Reforming Not Outsourcing NCAA Enforcement

We can assume the NCAA will continue to investigate and adjudicate violations of the membership’s rules. We can assume the decisions will continue to call down firestorms of protest. We can assume that the process will periodically make mistakes that lead to flawed judgments.

Endless variations exist for addressing self-regulating investigations and adjudication. Organizations can keep  them in house or outsource them. Most recent critics call for outsourcing the functions to eliminate possible conflict of interests. Yet outsourcing has serious problems with accountability. Whatever it does, any self-regulating organization such as NCAA has to be relentless in recruiting, training and professionalizing investigators. I also think NCAA internal reforms on  infractions and sanctions have a chance to make adjudication more consistent, legitimate and transparent.

Self-governing professional associations live with the paradox that peer governance creates inherent conflict of interest. Peers legislate for the good of the profession, but also legislate to protect competition and protect an equal playing field. Self-governing groups are tempted to over-legislate to offset the ability of the powerful to dominate and anticipate abuses. Professional enforcement faces pressures through clubby hiring practices. Peers judging peers invites the perception that peers will go easy on each other as in law or medicine or will be too hard on each other by trying to cripple teams as in sports.

These inherent strains lie at the heart of complaints about the NCAA and all self-governing associations. The most commonly tried "solutions" include: deregulation; outsource investigations; outsider based tribunals.  Let’s examine the three in NCAA context.

DEREGULATION:       The modern NCAA has made deregulation a central tenet. Deregulation should minimize picayune rules that lead to intrusive enforcement and burdensome record keeping.

Deregulation, however, is not as easy as it sounds. Most rules were legislated to combat booster abuse or excessive tactics by very rich schools. The elaborate regulations limiting meal expenditures and travel, for instance, came up to stop lavish banquets, private jet flights or clandestine booster gifts. Limits upon communication arose because student athletes complained about being bombarded.

Deregulation will advantage very rich schools, invite garish expenditures and intrude more on students. Schools have already asked for an override on a package of deregulations that would delimit recruiting staff and numbers of sent information. Deregulation makes a lot of sense in many areas and can lessen record keeping and interventions, but we have to accept the costs in excessive and lavish expenditures and launching new arms races in outlandish recruiting ploys.We have to accept that the rich will get richer under deregulation.

OUTSOURCING INVESTIGATIONS:              This approach is often tried and usually taken back in house, but might be worthwhile on a selective basis.

Day-to-day self-reporting, negotiations and discussions lead to the internal resolution of thousands of compliance issues. The NCAA should keep internal precedents and strong staff knowledge to make this work well. NCAA central compliance trains individuals who are recruited to work at schools, and this spreads professionalism. Central staff sponsors seminars and teaching as well as communication updates. Educational and everyday standard enforcement belong in house.

1.     Major investigations are another matter. The NCAA has demonstrated uneven ability to recruit, train and hold accountable field investigators. This is not an easy job, and investigators face resistance, withholding, and lying. Direct NCAA connections, however, help accountability and link continuously with legal staff and senior leaders. This approach does not guarantee against mistakes as my UW case demonstrated with a 4.5 million dollar judgment or against bad judgment as Miami illustrates.

a.     It may make sense, as the government and corporations do, to use outside investigators during very high profile cases. This should be a rare occurrence but might make sense if very high revenue schools or schools with histories of NCAA conflict are involved.
b.    It might make sense to narrow investigation scopes and bring sequential judgments to expedite the time and encourage earlier resolution of outstanding remaining violations. This will be hard, however, because the ultimate decision about "lack of institutional control" often involves linking together a pattern of infractions over time and across several areas. 

b.     Many groups usually bring outsourced investigations back in house for three reasons.

                                               i.     They cost more money, and outsiders have incentives to extend the cost.  The association loses control over investigators, and some agencies hire untrained and undermanaged folks to maximize profit.

                                              ii.     Legal accountability is harder to maintain with external investigators.

                                            iii.     Investigators will want return business and will adapt to the ethos of their client. Many outsourced consultants end up looking like internal staff to get return business.

2.     It makes far more sense for the NCAA to hire better-qualified investigators and train and monitor them better. This requires relentless effort. Outsourcing involves a small universe of specialized firms, and most of them will have colleges as clients. This dual client world would create even more conflicts of interest.

OUTSOURCE ADJUDICATION JUDGMENTS:                       The most vexing dilemma remains how to ensure fairness and legitimacy of infraction decisions. Past practice had a 10 person Infractions Committee meet to adjudicate all the major infraction cases brought by NCAA after investigation. Although often criticized for slowness, the slowness in bringing cases really results from the difficulty of doing investigations without subpoena power.

The Infractions Panel steadfastly refused to be bound by precedent or guidelines for penalties. It insisted each case was unique and had to be addressed on its merits. This lead to what many, myself included, saw as sanctions that often did not make sense in light of past practice. It made it hard to write careful decisions that would guide colleges. It made it hard to see consistency across not only decisions but application of sanctions.

This refusal to create consistent patterns generated the suspicion that the Infraction Committee would go easy on or strike hard for political reasons. Very little evidence exists to support this contention, and certainly no strong link has been made between members of the panel who are respected and careful in their decisions. In addition members with conflicts and conference affiliations recuse.

New NCAA rules try to address these issues in 2013.

1.     The NCAA  will impose strict accountability on head coaches for the actions of their assistants and staffs. This will prevent the endless excuse giving that head coaches have used for the last decade.

2.     The NCAA is creating four categories of infractions that have guidelines for sanctions. This will produce greater clarity and predictability for schools.

a.     These categories are: Level I—Severe breach of conduct, Level II—Significant breach of conduct, Level III--Breach of conduct, and Level IV—Incidental issues. Each level has a set of guidelines for sanctions.

3.     The Infractions Committee will grow into a pool of 24 individuals from whom panels will be formed to adjudicate cases. This will permit greater attention and quicker action on the range of cases.

The proposals make a lot of sense to me but have aroused misgivings especially around the issue of consistency across panels. Yet little consistency exists now because of the refusal to deploy precedent or guidelines. The new panels will have greater clarity on magnitude of the violation and stronger guidelines on the sanctions. This will focus its obligations to explain decisions. I appreciate unique circumstances arise but believe the Infractions panel has an obligation to explain its deviation from past practice or its expansion of precedent. This would require greater transparency in decisions.

I believe that the new pool approach could be improved by requiring an independent nonaffiliated neutral on each panel. Many other professional associations have gained from ensuring one voice is neutral but expert and the proposed pool can easily accommodate such individuals. This required neutral places an internal discipline on deliberations.

Outsourcing in such sensitive areas is overrated and not validated by other experience. I believe that the new approach on specifying violations and guidelines has real hope of increasing quality, transparency and clarity of decisions. The NCAA has to get a handle on consistency and internal accountability in its quality of investigators as well as ensure some neutral voice whether on the panel or with internal ombudsmen in its work.

Why Sports Unions Succeed and Others Fail I & II

The Paradox of Modern Sports Union Success

Unions are dying in the United States. Less than 8 percent of the private sector work force is unionized. So why do unions flourish so successfully in professional sports?

Well it is not because the owners like them. Both professional football and basketball owners are trying to destroy their unions with lockouts. Both will fail, and the owners know it even as the football lockout enters its fourth month and will be resolved soon.

The owners hate the unions; I mean they hate the unions. Many of the owners are self-made wealthy using the teams as forms of ego gratification or extensions of their own Ayn Rand self images as self-made individualists. They will do anything and have tried everything including collusion to destroy the unions, but they fail. Why?

I think the reasons sports unions succeed derive from the very unique shape of the labor market that makes it relatively immune to the global forces that undermine unions all over the world.

The global market enables employers to shift jobs to lower wage countries. Borders mean little, and even technical jobs can be outsources at will an connected via the internet. If owners don’t shift jobs abroad, they can always shift to the south or southwest where government war on unions will ensure lower wages, benefits and working conditions. The shape of the labor market in sports limits these options for owners.

Traditional unions depend upon their ability to organize workers and get workers to perceive that a common good can be achieved by negotiating wages and working conditions together. A common good gets disturbed across all union members. The gain is greater for all workers over the long run than if workers negotiated individually for their contracts. This is the key; if the union stays together, the long term benefits are huge, but if they fall apart, then the benefits fail them.

The benefits of a union revolve around guaranteed wages for work. But the combined power also generates benefits and work rules around safety, none of which individuals on their own could gain. Left on their own,  individual workers would end up with lower benefits, lower wages or job security and less safety over the life of the contract—this is exactly what has happened in the modern American private sector.

So why do sports unions work?

The first and more ironic point is that the owners actually gain an immense legal advantage from having unions to negotiate. This enables owners to get things like salary caps, entry salaries but above all transferrable contracts that can be traded within the league or cartel. The negotiated contract protects the owners and their cartel from potential anti-trust and restraint of trade challenges. The contract protects certain aspects of the game that permit some level playing field and the patterns of player investment and trades that the teams depend upon.

The professional unions move to decertify themselves removed this cover for the superstructure of the sports and their profitability. This enabled the union members to launch a series of law suites that would destroy the profit structure as well as the competitive balance of the leagues upon which the profitability depends. This is doubly important for basketball and football because both depend upon salary caps which could not be sustained without a strong union agreement.

So against their better judgment, the owners need and accept but hate the unions.

Part II will examine the exceptional form that unionization takes in professional sport to adapt principles of unions with the need for compensation for superstarts.

The recent settlement of the NFL lockout simply reminds the owners that they cannot conduct their business without a union of their players. At a deep level, the professional sport unions flourish because the number of elite athletes who can play professional sports is vanishingly small.  A small level of depth exists in the labor markets to permit some reasonable substitution for medium or low range skill players. The baseball statistic of value over replacement (VORP) suggests this.

The replacement level is so high and the number of replacements so limited, however, that the drop off of play would be precipitous. There is no reserve army of the unemployed to take their place and you cannot move place bound teams at will to other countries with lower wage scales.

Second, the players are highly skilled and the skills take a long time to develop. Most of the investment in skills comes from the individuals who forgo other options to achieve that exceptional skill. The player also takes a very high risk because very few people succeed so they have forgone other opportunities. The  players want to get maximum gains in the shortest time because pro careers especially in football and basketball average 3-4 years. So players have a very strong incentive to maximize their gains in a very short time of professional play and to band together to achieve this.

Third, only a small number of owners compete for the players; this permits cartel like behavior that can escape court scrutiny with legal contracts with unions.

This small group and limited substitution pool makes the value of the workers very high, doubly so because on the margins the addition of a couple players can profoundly impact the success of a team. So the union involves relatively little cost day-to-day cost to the players, and workers are socialized into the union at a very early age. The unions focus upon limiting entry, early salary scales, common mobile benefit pools and retirement benefits works well for players. The contracts also enable owners to have reserve clauses and trades and salary caps that game or owners needs to create some form of parity.

This common gain involves two major sacrifices by the players: the need to contribute money to a common strike fund and, second, the requirement to go on strike or endure a lockout if necessary to protect the common goods.

Sports unions, then, have a huge advantage over traditional unions. The members possess incredibly rare talents that take huge personal investment to develop over time. This means that they cannot easily be replaced by workers or technology. Despite the myth of movies like The Replacements, elite professional athletes cannot be substituted en masse and still provide a powerful, skilled and entertaining sport and spectacle. The inability to outsource, replace or move to a different venue means the owners are stuck with an ultra small elite and irreplaceable group of highly skilled elite employees.

Now two huge revisions have been made to traditional union values that promote egalitarian and limited wage differentials. First, athletes sign contracts that permit the teams/owners to trade the contract and trade them. This is incredibly rare; imagine Google trading an employee to Facebook!! The closest to this might be noncompeting contracts that some highly skilled employees sign. This enables a mini-market to occur across teams but players benefit from the loss of control of place of employment with strong portable pensions and benefits that build a substratum under all players. It also benefits everyone by creating strong minimum salaries and step increases.

The second major change from traditional unions is the free agency. Traditionally unions have been hostile to merit based compensation arguing that it undercuts solidarity and sets members against one another. This has been an Achilles heal for unions.

Professional sports unions solves this dilemma by permitting individuals to become free agents after set periods of time. The initial apprentice years have tracked salaries after bonuses, then after having served this time, free agency releases a player from the team and permits the player to sign with any other team. Now some restrictions exists in football, hockey and basketball about how many and levels of agency signing, but the point is that this permits players to have the advantages of unions—solidarity, portable benefits, strong control of entry salaries—with the advantages of strong merit based or market payments to players after they have served an apprentice period.

Another lingering aspect that makes unions strong by increasing the value of the players is that modern sports teams market themselves largely through star power or faces of the team. Teams invest immense money in their brands but they depend heavily upon a few hyped players with their faces and names splattered all over the city or nation to create a unique brand and bridge the emotional range from corporate team shells to fan association with the team.

One final point seals their stature. In economics many goods are vulnerable to competition because they can be substituted for. So if you take away my house, I can move to an apartment or condo. In professional sports, there are no easy substitute goods. It is interesting that many football fans will not find basketball a suitable substitute for football. Likewise baseball and hockey core fans will not regard the other sports as substitutes. So along with the limited labor market and difficulty to replace skills, lies the other problem that most sports cannot be substituted for by other sports. When a sports team leaves a town, people who watched that sport don't migrate to others; they might follow the sport on TV, find another team to root for, or simply lose interest. This cements the unique bargaining power of the elite athletes.

The success of modern sport unions depends upon player possessing a unique set of skills that counteract the anti-union pressures of a global market. I can’t think of anywhere else it would work.