04/21/2014 01:24 pm ET Updated Jun 21, 2014

Student Athletes or Employees: The Debate in Perspective (Part 1)

Kansas City Star via Getty Images

Now that March Madness is over it is time to bring a little sanity to the debate over whether those engaged in major college sports are student athletes or workers. The sides advocating for unionization of students involved in those sports and those opposing such a move both have some legitimate points.

We believe that the best way to look at this, though, is by considering the broader context rather than by merely evaluating contending positions for and against unionization or the status of persons attending college who participate in sports.

At the outset, however, we should state that we do have an opinion. That is:

  • Most of those in college sports are student athletes
  • Some of those are workers (even if only itinerant)
  • All, no matter what their classification, deserve to be treated fairly

With that said, let's review the primary focus of the debate at the moment.

Near the end of March, Peter Sung Ohr, a regional director of the National Labor Relations Board (NLRB) ruled that a group of Northwestern University football players were employees of Northwestern and have the right to form a union and bargain collectively with the University.

Factors that influenced Ohr's ruling included: the players performing services for the benefit of the employer for which they are compensated; the employer's control of their performance and the duty requirements; and the players' role as athletes being completely separate from their academic role. (The football players will cast a closed ballot vote on whether to unionize on April 25.)

Before and after the NLRB ruling, the NCAA maintained, as it has over the years, that those involved in college sports are "student-athletes." NCAA President Mark Emmert asserted, "We have long heard from fans that there is little support for turning student-athletes into paid employees of their universities."

Emmert is correct on fan sentiment. A recent Washington Post-ABC news poll found that only 33% supported paying athletes while 64% opposed it, with 47% strongly against the idea."

Like most fans, we prefer to view those involved in college sports as student-athletes rather than as professionals in waiting. We want to believe that when we are watching college sports that we are seeing amateurs competing for the joy of competition and the love of the game.

But, as we examined things more closely we got a different picture that caused us to modify our view and might also change public opinion somewhat. Based upon our investigation, the primary conclusions we came to were:

  • College sports are a very big business
  • College coaches are paid extremely well
  • There is a wide range in student athlete graduation rates
  • The NCAA has exceptionally deep pockets

College sports is a huge business at all of the major Division I schools. In 2012, the top 10 schools brought in revenue (from multiple sources such as tickets, donations, media rights and branding) ranging from $163 M+ at the University of Texas to $105M+ at Auburn University. Most these schools earned around $15M after expenses.

Ryan Brewer, a finance professor at the Indiana/Purdue University has calculated the value of college football teams. His estimate is that the Texas team is worth $875 M, Notre Dame, $811.5M, Michigan $685.5M, Ohio State, $674.8M, and Florida $660.8M. Mississippi State, the 50th team on Brewer's list, is worth $102M based upon his estimate.

Not all college athletic departments are profit centers. In fact,according to Patrick Harker, President of the University of Delaware and a NCAA, Division board member, "Only about 10 percent of Division I college programs turn a profit, ...and most of them lose money."

In spite of that, spending has increased significantly on college athletics at all levels. The Knight Commission on Intercollegiate Athletics has tracked and complained about the growth at Division I for some time.

A new report released by the American Association of University in April 2014 revealed that from 2004 to 2011:

  • At public four year colleges in all divisions, inflation adjusted spending went up 24.6 percent per student-athlete compared to 1.6 percent per student.
  • At community colleges, spending increased by 35 percent for per student-athlete compared to 2.6 percent per student
  • The fastest growth was in Division III schools without football teams where spending for each student-athlete "more than doubled from 2004 to 2012"

Speaking of spending -- it's quite lucrative to be a head coach in either football or basketball at a major institution. In 2013, 70 college head football coaches received total pay of over $1M. Nick Saban of Alabama earned the most at over $5.5M and Brian Kelly came in 70th at a little over $1M (check this figure).

Round ball coaches didn't do fare quite as well as their football counterparts with only 35 cracking the million dollar total pay mark. Mike Krzyzewski of Duke was first on this list at $9.6+M and Mark Few of Gonzaga was 35th at $1.1M.

That brings us to the "unpaid" student-athletes -- or workers, as you might have it. Regardless of what label is assigned to these individuals, there are certain places where their tenure is temporary for whatever reason and others where they stay the course, do well academically and get their degrees.

From this year's Final Four in basketball, the University of Kentucky represents the former and the University of Wisconsin is an exemplar of the latter.

Kentucky fielded a starting lineup of five freshmen in the NCAA championship game. If past is precursor, it is unlikely that these young men will be around for long.

Kentucky won the NCAA championship in 2012 with a starting lineup of three freshmen and two sophomores. They were all drafted by the NBA in that year.

In contrast, as the New York Times reports, "Every senior on the Wisconsin men's basketball team in the past two years graduated and the team is on the track to achieve that again this year."

To the NCAA's credit, it has placed an increased emphasis on academic accomplishments and graduation over the past two decades. In the Fall of 2013, it was able to report that over the past 4 years 81 % of all student athletes graduated and "82 percent of athletes in the 2006-07 freshman class earned their diplomas."

That is excellent news. But, as frequently happens, numbers in the aggregate can conceal as much as they reveal and the results can depend on what is being counted and who's doing the counting.

For example, an alternative annual study of athletes' graduation rates done by University of South Carolina's Collegiate Sport Research Institute found that in Division I level football, "athletes who entered college in 2005 graduated at rates 18 percentage points lower than non-athletes, and black players lagged by 24 percentage points."

A study from The Institute for Diversity and Ethics in Sports at the University of Central Florida on 2011 NCAA Division I basketball tournament teams disclosed that the "gap between the graduation rates of African-American and white student athletes" was 32 percent.

We do not have sufficient data nor do we need to get into evaluating the merit of competing studies. It is instructive enough to understand that at the Division I Level, using the NCAA's own data, there are schools that do an excellent job in facilitating the academic performance of and graduating their student-athletes and others whose performance is less than stellar.

In September of 2013, put up a story/slide show titled "College Football Schools with the Best and Worst Graduation Rates" using the NCAA Graduation Success Rates (GSR) and Academic Progress Rates (APR) as a tie-breaker if the GSR's were the same. Bleacher Report identified the Top 25 Best Performers and the Bottom 25 Worst Performers.

On the best list, Northwestern (the unionization target) was number 1 tied with Notre Dame with an astounding GSR of 97% but separated by an APR of 996 for Northwestern vs. 973 for Notre Dame. Other well known traditional "powerhouse" football schools near the top were: 4. University of Miami (GSR = 94%), 8. Penn State (GSR = 91%), and 9. Stanford (GSR = 90%).

On the worst, list, the bottom was led by 1. Florida International (GSR =40%) and 2. Central Michigan (47%). What? Only small schools don't graduate their "student athletes"?

Not to worry. There are powerhouse football schools at or near the bottom as well. They include: 3. Oklahoma (GSR = 47%), 4. University of California (GSR = 48%), 8. Arizona (GSR = 53%), 9. Arkansas (GSR = 54%), 13. South Carolina (GSR =55%), and 19. Southern California (GSR = 57%).

The range in graduation success rates from a 97% rate to a 40% rate is stunning and should be unacceptable to organizations with a primary mission of education and an espoused concern for student athletes. On the other hand, maybe an overriding concern of the NCAA is kind of like Jerry McGuire "Show me the money."

The NCAA recorded a nearly $61 million surplus for its 2013 fiscal year. It now has net assets of more than $627 million. The Association has a 14 year $10.8 billion contract for the basketball tournament with ESPN and the major conferences recently signed a 12-year college football playoff package that is worth $7.2 billion.

There is room for improvement with regard to how the NCAA and its member colleges treat students who are athletes or athletes who are students -- as the case may be. That's not just us our take on this, it's the assessment of Donald Remy, the NCAA's lawyer.

Remy was quoted in the New York Times as stating, "While improvements need to be made, we do not need to completely throw away a system that has helped literally millions over students over the past decade alone attend college." We're not certain about "the millions of students" in 10 years but concur completely that "improvements need to be made."

In the second part of this blog, we will provide more analysis on why those improvements are necessary and set out recommendations and possible options to facilitate the kinds of changes that will be necessary to align expressed values with organizational behavior -- or, in street language, to put your money where your mouth is.

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