Tax-Exempt Sports Analytics

Over the past 10 years, and especially in the past five years, analytics have become a very hot topic in the sports world. Many National Football League (NFL), Major League Baseball (MLB), National Basketball Association (NBA), and National Hockey League (NHL) franchises have restructured their organizations to implement sports analytics departments with the goal of gaining an edge over other competitors both on and off the field, court or ice. Sports analytics is the science of analyzing raw sports data, gathering insights to inform different decisions and conclusions. These new sports analytics departments have been instrumental in improving the between-the-lines performance as well as financial operating results of their respective organizations.

The Oakland Athletics MLB franchise is probably the most famous team known for the use of sports analytics via the use of sabermetrics. This practice resulted in the creation of the famous acronym “Money Ball” under general manager Billy Beane, which involves using sports analytics to evaluate players and make personnel decisions. This strategy has helped a team with a total player payroll consistently in the bottom 20 percent of MLB to remain competitive and in many instances more successful than other teams with payrolls two to three times larger. There are many other examples of very successful franchises using sports analytics in different ways including the Houston Astros, San Antonio Spurs, and Chicago Blackhawks.
The same tactics utilized by many teams in sports analytics are relevant and can help tax-exempt organizations (TEOs) win in terms of improving both quality of operations and financial performance. Some TEOs, especially very small ones, may not have the financial resources available to invest in data analytics, but it is still something to consider. For TEOs who currently have financial resources available for investment, here are some keys to getting this idea to work for your business:

1. Develop and Hire a Goals-Driven Analytic Position

Currently in New York State, many TEOs are struggling for a break-even bottom line on an annual basis. This is due to factors such as funding decreases at the state and federal levels and high staff vacancy rates impacted by the rising minimum wage. Many issues are out of the TEO’s control. It has become increasingly important to find creative ways to control costs and explore alternative funding streams. Hiring even one individual for an analytic position who understands your business and has a strong knowledge of analytical tools and forecasting models could be a huge benefit to the success of your organization.

In the NYS tax-exempt industry, many key service sectors including the Office for People with Developmental Disabilities have undergone significant changes over the past few years such as the creation of Care Coordination Organizations, implementation of Rate Rationalization as well as the development of the Self-Direction Program. In the future, organizations will be required to move into Managed Care and understand a value-based payment system and contracting implication. Employing or contracting for an analytical position that can help analyze the impact of these items and look for ways to increase service quality, funding, and reduce costs will benefit your organization.

2. Gather Data from Multiple Sources

Data is the key to analytics. Sports teams acquire data from actual game statistics, scouting reports, and other companies who gather sports statistics. In addition, many teams actually put sensory equipment on players and utilize it to analyze body movements. Similarly, TEOs can obtain relevant data from internal databases, commercial databases, and many other sources. By drilling down and properly analyzing relevant data, many organizations should be able to make sound decisions and necessary operational changes to enhance service quality, reduce costs, and maximize reimbursement rates. Factors such as monitoring and controlling overtime being paid, effectively using relief staff, understanding spending patterns, as well as the amount of time it takes your organization to bill for a service and get paid for that service, are all examples of areas where data analytics could be utilized to identify weaknesses and improve quality as well as financial results.

An important thing to understand when gathering data is that not all data is equal or has the same value. As an organization, you need to understand and focus on areas with a potential impact that is worth the cost. Burying yourself in mounds of useless data or data that has minimal opportunity to lead the organization to an impactful decision is not worth the investment or effort. Organizations need to ensure proper planning is done so that efforts are spent in areas where significant opportunity for improvement exists.

3. Focus on the Organization and Communicate

Sports analytics are primarily focused on individual players: who to draft, who to promote, who to trade, and who to play and when. However, the overall goal is not to just obtain the best players but to create a team that, collectively, wins.

Organizations should take a similar approach. Analytics can do many things, including identifying unproductive business relationships and detailing underperforming employees. Analytics can also help determine how different departments or groups of employees perform under one supervisor compared to another. Getting the right team together for the right task could have very positive impact on both operating results and team morale.

Communication is another key element to the success of data analytics. Selecting analytical tools that provide the best fit for your organization’s activities and goals is critical to the success of all future analytical projects. The selection should include gathering and prioritizing requirements. Active communication between finance, operations, the IT department, and key contacts for your organization’s software vendors such as payroll, accounting and billing are critical to ensure that the proper analytical tools are selected and utilized.

If funds are available to add a data analyst position, proper planning is done, and communication is strong across your organization, the use of data analytics could help your organization significantly improve its financial viability and quality of operations.

This material has been prepared for general, informational purposes only and is not intended to provide, and should not be relied on for, tax, legal or accounting advice. Should you require any such advice, please contact us directly. The information contained herein does not create, and your review or use of the information does not constitute, an accountant-client relationship.