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Posts Tagged ‘Payroll’

A couple of days ago I wrote an article for Inside The Majors discussing the future of Albert Pujols in St. Louis.  As much as Cards fans hate to admit it, the end of the 2011 season is quickly approaching and Pujols could be gone.  While I covered all of the factors that affect the Cardinals, I did not discuss in depth something that applies to every Major League club.

“The other big question is whether it is even worth it for a team to spend 25-30% of their budget on one player, but that is a story for another day.”

That day has come.  While it is very rare for a player to make more than 25% of a team’s total payroll, it could be the reality in St. Louis, with Pujols eating $25 million out of approximately a $100 million payroll.  I want to look at the success rate of teams where they have a player who takes up more than 20% of the team’s financial resources.  After examining the numbers from 2006-2008, I lowered my threshold to 18%, still very high, to get a larger sample size of data.  All salary information is from USA Today, and these were my discoveries:

Over the last three years there have been eighteen occasions where a single player has made up over 18% of a team’s total salary.

20082008 25%

 

  

  

  

  

  

 

2007

2007 25%

 

  

 

 

 2006

2006 25%

 

 

 

 

 

 

 

 

 

As you can see, these teams as a whole have not been very successful, with an overall record of 1398-1517 for a winning percentage of .480.  The only playoff clubs among the group are the 2007 Rockies, and the 2006 Tigers, A’s and Padres.  That means 22% of these clubs have made the playoffs, while the rest of the teams in the league made the playoffs at a 28% clip.  Not a huge drop off, but significant enough.

There is also a lot of repetition among the teams, with the Rockies appearing all three years, the Royals with three players in two years, and the A’s, Marlins, Pirates and Giants all making two appearances each.  Other than the Giants, these are all small-budget teams, and it does not take much to eat up 20% of their payroll.  You will never see a Yankee make 20% of the team’s salary simply because the denominator of $200M is way too big.  On the other end of the spectrum, Willis ate up 29% of the Marlins salary in 2006 while only making $4.35M

So far, I have shown that these eighteen teams have performed below the major-league average in terms of winning percentage in playoff appearances.  However, what I have failed to mention is the total payrolls of these teams.  If you sort all of the MLB teams by total payroll each year and rank them, the eighteen teams on this list rank an average of twenty-two.  The 2006 teams are an average of $16M below league average, the 2007 teams are 20$ million under, and the 2008 squads are a whopping $31 million under the league average.  Only three of them ( ’06 Giants, Astros and Tigers) are in the top half, and thirteen out of eighteen are in the bottom third.  These teams are actually quite successful considering their financial limitations.  If you were to tell me I could run a team for $20 million less than the average but only have a 6% chance less of making the playoffs, I think I would take you up on the offer.

I honestly thought going into this that I would discover that it would almost without fail be disastrous to have one player take up a huge chunk of your payroll.  There are occasions where this is true, most notably the 2008 Royals who spent 40% of their money on Meche and Guillen, two barely above average players.  However, it is also very possible for these small market teams with one high-paid star, like Todd Helton, to succeed.

After my analysis, the original point from my Inside the Majors article stands.  John Mozeliak, get Pujols locked up.  If there is one player that is worth of that much money and such a large percentage of your payroll, it is him.    

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Every year you hear the same arguments coming from the fans of small market teams to justify their team’s futility.  They range from “we just do not have the payroll to compete” to “it is those darn Yankees and their $200 million payroll stealing all of our talent”.  I have always felt that these arguments, while passionate, were completely unfounded.  I believe that when the first pitch is thrown to open Spring Training, any team has the chance to still be playing in October.  However, that is a difficult argument to make without any numbers to back it up.  So I decided to run the numbers and this is what I have come up with.

The Numbers

 

 

I started by listing every individual team since 1998 (the first year that MLB had thirty teams) by total payroll.  I then added wins, losses, playoff appearances and World Series titles.  For example, the row for the 1998 Atlanta Braves would have a $59.536 million payroll, 106 wins, 56 losses, a playoff appearance and no World Series.  Then year-by-year, starting in 2008, I ran regressions with payroll as my dependant variable.  What I found was that in no way was total payroll indicative of wins, losses or World Series titles.  There was, however, a very loose relationship between payroll and playoff appearances, but nothing substantial enough upon which to found an argument.  So to all the Yankees and Red Sox haters out there, I am sorry but there is not much in the numbers to back up your argument.

Of course, the data that Excel spits out is not the only way to interpret the information, so I decided to have a look with the naked eye as well.  Two things I can say for certain are that a high payroll does not equal success, and well-run teams can compete even with below-average payrolls.

 

Money Doesn't Buy Happiness

Money Doesn't Buy Happiness

What Were They Thinking?

 

 From 2001 to 2004, the New York Mets had payrolls that ranked 4th, 6th, 2nd and 4th in the league, with a final outcome of 294 wins, 352 losses, one season above .500 and as you can probably guess, no playoff appearances.  The 2003 squad was particularly inept; their 66-95 record the product of a $117 million payroll, second only to the Yankees.

From 1998 to 2000, the Baltimore Orioles were 24 games under .500 despite payrolls that ranked 1st, 8th and 3rd.  After this, ownership wisely decided to stop spending truckloads of money as it became clear the team was going nowhere.   

Bang For Their Buck

On the flipside, there are other teams that were consistently good over several years despite budget limitations.  Billy Beane’s Moneyball A’s made four consecutive playoff appearances from 2000 to 2003 despite a payroll in the bottom six in three of those years.  From 2001 to 2008,Terry Ryan’s Twins were 117 games over .500 despite a payroll that never cracked the top seventeen, and three times found itself in the bottom six.

The Three Tiers

The final way I looked at my charts was to split the league into three tiers each year, with the top 10 payrolls occupying one tier, the middle ten another, and the bottom ten the final tier.  Here is how it played out.

Top Tier  

  • Payroll: $10.696 billion
  • Wins: 9,633
  • Losses: 8,175
  • Playoff Appearances: 53
  • Word Series Titles: 6

Middle Tier

  • Payroll: $7.124 billion
  • Wins: 8,840
  • Losses: 8,975
  • Playoff Appearances: 23
  • Word Series Titles: 4

Bottom Tier

  • Payroll: $4.381 billion
  • Wins: 8,240
  • Losses: 9,563
  • Playoff Appearances: 13
  • Word Series Titles: 1

As you can see, the top ten teams essentially spent as much money as the bottom twenty to win on average ten more games per year, make seventeen more playoff appearances and win one more World Series title.  On average, this means that the playoff pool consists of five teams from the top tier, two from the middle and one from the bottom.    

Conclusion

I think this helps proves that anyone has a chance to make the playoffs and win the World Series during any given year.  While low-payroll teams do not have success as often as the high-payroll teams, it is not impossible for a $55 million team to put together a winning season or even make the playoffs.  Fans of perpetually bad teams like the Pirates, Royals, Nationals and Orioles need to stop blaming cheap owners and payroll limitations, and start focussing their anger at poor management and bad drafts.

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