kinds of performance pressures comes the possibility that maybe you do thing in a way that maybe aren’t good for the university’s image,” Quigley told me.
Will a new coach push too hard to put in a star player who has had a recent concussion? Will they ignore player misdeeds off the field?
“We should be careful what we are asking for,” Quigley said.
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