Cases_SP09_1

Cases_SP09_1 - BIFF BARNHART by Ray Orrange The Athletic...

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BIFF BARNHART by Ray Orrange The Athletic Director at a major Midwestern University, Biff Barnhart, is about to lose another night’s sleep over the school’s ailing football team. The Beagles have just finished their 3 rd consecutive losing season. At a bit past 1 AM he took another call from Ian Abe Egger, the Director of the Foundation: Barnhart you re killing me. You got to do something, and you have got to do it NOW! Every losing season costs us millions in Alumni gifts Universities have long been identified by their success in Division 1 athletics, and it is certainly no secret alumni donations do rise and fall with the success or failure of the football team. In fact, the annual fund drive has been scheduled to begin in March, soon after the dust settles from the football season. Abe looked at fundraising over the last decade. In the six seasons where the football team won less than 40% of the games (losing seasons) Abe was only able to raise an average of $1.2 million in contributions to the Athletic Department (adjusted to today’s dollars). In the four seasons where the football team won between 40% and 60% of the games (neutral season) Abe was able to raise an average of $3 million in contributions to the Athletic Department. Abe is confident that if the football team were to have a winning season where they won more than 60% of the games, he could raise something in the neighborhood of $6 Million. Unbeknownst to Abe, Biff has already decided to fire the football coach, nice guy and perennial loser, Joe Noidea. The announcement is to be made after a new coach has been hired. Joe is aware of the change and has agreed to accept a position in the School of Management as an inspirational speaker. At the recently concluded NCAA championship, Biff interviewed a dozen candidates. He has three he really likes, and could be happy with any of them: Coach Williams, Coach Neureaga, or Coach Claven. Coach Williams, from a perennially successful program, would command a salary of $3.5 million per year. At his current school he has a record of 38-14, including 4 bowl appearances. No doubt the alumni would be thrilled. Biff estimates the following: Coach Williams has an 88% probability of producing a winning season the first year, a 10% probability of a neutral season and a 2% probability of a losing season. Coach Claven , from a “mid - major” conference, would be willing to come on board for $1 .5 million per year. Given the condition of the program, Biff believes that Coach Claven has a 34% chance of producing a winning season which is better than his estimated 26% chance of having a losing season. Coach Neureaga, more of a gamble, has been an assistant at a big school and would require a $200,000 yearly contract. With this limited experience there isn’t much of a likelihood that he could produce a winning season the first year; say 12%. If he doesn’t have a winning season he is just as likely to produce a neutral season as a losing season. A two-year contract would be required. No incentives are to be offered by the University. The
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Cases_SP09_1 - BIFF BARNHART by Ray Orrange The Athletic...

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