Cost accounting is designed to help managers understand the costs of running a business and make decisions; however, it is a concept that is not, and need not be, strictly limited to traditional business models. In the National Football League (NFL), general managers (GMs), team presidents and owners must make similar financial decisions about extending contracts to members of their current roster, releasing their players and offering new deals to potential free agents. The cost accounting system is the result of the decisions made by the managers of an organization and the environment in which they are made, and there is no doubt about the multi-million dollar business that professional football has become.
Instead of materials and machinery, the NFL’s executive management has to assess the depreciation of its direct labor and whether its current value, as well as its future value, legitimizes the cost of paying that individual what he seeks or would willingly accept. realistic. However, the reason this is so subjective is because we are dealing with real human beings, not things or products. While this is not necessarily a tax deduction, an NFL team may assess their personnel accordingly based on current cost adjustment (i.e. salary cap) and asset depreciation that is the declining football player. .
There’s also the issue of accelerated depreciation, particularly for the running back position, based on the number of hits, injuries and physical wear and tear a player incurs over the course of his career. Additionally, older players (such as those 30 and older) are seen as being at a significant disadvantage, while young players are seen as appreciating assets, especially if they sign reasonably priced rookie contracts. The need to remove any inherent bias in these front office evaluations is sorely needed, but nonetheless they are perceived as slights (offending the released player or making an “insulting” offer) when in fact they are made as a business decision, not a personal decision. a.
Activity-based costing (ABC) is a system for assigning costs to products based on the activities they require. In the case of NFL free agency, activities are those football plays made on the field that result in yards, touchdowns, and subsequently wins. Executive management can then use the resulting activity cost data to determine where to focus their operational improvements to maximize value and ultimately meet the ultimate goal: win championships and satisfy a die-hard fan base. To achieve such success, alternative internal accounting methods such as balanced scorecards can help general managers make better short-term decisions as well as provide better long-term performance measures for the organization as a whole. , thus lining up the general manager. and owner interests.
When making the final business decision about a player’s future, it is critical to consider all of the above variables. For example, in the recent case of Thomas Jones, the New York Jets decided to part ways with the 31-year-old running back after a 2009 season that included his most productive season rushing the ball (over 1,400 yards and 14 touchdowns) to protect the team. to pay his next roster bonus of $3 million on top of a base salary of $2.8 million. Aside from his age, he had a career-high 331 carries in the regular season and seemed to wear down a bit down the stretch when rookie Shonn Greene started getting most of the carries. As an organization, the Jets couldn’t rationalize paying this amount to a player they saw as declining and decided to move in another direction. Jones would later sign a two-year, $5 million deal with the Kansas City Chiefs in March 2010, a clear example of two different accounting principles and each team’s respective analysis; It turns out that Jones had a productive first year with the Chiefs before having a poor season last year at the age of 33.
The example above is one of hundreds that occur in any given offseason and epitomizes the different accounting-level systems the team uses to evaluate, judge, and ultimately offer or deny contracts. It’s for these reasons that teams hire chief contract negotiators and why those with the precise formula motto are so sought after and why the franchises that hire them are often the successful ones.
