Lessons From NFL Free Agency: Examining the Good and the Bad Business Moves

The frenetic opening days of NFL free agency are upon us, and with the league fresh off its "first billion-dollar day," at least according to Peter King's math, this may be the most active offseason ever. Whether it's Dallas' decision to release DeMarcus Ware or the surprising move of one Baltimore Raven, there are plenty of business lessons to observe -- here are three of the most important.

The good

1. The hometown discount is still a valid concept.
On Wednesday, the Ravens resigned Jacoby Jones with a four-year, $12 million deal. The wideout, who played an instrumental role in the 2013 Super Bowl, was reportedly also considering the New York Giants. On an annual basis, he now makes nearly 10% less than his previous contract, and as NFL Network's Ian Rapoport reveals, Jones "turned down more money elsewhere."

Hometown discounts aren't exactly plentiful these days -- take Golden Tate's move from Seattle as a recent antithetical example -- but at least Jones clearly still believes in the concept. 

As one, now widely cited study from a '90s-era World Development Report shows, income and happiness are positively related, but exhibit diminishing marginal returns. Once income hits a certain point, quality of life tapers off, and even falls in some cases. In other words, "mo money, mo problems." In the business world -- football or not -- some employees are willing to take less money to remain in an environment they enjoy.

2. Top talent sometimes deserves a change of scenery. 
According to a Harris poll conducted last year, more than 50% of American workers want to switch careers. While NFL players can't leave football without retiring, changing teams sometimes allows them to attack that itch only a scenery change can scratch. Take DeMarcus Ware, for example.

The defensive end, whom ESPN just called a "sure-fire Hall of Famer," played nine seasons with the Dallas Cowboys before the team let him go this week. The Broncos promptly snatched him up with $20 million in guaranteed money, illustrating that sometimes the best employees deserve -- and get -- a change of scenery. After Ware declined to take a salary cut, his longtime team had no other choice. 

But it's ultimately a win for both sides. Ware can make a run at the Super Bowl in the backend of his career, and the Cowboys can use their resources to address more pressing needs.

The bad

3. Some businesses ignore experience entirely.
Steve Smith has played wide receiver for the Carolina Panthers since 2001, and in that time, he's amassed more than 12,000 yards -- 19th all-time. So when he signed a four-year, $30 million contract extension in 2012, most assumed he'd end his career there. But as unfortunate as it is, some businesses ignore experience entirely.

First image (above initial text) via Bradley P Johnson, Flickr. Second image (directly above) via Parker Anderson, Flickr.

Carolina has cut the 34-year old, not long after Smith's agent shared his thoughts with the Associated Press earlier this week. "Where we are disappointed is the fact he signed an extension to stay loyal to the club and complete his career as a Panther," he said, adding, "now we are at a crossroads where the [team doesn't] want him anymore."

As fans on social media point out, Carolina's remaining six rostered receivers had a combined zero catches last year -- they were not in a position to lose the talented wideout. And while rumors suggest he may not see eye to eye with his bosses, it's not smart to leave your leader, whether it's a quarterback or a CEO, with no experienced help.

What's next?

Looking toward the draft
In a little less than two months, a period that's arguably more important than free agency will begin: the NFL draft. Heavily hyped players like Johnny Manziel and Jadeveon Clowney will be taken in the first few picks, and after they're gone, front offices will look to prove who's done their research in the later rounds. 

Just like this week's roster moves, I expect some teams will exhibit examples all businesses can follow, while others will likely make a mistake or two.

And just as there's a gap between the Seattle Seahawks and the 31 other NFL teams that didn't win the Super Bowl, there's a huge difference between a good stock and a stock that can make you rich. The Motley Fool's chief investment officer has selected his No. 1 stock for 2014, and it's one of those stocks that could make you rich. You can find out which stock it is in the special free report "The Motley Fool's Top Stock for 2014." Just click here to access the report and find out the name of this under-the-radar company.


Read/Post Comments (0) | Recommend This Article (1)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

Be the first one to comment on this article.

Sponsored Links

Leaked: Apple's Next Smart Device
(Warning, it may shock you)
The secret is out... experts are predicting 458 million of these types of devices will be sold per year. 1 hyper-growth company stands to rake in maximum profit - and it's NOT Apple. Show me Apple's new smart gizmo!

DocumentId: 2874011, ~/Articles/ArticleHandler.aspx, 12/22/2014 9:58:54 AM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...


Advertisement