If I Was Running A Company…Ilya Kovalchuk

A bunch of my HR bloggers in the past few weeks have written a lot about LeBron James, his decision to join the Miami Heat, and how it reflects HR.  LeBron is a great example for people who like the NBA and HR…but it does not come close to what is going with Ilya Kovalchuk.

To summarize who Ilya Kovalchuk is; he’s a former number 1 pick in 2001, who played for the Atlanta Thrashers for 8 seasons.  He was a play-making forward who helped the Thrashers to go to their only playoff series in 2006-07, where they got swept by the New York Rangers. During the middle of this past season, Kovalchuk was traded to the New Jersey Devils, hoping to bring back the Stanley Cup in New Jersey. Unfortunately in the Eastern Conference Quarterfinals, the Devils were eliminated in 5 games by the Philadelphia Flyers.  This is where the fun begins.

The reason the Atlanta Thrashers traded Kovalchuk is because they knew they couldn’t resign him since he rejected a 12 year, $102 million deal, plus they didn’t have the budget for his demands.  Everyone in the NHL knew Kovalchuk was the top free agent this offseason, so his value was very high.  Since that was establish, Kovalchuk wanted a 10+ year, 9 figure deal.  Usually in the NHL, free agents have decided after 12PM on July 1, which starts Free Agent Frenzy and Canada Day.  The problem: Kovalchuk didn’t sign with anyone.  He had choices between the Devils, Thrashers, the Los Angeles Kings, the New York Islanders, even the Kontinental Hockey League (KHL). People were worried that he might drive the value too high and/or was trying to be a divo. The problem was Kovalchuk is a top 10 talent in the NHL and he should merit in average how much the top ten make, and he is 27.

The situation has led to 20 days of drama, negotiations, bickering, and grandstanding.  However, Kovalchuk got the deal he wanted and signed a 17 year, $102 Million deal to return to the Devils.  Instead, the NHL rejected the offer because the contract was too front-loaded. It will eventually get resolved and everyone will be happy…except the Kings and every hockey fan outside of New Jersey.

In perspective:

For Ilya Kovalchuk, he had two job offers on the table: the Kings and the Devils. From reports, Kovalchuk wanted to go to L.A., but the Kings were offering 15 years, $80 million. The Devils decided to counter-offer and put 17 years and $102 million and that’s what Kovalchuk chose.  While almost everyone was signing on July 1, Kovalchuk waited to get an offer he liked and got it.

For the New Jersey Devils: they know Kovalchuk had great value, but they also know Kovalchuk wanted a contract over $100 million. They waited patiently and calculate the best offer for not only Kovalchuk’s needs, but their own needs.  Instead of paying him $10 million a year, Kovalchuk is going to get paid on average $7.5 million per year (granted, it’s a front-loaded contract).

For the NHL: I’m glad they stand up on someone (or team) that is trying to manipulate the system.  One problem: this rejection won’t last since you allow similar front-loaded contracts to go through from Marian Hossa, Chris Pronger, and Roberto Luongo. The NHL should re-read the Collective Bargaining Agreement and put it on your agenda as number one priority to cover the loophole in the next Collective Bargaining Agreement.

By the way, to look at each NHL team’s salary cap situation, go to Capgeek.com

For Devils General Manager Lou Lamoriello, you are a great negotiator and you kept Kovalchuk in New Jersey for 17 years (that might be a new record). After the contract talks are done, you should have shut up.  You made the situation worse when you publicly said you hated the structure of the contract and wanted to game the system. You were gotten away with it without consequences if you said nothing.  It’s alright to be quiet from time to time.

So to my HR friends, you can enjoy the LeBron James saga, but Ilya Kovalchuk’s situation is HR’s version of Inception.

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