The National Guard is wasting $56 million a year on NASCAR and IndyCar sponsorship according to U.S. Senator Claire McCaskill (D-MO), chairman of the Subcommittee on Financial and Contracting Oversight that called a hearing to discuss ending the sports sponsorships.
“In this environment of dwindling recruiting budgets, I want to understand why the Army National Guard has maintained sports sponsorships that provide less value per dollar than other forms of marketing,” McCaskill said.
The use of public funding for sports sponsorships has been a long-debated topic and the military is about to lose the fight once and for all. More than $72 million in sports sponsorships came within 14 votes of vanishing in 2012 when Congress voted on House Bill 5856, legislation targeting the military’s use of sports sponsorship. This narrow vote followed a similar vote a year earlier that fell 133 votes short of passage.
“Congress has voted three times and the margin of defeat has steadily declined from 133 votes to 93, to 14,” noted David Carter, Executive Director of the USC Sports Business Institute and Editor-in-Chief of Fields of Green. “We know these sponsorships will continue to face scrutiny and they need to reverse this trend.”
The Republican congress is facing re-election in November, and if voted out, $72.3 million in sponsorship will likely go with them. Democrats voted 121-60 to pass the bill while Republicans were responsible for saving NASCAR a major sponsor by voting 156-81 against it.
We know this routine well; after all, it was only six years ago while this article’s author Ray Bednar was Global Head of Sponsorship at Bank of America that his CEO had to testify before Congress and justify the bank’s involvement in sports sponsorship.
Congressional decision-making is actually a very simple process. Elected officials rarely take a deep dive into the facts concerning issues under consideration. Instead, they routinely ensure that three critical elements frame their decision. First, they want to ensure their vote doesn’t conflict with the majority opinion of their constituents. They also want to make sure they receive optimal press coverage. Finally, they consider how their vote will impact their reelection bid.
Based on these motivators, what can we expect from the next sponsorship-related vote following the November elections?
1) With the notable exceptions of North Carolina and South Carolina, which are economically tied to NASCAR, there is little risk in voting this down and sticking with the party line. And that party line may change overnight.
2) History has already demonstrated that this issue will receive media attention. The Army’s sponsorship withdrawal from NASCAR received substantial media coverage. Harping on corporate America’s involvement in sponsorship has become political sport regardless of its contribution to shareholder value. Bank of America, AIG, Northern Trust, Citi and numerous others have received high-profile public scrutiny.
3) Congress will rush to be in line with the working man and against supposed fat-cat boondoggles with elections on the horizon. Can you hear the chorus? “I was the deciding vote to cut the egregious spending of our military on sports marketing; no more entertaining generals at NASCAR races on the taxpayer dime!”
How did we get here and what can the primary stakeholders, namely the military, NASCAR and sports marketing agencies, do to stave off looming attacks on the sponsorships that drive their business/recruiting interests?
Czechoslovakian playwright-turned-emancipator-turned-statesman Vaclav Havel, the leader of the Velvet Revolution that helped bring down the Iron Curtain, explained these situations best when he coined the term “collective irresponsibility.”
In collective irresponsibility, no single entity is responsible – the group at large is irresponsible, while the members individually may actually feel they are acting responsibly. All collectively irresponsible organizations or relationships eventually fail under their own weight of non-accountability – just like the communist regimes in central Europe and eventually the Soviet Union itself.
A large group of people in a sponsorship like the one the Army maintained with NASCAR easily fell into this comfortable paradigm.
Are each of the parties involved negligent? In our expert opinion, yes, and very clearly so. The lack of tangible data reinforcing the merits of these marketing partnerships proved damning, especially since Senator McCaskill is specific in her request to understand the return on marketing dollars spent, measured by the number of new recruits joining the armed forces.
Rest assured that this Congressional oversight will not stop with the military. The same scrutiny is happening in boardrooms across the globe. CEOs and their boards are awakening to the notion of collective irresponsibility and asking themselves how they find themselves in these large partnerships in sports, arts and entertainment – all too often with little to no accountability.
Prior to the next vote, the critical stakeholders must make mandatory the following four initiatives to avoid additional public sector scrutiny.
– Clearly define business objectives and goals that form the basis of the relationship, and from which all programs are designed, measured and held accountable.
– Develop unambiguous responsibilities when it comes to delivering on these marketing objectives and goals. This includes ascertaining and assigning responsibility for each member’s performance.
– Hold regular, no-holds-barred reviews of the marketing program’s progress.
– Demonstrate tangible and defensible results that reinforce return on investment and/or return on objectives.
This is all simple stuff. To quote a wonderful old Army doctrine, “If it can be seen, it can be hit; if it can be hit, it can be killed.” If a company designs sponsorship relationships to be measured the same way it designs and measures other business relationships, it will find success. We see this success at leading firms every day.
Barack Obama famously ran under the banner of “CHANGE” in 2008. Sports sponsors, and the leagues that rely on them, need to embrace change more quickly. If they fail to do so, they will face the unpleasant change brought to bear on those lulled into the insidiousness of collective irresponsibility.
Ray Bednar is Principal of Hyperion Marketing Returns, Rockefeller Consulting. A West Point Graduate and Harvard MBA, he is recognized as one of the 100 most powerful people in sports by Forbes Magazine
Tony Knopp is CEO and Founder of Spotlight Ticket Management, managing over 9 million tickets annually worth over $1 billion.