The National Football League Organizational Analysis Part A: Management Functions SWOT Analysis
Western Washington University
Scout Braunstein, Hanna Paradis, April Wickline
The National Football League (NFL) is a professional American football league consisting of 32 teams, divided equally between the National Football Conference (NFC) and the American Football Conference (AFC). According to the National Football League (2015):
All of us in the NFL are proud of our rich history and our special place in American culture. While we are fortunate to be recognized as one of the world's strongest entertainment brands, we also believe that the future offers more opportunity for the NFL to grow. (para.1). The NFL has a commitment to diversity and their diversity mission statement is:
To cultivate an organization and community representing a wide variety of individuals at all levels, all of whom respect, honor and celebrate the broad range of human differences among us, while also embracing the commonalities we share, and to provide each individual with the opportunity to achieve his or her full potential as organizational goals are pursued. The overall objective of the diversity effort is to create a culturally progressive and socially reflective organization that represents, supports and celebrates diversity at all levels. (para. 1-3)
In 1966, the league was granted 501(c)6 status. According to Worth, stage V of the life cycle of a nonprofit is when:
The organization revisits its mission and programs and undertakes change. Minor changes may take it back to Stave IV. Major changes may take it back to Stage II. Returning to one of the earlier stages then may lead to renewed continued growth. (Worth, 2014, p. 192)
The NFL has recently decided to withdraw their 501(c)6 status which classifies it in Stage V. The 501(c)6 designation means the NFL is a trade organization. This tax-exempt status does not apply to the league's 32 individually owned franchises, which are all except for one, for profit.
The NFL stands for the National Football League, which means that its jurisdiction is within the United States. However, its clients (fanbase) are served worldwide. Every state in the nation has a team except for Oregon, Nevada, Idaho, Montana, Wyoming, Utah, New Mexico, North Dakota, South Dakota, Nebraska, Oklahoma, Iowa, Arkansas, Mississippi, Kentucky, Alabama, West Virginia, Virginia, Delaware, New Jersey, Connecticut, Vermont, Massachusetts, Rhode Island, New Hampshire, Maine, Hawaii, and Alaska (Yahoo, 2015). The NFL as an organization reaches out to fans all over the world by selling merchandise. The NFL has been coming out with programs that allow clients in different countries to begin streaming and watching games from their own computer or TV.
The league itself has three defined officers: the commissioner, secretary, and treasurer. There are two conferences and each conference has one officer, which is titled as the president. The commissioner is an elected official that is voted on by a vote of two-thirds or 18 of the members of the league. The decision is based off which on is greater. The president of each conference is elected by a vote of three-fourths or ten of the conference members. The commissioner then appoints the secretary and treasurer and has various authorities in disputes between the clubs, players, coaches, and employees. According to Wikipedia (2015):
He is the "principal executive officer of the NFL and also has authority in hiring league employees, negotiating television contracts, disciplining individuals that own part or all of an NFL team, clubs, or employed individuals of an NFL club if they have violated league bylaws or committed "conduct detrimental to the welfare of the League or professional football" (para. 1).
The league has a Junior Rotational Program and provides a year round as well as a Summer Internship Program for community members and volunteers to get involved.
The NFL has a strong role in different communities across the nation where there are ample opportunities for volunteers and different communities to get involved. Football and community are the twin pillars of the NFL. Whether nationally at the league level, locally at the team level, or individually through the volunteerism and philanthropy of owners, players, coaches and club personnel, there exists a powerful NFL-wide commitment to giving back. This commitment is year-round-there is no offseason to the NFL's multi-tiered, ongoing work to strengthen America's communities. Through the active involvement of the 32 NFL teams, and long-standing partners, the league is able to make a positive difference in America's communities and connect with millions of fans each year.
As a 501(c)6, the NFL has within it multiple 501(c)3 programs. These programs include, but are not limited to, NFL Play 60, USA Football FUNdementals, and NFL PP&K. Through these programs the NFL is able to reach out to people who want to be active within their community. (NFL Rush, 2015, p. 1)
Utilization of Strategic Planning
Strategic planning in the NFL is different for each individual team and it is mainly utilized in the off season. Each strategic plan is based off of the dynamics of each team. Lyons (2014) explains that the off season is often full of roster changes and the landscape of player personnel includes is shaped by retirements, cuts, trades, free agency, and the draft.
Strategic planning is defined by Worth (2014) as an organization's process of defining its strategy, or direction, and making decisions on allocating its resources to pursue this strategy. It may also extend to control mechanisms for guiding the implementation of the strategy.
Bryson as cited by Worth (2014) defines strategic planning as “a deliberate, disciplined approach to producing fundamental decisions and actions that shape and guide what an organization” (p.160). There are many different actions the NFL takes during the strategic planning process in the off season, one of which is led by Brian Rolapp. Although the official commissioner is Roger Goodell, there are a few individuals such as Rolapp that do important behind-the-scenes work. Rolapp’s main job is to contact the media when concerns with sites that regard the NFL arise as well as to raise revenue for each team each season. Recently, Rolapp has launched a YouTube channel. This is a way that Rolapp hopes to gain revenue and to keep the NFL in the lime light. In doing this it is believed that the public will remain excited and plugged in. This channel helps with sales in ticket stands, as well as merchandise sales. The anticipation of the game from the public is a huge factor for the NFL (Roberts, 2015).
Strategic planning in the NFL starts at the headquarters. This is where scheduling happens for televised shows, where games will be played, and where bad publicity is dealt with. King (2014) explains that “at NFL headquarters, four men and 40 computers work for 70 days, sifting through a half-million possibilities” (para. 1). Bad publicity streams from issues that the NFL deals with yearly such as lawsuits and inadequate safety precautions. According to an article from Forbes magazine, football in general is “experiencing a crisis that has to be strategically managed if it is not to lose the momentum it has built up over recent decades” (Makovsky, 2013, para. 1). Goodell claims that establishing a health and safety culture is what needs to happen in order to break away from these tough times. There are lawsuits involving 4,000 former players on safety issues that could cost the NFL hundreds of millions of dollars. The NFL broadcasts the most popular sport in the nation and has the potential to impact so many so it is critical that risks to potential football players be avoided at all times.
In regards to strategic planning, Makovsky (2013) states that “a plan of action must be communicated and followed through on with full transparency to the public to sustain the growth of the sport and the support of parents who are growing skeptics” (para. 5). An example of action is that the head of the Players Association pointed out that they will now have independent neurologists at every game to make instant concussion diagnoses. Another example is the NFL’s use of media to advocate for their newfound communication changes. In a TV interview, Goodell emphasized the rule changes, equipment advances and the major investments in research that are already well underway. “The NFL also used its considerably valuable institutional advertising time during the Super Bowl broadcast to raise awareness for NFL Evolution, the NFL’s new health and safety portal” (Makovsky, 2013, para. 6).
Type, Function and Involvement of the BOD
Research suggests that the NFL does not have an official board of directors, but it does have people who act as a board of directors. Phil Rosenthal (2015) explains that Roger Goodell is the CEO of the NFL but he does have to answer to someone. In this case, that someone is the 32 owners of the teams within the NFL (Rosenthal, 2015, p. 1). Therefore, the type of Board of Directors for the NFL are the team owners.
Experience and Role of the Executive Director/CEO or CFO
In regards to the NFL being a 501(c)6 nonprofit, the role of an Executive Director is known as a Commissioner. According to the Constitution and ByLaws of the National Football League, it is required that the League hire someone who has integrity. (National Football League, 2006, p. 28, para. 1). It seems as though Roger Goodell’s experience with the NFL showed the organization that he had integrity through his experience with multiple successes throughout the league before he became a commissioner. According to the National Football League Football Foundation (NFL Football Foundation, n.d.), Goodell was responsible for developing, expanding and realigning the stadium. He also played a part in the team that was in charge of creating the NFL’s television agreements (NFL Football Foundation, n.d.). According to the Worth (2014), “A nonprofit chief executive is dedicated to following the highest ethical standards” (p. 102). This applies to Goodell because he has concentrated on “player health and safety; the medical needs and pensions of retired players; personal conduct; revenue sharing; stadium construction; media innovation; and international development” (NFL Football Foundation, para. 5). Goodell has served his role as Commissioner by improving policies in order to keep fans happy, as well as reconstructing programs within the league in order to serve current and retired players in their everyday lives (NFL Football Foundation, Profile Details, para. 7). From these credentials, it makes sense that he would be appointed to take on the role of Commissioner for the league since it’s apparent that Goodell has executed his roles as the Commissioner through looking at ways to make the NFL better.
Most Recent Annual Fiscal Snapshot
The NFL gets a large portion of their revenue from program service revenue. This recent year the amount they got from program services was 99.6 percent of their total revenue (National Football League, Form 990). However, the NFL’s total expenses are 97.2 percent of their total revenue (National Football League, Form 990). This is partly because they spend a lot of money on salaries, other compensation, and employee benefits. It is significant to note that no amount of this organization’s expenses goes towards fundraising. This is probably due to the fact that so much of their revenue comes from membership dues and assessments, advertising, marketing, etc.
Recruiting, Hiring, Training, Monitoring and Disciplining Staff
The NFL takes into consideration many things when recruiting paid and volunteer staff. According to the NFL's website part of their promise to the fans is that they recruit and hire accountable staff, this means that the organization expects the organization to behave fairly. The NFL website also mentions how they accept responsibility when they do something wrong and then strive to be better in the future (National Football League, 2015, p. 1. para. 4). According to Love (2009), the recruiting process involves a draft. 32 teams of America’s National Football League congregate annually to seek out players who are new to the NFL (Love, 2009, para. 1). New players are recruited by placing the NFL teams in order from worst to best, and the worst team picks first (Love, 2009, para. 5).
The training process for these paid staff members, such as officials, involves years of experience (Officiating Development, 2015, p. 4, para. 1). This source also indicates that the NFL officiating department monitors their staff of officials by creating “a robust talent pipeline to ensure that the next generation of officials is ready to step up when needed” (Officiating Development, 2015, para. 2). The NFL closely monitors the local, state and collegiate officiating associations in order to maintain this intensive pipeline of officials throughout high schools and colleges in the country. The NFL also conducts grassroots campaigns that are constructed to recruit young adults to officiate football on various levels of expertise (Officiating Development 2015). Based on information about integrity from www.nfl.com/careers/values this organization is focused on always making the right call (National Football League, 2015). Therefore, this information suggests that integrity is a major aspect of the training process for the NFL.
Pedulla (2014) states that the NFL decided to hire 1,500 temporarily paid staff for positions that were previously volunteer oriented. According to Pedulla (2014) this is due to the fact that the “Major League Baseball got a class-action suit against them for not paying their volunteers for an All-Star Fanfest” (p. 1, 2014, para. 4). One of the many ways that the NFL monitors its staff is through making policies that require them to attend certain events. For example, players are required to agree to a media policy which states that they need to be “Available to the media following every game” (Pro Football Writers of America, 2014, para. 1). NFL writer, Hanzus (2014) discusses how the NFL puts discipline into place by giving out fines to the players. One example of this is how Marshawn Lynch was fined 50,000 dollars for breaking the rules for the NFL’s media policy (para. 1). Even though the NFL players are often monitored through policies that they agree to as current staff members, the NFL also monitors it’s retired staff members through addressing their medical needs and pensions (National Football Foundation, 2015, para. 5). According the National Football League “The NFL staff has been a fundamental part of the league's success and will continue to play a key role in our continued growth and progress” (National Football League, 2015, para. 1), This makes the NFL unique as a nonprofit organization because ethics would require that they continue to monitor their staff even after retirement due to injuries they may have experienced while under their employment. However, it makes them a typical nonprofit because they acknowledge that their staff is a very important asset to the organization.
Reliance on Volunteers
The NFL is reliant on volunteers the most for the Superbowl because of how big of an event this is. Pedulla (2014) provides information on how the NFL recruits volunteers by offering them a chance to attend the events like the Superbowl for free as long as they agree to work (para. 4).
Given the nature and context of the NFL, and the fact that it is nationwide it is believed that it’s employment opportunities has the ability to reach people in all demographics. Examples include team staff members, stadium staff members, ticket and merchandise vendors, online specialists, etc. The variety of jobs allows for a wide range of compensation and benefit packages.
Diversification of Funding
The NFL has diverse funding sources which allows the organization the stability to take riskier investments and prevents the organization from financial issues centered on too little funding sources. The NFL’s major funding sources are internet advertising, regular advertising, licensing and merchandise, and ticket sales. Interestingly, as a nonprofit the NFL does not spend any money on professional advertising and does not receive and grants or other contributions. The organization is extremely well-known and because of that they are able to receive revenue through so many sources. This allows them the freedom to spend their time and effort in other areas, apart from advertising.
Adams (2003) mentions how the internet has greatly increased the NFL’s annual revenue. He reports that in 2002 the NFL made an effort to diversify revenue from its internet operations. This effort was extremely successful with charging for some premium content on the NFL website. The industry sources estimated that the revenue from rights fees, advertising, subscriptions, and licensing would bring the league’s web operation to about $60 million for the season, along with profits in the eight figures.
One of the important revenue sources for the NFL is licensing. Fisher (2010) mentions that the NFL is very strict about who has rights to their intellectual property so they act as a single unit to limit and choose the most worthwhile vendors. According to Pelligrino News (2013), the league charges a considerable fee to use the NFL logo and sell merchandise affiliated with the organization. Fisher (2010) indicates that television networks are willing to pay $28 billion to air NFL games over a nine year period. Also, advertisers who would like to promote products have to follow the NFL license trademarks and terms which increase the already expensive cost of advertisements and marketing.
Advertising alone is also a huge contributor to the overall revenue of the NFL. Pelligrino News (2013) states that during the regular season advertisers spend roughly $3 billion dollars. During the Super Bowl advertisers spend $3 to $4 billion dollars on commercials lasting 30 seconds. A method of advertising is merchandising, which is also an extremely effective source of revenue for the NFL. Pelligrino News said that the NFL merchandise sales reached $2.1 billion dollars in 2010. Since the reach of merchandise extends outside the United States, it is able to bring in more revenue than venue revenue and ticket sales.
A major portion of the NFL’s product is watching the games, so a primary source of funding comes from ticket sales. The organization is focused on entertainment and in order to participate, fans much either watch the games at home or purchase tickets to attend the games. A major portion of the NFL’s product or program is watching the game. Between regular season games and the Super Bowl, ticket sales encompass a large fraction of the NFL’s revenue. According to Pelligrino and Associates (2013), each team generates about $51 million dollars in ticket sales. For Super Bowl XLVII the average ticket price was $3,100. Since the trade organization is rooted in entertainment.
Although the NFL is the most watched, most attended, and most popular sport team in terms of merchandise in America, according to Pelligrino and Associates (2013), the organization can still suffer if one of these funding resources is removed. According to K. Slette (personal communication May 6th, 2015) having a diverse funding mix is important to prevent overreliance on one source of funding. If one funding source runs low or completely out, an organization should be able to remain lucrative and prosperous.
Influence and Lobbying
Miller states “How we distribute our game to our fans is the most essential business issue we have in Washington” (as cited by Shipley, 2011, para. 12). As a 501(c)(6) nonprofit, the NFL may participate in lobbying and other legislative activities. Different from a 501(c) (3) nonprofit, they are not prohibited from engaging in political activities and have more leeway in terms of the amount of lobbying they are allowed to do (Fox, 2015). According to opensecrets.org (2015), the NFL has increased its spending on lobbying and related activities from $380,000 in 2006 to a record breaking 1.2 million in 2011.
Interestingly, the increase in spending has coincided with the current position of the NFL Commissioner Roger Goodell. Shipley (2011), mentions that Goodell is the son of Charles Goodell, former New York Senator. The author also mentions that since Roger Goodell has been commissioner the NFL has “Opened a Washington lobbying office, lured a well-connected congressional aide with expertise in antitrust law to run it and created Gridiron-PAC for campaign contributions” (Shipley, 2011, para. 6). Shipley also explains the increase in lobbying.
The NFL has dished out nearly $5.5 million to a cadre of D.C. firms since Roger Goodell became commissioner late in 2006, tripling its lobbying expenses over the previous four years. League officials and supporters also have directed an additional $680,000 to key political leaders and allies through a recently formed political action committee. (para. 3)
The NFL hires multiple lobbying firms to advocate on their behalf including, Capital Counsel, Elmedorf Ryan, Glover Park Group, John Dudinsky & Associates, as well has having their own lobbying firm. Issues of interest across all lobbying firms working with the NFL include radio and TV broadcasting, sports and athletics, health issues, taxes, labor, antitrust, and workplace issues. The agencies in which these firms lobby is the U.S. Senate, U.S. House of Representatives and the White House. Bills currently being addressed by the NFL include H.R. 26, Terrorism Risk Insurance Program Reauthorization Act of 2015, S. 1014, which addresses youth safety with sporting equipment, and S. 1524 PRO Sports Act.
In regards to the legislative activities of the NFL, as a 601(c)(6) nonprofit they must adhere to the following guidelines, “Determine whether the business league is subject to the reporting requirements of ICR section 6033(e)” (Internal Revenue Service, n.d, para. 12). As well as “Inspect Form 990-T filed by business leagues which elected not to or failed to provide such notification to verify the proxy tax under IRC section 6033(e)(2)(A) was properly calculated” (para. 12). According to opensecrets.org (2015), the NFL recorded spending $270,000 dollars on lobbying expenses in the first quarter. The Lobbying Disclosure Act of 1995 (section 5) (2015) correspondingly reports $270,000 dollars of expenses related to lobbying activities in this first quarter of 2015. ` According to the rules of the IRC, the NFL properly calculated and correctly recorded in the first quarter of 2015.
· Extremely well-known organization
· Ability to reach worldwide through merchandising, game streaming and other online content
· Diverse funding mix
· No reliance on fundraising
· Complex interworking- varying leadership and management roles allows for a lot of communication and transparency within the organization.
· Large advertising and marketing efforts make the NFL extremely well-known.
· Entertainment available for all demographics: children, teens, and adult programs, as well as online gaming, worldwide access to games and merchandise, etc.
· Loyal fan base
· 501(c)(6) status provides more opportunities for lobbying/ advocacy,
· Strong communication within organization.
· An abundance of undesignated revenue that can be spent in other endeavors or investments.
· Most teams have renown cheerleading squads which bring s level of allure to the sport
· Able to earn revenue through fines
· Strong lobbying/ advocacy role
· Lifelong safeguarding and communication with retired employees and players increases opportunities for potential donations.
· The Super Bowl is one of the most watched sporting events in the world
· Lawsuits are frequent and often public
· Safety issues due to the aggressive nature of the sport itself
· Many other organizations affiliated with the NFL makes it difficult to create strong, equal communication
· Recent withdrawal of nonprofit status removes the organization’s IRS tax exempt status
· Small fan base outside of the US.
· The organization must pay close attention to injuries and overall health of players during and after their time in the organization
· New phase of organization life cycle creates room for growth and new opportunities
· Recent withdrawal of nonprofit status allows for more profit and less restrictions
· The most well- known sport in the nation
· New technologies allow for better planning and responses to injuries, strategies, communication and much more.
· National movement focused on being more active increases people's interest in physical activity and participating in sports
· Competition with other sports leagues, especially the increasing popularity of soccer in the US.
· Fluctuating economy affects the organization's ability to earn revenue
· Incidents with players are often public which affects the image of the organization.
· There is a lack of transparency where the public is concerned. It is difficult to find financial documents, make contact with employees, and access public information
The NFL as a whole has numerous aspects that make it what it is today. While the league itself is of nonprofit status, the teams that make up the league are not. It is concluded that the teams are a central function of the organization as a whole and without them, it wouldn’t exist. “Running an NFL team is a complex task. You have to hire coaches, write and negotiate player contracts, scout and draft college players, formulate marketing strategies in your team’s region, set ticket prices, employ stadium vendors, acquire stadium advertisers and much more. With so much to accomplish, it is no surprise teams delegate the duties throughout numerous factions of front office members. To detail every position for every NFL team would be a tireless, cumbersome read….there are vernacular disagreements among front office positions. For example, some teams label their CEO as the team’s chairman, or their general manager will instead be classified as their vice president.” Given the complex structure of the NFL as a whole and considering the various different titles and positions within, the overall health/well-being of the organization’s management system is substantially respectable.
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