## Analyzing Fiscal Efficiency and General Managers in the MLB

Heads up: This is going to be long.

How effective a team is at spending and allocating their payrolls has always interested me. With Bavasi, the Mariners were notoriously bad spenders, throwing away millions of dollars on useless players, making them one of the most inefficient teams in the league. For this project, I wanted to determine the effectiveness of each general manager during his management of a franchise.

When analyzing team transactions, analysts like Dave Cameron will cite the cost per win in the market as a tool determining the effectiveness of a player signing/trade. In analyzing the spending efficiency of an organization, we have to determine what they pay per one unit of commodity. In MLB, that commodity is, you guessed it, wins.  Calculating what a team spends per win is a crude approach to analyzing spending efficiency, and it will show you trends in the data, but plain dollars per win is a poor example of spending efficiency on a team level as it ignores marginal cost. For market transactions, it is still very useful.

Teams must spend a minimum of \$10,000,000 on their team, as teams need to fill 25 roster spots and must pay each the minimum of (in 2010) \$400,000.  Essentially, paying \$400,000 for a player eliminates the marginal cost to the team, and we consider these players "free."

Those familiar with the concept of marginal wins can skip ahead to the next paragraph.

Next we must discover what freely available talent can produce in terms of wins. That is, how many wins would a team of players being paid the minimum MLB salary produce? Research done by Tom Tango here indicates that a team filled with "replacement level" talent will accrue about 47 wins per season. Now that we've determined the talent level of freely available talent, we can adjust our payroll and win totals to account for that. The marginal payroll divided by the marginal win total gives us a better idea of the actual use of an organization's resources, as it removes the minimum spending and results, and is therefore more indicative of their spending efficiency.

All data for this project was gathered via Cot's Baseball Contracts, Forbes, ESPN, and Baseball-Reference. What I did was calculate total payrolls for each 2010 starting general manager's tenures, going back to at most 2000. In a special case, I calculated the Padres' and Jed Hoyer's payroll to include the 10 years of Kevin Towers. I adjusted payroll for inflation and divided each team aggregate payroll by the amount of years their GM has been in control, resulting in a seasonal payroll for each team.

Chart 1: Payroll per MLB GM Tenure, dating back to 2000 (click to enlarge)

I then summed up each team's wins during GM tenure, and adjusted the numbers, subtracting (25*inflation-adjusted league minimum salary) from payroll each year and subtracting each team's win total by 47 to come up with marginal payroll and marginal wins, respectively. I then simply divided a team's marginal payroll by their marginal wins. Here is a chart with data for each team, including how many years that GM has been in office:

 Team GM Years Marginal \$/win Florida Michael Hill 4 746,358 Tampa Bay Andrew Friedman 5 1,172,436 Oakland Billy Beane 11 1,212,349 Minnesota Bill Smith 3 1,508,720 San Diego Kevin Towers (10) + Jed Hoyer (1) 11 1,641,582 Texas Jon Daniels 5 1,719,569 Toronto Alex Anthopoulos 1 1,807,615 Cincinatti Walt Jocketty 3 1,938,266 Milwaukee Doug Melvin 9 1,955,100 Arizona Josh Byrnes 5 1,963,504 Chicago White Sox Kenny Williams 11 2,031,803 Colorado Dan O'Dowd 11 2,055,028 San Francisco Brian Sabean 11 2,083,224 St. Louis John Mozeliak 3 2,108,940 Atlanta Frank Wren 11 2,244,080 Cleveland Mark Shapiro 9 2,403,862 Los Angeles Angels Tony Reagins 3 2,427,520 Philadelphia Ruben Amaro, Jr. 2 2,441,345 Washington Mike Rizzo 1 2,557,955 Pittsburgh Neal Huntington 3 2,644,602 Kansas City Dayton Moore 4 2,711,001 Houston Ed Wade 3 2,732,609 Los Angeles Dodgers Ned Coletti 1 2,790,615 Boston Theo Epstein 8 2,801,707 Chicago Cubs Jim Hendry 8 2,892,835 Detroit Dave Dombrowski 9 3,135,800 New York Mets Omar Minaya 6 3,175,043 Baltimore Andy McPhail 3 3,186,589 Seattle Jack Zduriencik 2 3,323,781 New York Yankees Brian Cashman 11 3,728,911

Table 1: Marginal \$/win per General Manager

As you can see, teams like the Marlins are remarkable at efficient spending, getting each marginal win for pennies on the dollar. The Rays are up there as well, and it's not surprising to see GMs like Billy Beane and Kevin Towers spending efficiently, given the A's and Padres tiny payrolls and solid performance the past decade. It's also no surprise to see teams like the Yankees and Mets spend a ton on each marginal win, given that they have the resources available to them.

I caution everyone to take data for GMs with less than 3 years experience with a large grain of salt. Jack Zduriencik is, according to this measure, the 2nd worst spending GM in the league. As Mariner fans experienced first-hand last year, that is almost entirely due to a monumental collapse of a season. Data starts to show trends three or four years into a GM's management, as that should give most GMs ample time to rebuild and contend and display their true efficiency with regards to spending.

I should note that the above numbers are not representative of the value of a win to each specific team. Clearly, each marginal win is worth more to the Cardinals than it is to the Pirates. The numbers simply represent what each team paid per marginal win.

Because wins are important in assessing general managers as well, it is important to factor how successful a team was into a GM evaluation. For that, I summed up each team's wins during the course of a GM tenure, and divided it by seasons managed, giving me a team's seasonal win average. I then plotted a GM's win average against what their paying for each marginal win.

Chart 2: Marginal \$/win vs. Seasonal Win Average, per Team

Here we see not only how effective each team was in the marketplace, but also how effective they were on the field. Team's like the Yankees and Red Sox are paying above the average cost per marginal win (represented by the horizontal line), but it's well worth it as they average more than 90 wins per season.

A couple notes:

• Dave Dombrowski (Detroit) loses a lot of games despite spending a lot of money per marginal win for the last decade. It's a wonder he still has a job, at least according to this measure. It should be noted that in his second year (2003), his team accrued 43(!) wins, good for the only negative marginal \$/win score I calculated: -\$12,370,521.
• With the Rays we often say, ‘Imagine if they had a league average payroll.' With the Marlins, it's ‘Imagine if they had the Rays payroll.' They manage to do so much with so little, year after year and get very little recognition for it. In 2008, the Marlins had an inflation-adjusted payroll of \$22,341,519, with which they won 84 games. That results in a marginal payroll of \$12,591,519, and a marginal \$/win of \$340,297. Stare at how ridiculous that number is. Then, take into account that they had an inflation-adjusted marginal payroll of \$8,242,358 in 2006 and a total of 78 wins, for a miniscule \$265,882 marginal \$/win. If I ever write a Jonah Keri-esque book, it will be on the effectiveness of the Marlins.
• Brian Sabean is often regarded as one of the worst GMs in the game, at least in acquiring talent through the open market. When it comes to this measure though, he gets into the best quadrant, spending below the average market value and averaging over 86 wins per season. How much of that is due to him having the best player of the last 80 years and how much is due to his ability to draft well is up for debate.
• Coming in to this project, I knew Billy Beane would place well. He had a pretty famous book written about him for a similar reason. I was surprised though, at how well both he and Bill Smith did compared to the non-Marlins/Rays pack in terms of discretion.
• It's a wonder that Dayton Moore convinced the Royals to give him an extension, given that he's in the exact opposite quadrant of where a GM wants to be. Neal Huntington, though early in his commandeering of the Pirate ship, is trending about as worse as a small-market team can.
• It's much too early to garner information from this graph for teams like Washington, Seattle, and Los Angeles (NL). The GMs in place just haven't had the time to exhibit their talent in the marketplace yet, so we can't draw any conclusions and can barely insinuate based on the data above.

Take a look at the upper-right quadrant above, then refer to the Seasonal Payroll graph. Notice anything special about those teams? They're all top spenders in the MLB, having the largest payrolls. This suggests that there are diminishing returns to spending in MLB markets. A quick graph of marginal \$/win vs. Season payroll confirms this:

Chart 3: Examining Diminishing Returns to Spending in MLB Markets

In this final graph, we see that diminishing returns to spending does exist in accruing marginal wins. I would imagine it does for plain \$/win as well. As a team spends more, it becomes less efficient. This makes sense, as similarly, if a team can spend more they can afford to be less efficient, and still perform well as an organization.

On a final note, this data, while indicative of a General Manager's spending success, should not be the sole tool in analyzing a general manager's performance. Judging spending efficiency simply from the outcome of a GM's investments is a results-based measure, and needs years of data before it can be conclusive. That being said, it can be an extremely useful measure in analyzing a team's discretion and success with their resources, and the Marlins are clearly doing something right.

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