What Global Services Can Learn from the NFL Salary Cap | Sherpas in Blue Shirts

Posted On March 28, 2013

For readers who are not sports fanatics…the U.S. National Football League (NFL) – and many other professional sports leagues around the world – must abide by a rule called a salary cap that places a limit on the amount of money each team in the league can spend on player salaries. Every year, this results in the team owners dismissing still productive players, in part due to expected changes in future performance, but largely because they must cut players with salaries above what they can afford in order to stay under the league-mandated salary cap for the entire cost of the roster. Invariably, this means changes to the teams’ make-up from year to year, as their rosters are rebuilt to compete in the new season.

So, what does this have to do with global services (and how can you justify reading about football while at work)?

Looking at the salary cap as a cost benchmark – which for each NFL team sets in motion a range of forces that define which teams are successful – provides some interesting lessons for the global services industry.

1. Talent models: build through the draft

The price of experienced talent in the NFL limits the teams’ ability to use that talent while still staying underneath the salary cap. Although a team could build itself entirely with 6+ year veterans, it would have to do so with almost all of them being average or below average performers. It simply could not afford to have higher paid, above average performers. And, while few top-notch players are important to each team, they’re not necessary in every spot on the roster.

Entry-level players provide teams the opportunity to find high-potential talent and utilize it before a market develops to buy it away. They also enable teams to experiment with larger volumes of comparatively cheaper talent. And, of course, once a player gains experience and can test the open labor market, the highest bidder wins, so the player is automatically paid above what the average bidder felt was the market value.

So, entry-level talent helps fulfill key roles because the diamonds in the rough are beginning to emerge, and because the market is not able to overpay for this talent in the earlier years of their careers. In the NFL, the winning teams are built based upon key talent that is found in the draft and supplemented with signings of select players from other teams.

Global services face a similar dilemma: entry-level talent is comparatively affordable, whereas experienced talent that is known to perform above average comes with a high price tag.

Implication for global services: sourcing talent from colleges and other education programs is essential to building a competitive cost structure.

2. Management: coaching matters – a lot

Since teams are experiencing greater than ever churn in their roster of players, it is becoming increasingly apparent that a good coaching staff is critical and can rapidly change the performance level of its team. In most cases in the NFL, whether a new coaching staff will be successful is evident quite quickly – generally within two years.

In order to be competitive, a coaching staff must both develop the entry-level talent from the draft and help mold together the entire team to perform at or above their collective level of capability. This often means pushing newly drafted talent (which they must be able to identify early on) into bigger roles than what seems ideal at the time.

As a result, teams with a capable and stable coaching staff are often able to sustain above average performance over multiple seasons – and members of these coaching staffs become prime candidates for bigger roles on other coaching staffs which are looking to turn around performance.

Implication for global services: ensure a management model that can rapidly develop new talent, (invest in the right training, etc.), and increase the overall performance level…operational expertise may not be enough.

3. Culture: it must endure beyond changes in players and coaches

With expected change in players and coaching staffs, the longest-term success comes from establishing and nurturing a culture that can both sustain itself over time and help raise the performance of players above what may be their natural, individual ability.

As hardcore fans of the NFL know, many of the high priced veterans that sign with other teams fail to live up to the expectations and may be cut in only a few years. Why? Some is due to physical decay or inability to step up to fill bigger shoes. However, the change in team culture – expectations, offensive/defensive schemes, attitudes…the way things are done – can also limit a player’s ability to perform at a high level.

By contrast, teams with strong cultures can often find average players and attain above average results – assuming the average players were correctly identified as being a good fit with the “system” (or culture).

Implication for global services: build a culture, (and supporting tools, processes, etc.), that relies not only on superstars, but rather on the ability of many team members to perform above their expected level – including that of the superstars.

So, draft smart, coach well, and build an enduring culture. And, if you’re seeking ways to refine your global services skills, you might want to spend some time watching the NFL teams’ strategies…the draft begins on April 25.

Note: apologies to our non-North America readers and those who don’t follow the NFL. We understand that calling our violent game “football” is an insult to all fans of FIFA, the World Cup, etc. – we simply can’t help ourselves.

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