Incentives and FA signings

[Shane Wahl]

What do you think of the notion of incentive-laden contracts . . . for pretty much everybody?

 

For instance, if I were a part of the uber-wealthy aristocratic class of owners, I would employ a particular approach for FA signings, and I don't really think I would like to budge from it. Consider a free agent whose average value is X. There are teams who are going to pay more than that and teams who would try to pay less. I would take that average as a baseline and include incentives over the likely amount of the top payers. Does this really seem like a bad idea?

 

Take Edwin Jackson. Let's say the average is 3/39. Add in 9 million in incentives over those three years and it could, based on performance mean a 3/48 contract (which, right now, I am assuming is at least 5 million over the top payer now, but that is adjustable). The incentives would be likely three-tiered, with the bottom one very attainable, the second one based on above-average performance for the players, and the third based on great or peak performance.

 

The general idea is to 1. minimize risk, 2. get players, and 3. reward great performance and be glad for it by paying more. Payroll issues are not reducible to amount spent, but rather how that amount matches performance. Incentives provide for this.

 

Just wanted a different kind of conversation and thought this was a good idea. I know "guaranteed money" is a big deal, but I think there may be something to this approach.

[glunn]

You analysis seems logical to me, but I wonder in your example whether other teams might offer something like 3/43 plus less incentives, taking into account the upside.

 

And no matter what the Twins offer, the player can play one side against another. If the Twins offer 3/39 plus 9 million in incentives, the player can use this to try to get another team to offer more.

[ThePuck]

Haren is off the board now. 1 year, 13M...by a team loaded with pitching

[FrodaddyG]

Two words: Players. Union.

[TheLeviathan]

Two words: Players. Union.

 

Good to see you back Fro!

[Cris E]

It's a swell idea for the teams, but players want to minimize risk too and they define risk as not getting paid. In an incentive-laden contract the team wins both ways: it's cheap if the guy performs and it only gets expensive when he plays really well. For a player there is a downside to playing badly. He'll mitigate that risk by giving back the high end because there are no guarantees about career length: most players can't assume they'll get another chance at a big deal.

 

The other thing to consider is that it's not an either/or situation. The ratio of base pay to incentive can vary widely, so another team can play the same game but beat you by simply dropping a million or three from incentive down into base to improve the ratio.

 

Finally there are limits on what you can incent for: playing time (AB, IP, etc) is OK , events (leading the league in something) and awards are OK, but starting in 2012 bonuses for "milestone" achievements are illegal (ARod hitting #650, Pujols getting #3000, etc) and the rather vague "personal services" riders are out as well.

[DaveW]

Two words: Players. Union.

 

****ing Obama!

[SpantheMan]

Good for teams, bad for players

[Rosterman]

Nope, the only incentive is that if you play for a winning team, you get extra bonus money for playoffs or World Series. Otherwise...the bigger thing now is the option year with a buyout...which Haren scored bigtime on this year!

[glunn]

Two words: Players. Union.

 

****ing Obama!

 

Yes, Obama founded the Players Union right after he perpetrated the Lindbergh kidnapping.

[Shane Wahl]

Let me rephrase things. I don't see how it might not be in the players' benefit at all, based on performance. Why do we have 1 year deal with incentives (remember the Baker 3 million and 3 million in incentives that didn't work out?) for some pitchers and not for longer contracts?

 

I understand the Union's view on this. To give a better description that leans toward players. Imagine Shaun Marcum at a baseline 2/16 million dollar deal. Let's just assume that someone MIGHT pay 2/20 for him, with no incentives. If you incorporate four levels of incentives for a max of 2/25 million based on performance, wouldn't that benefit both parties. Say you have 4 levels for the 9 million--2.25 million apiece. Make the first two very reachable: 100, 150 IP with sub 4.10 ERA or whatever. The contract becomes 2/20.5 right there. Add in 180 innings with 4.00 ERA for another 2.25. And then 205 with 3.90 ERA for the full 12.5 million each year.

 

The general idea is that this minimizes risk for the team, while maximizing max return for the player.

[DaveW]

Do you understand how unions work? Honest question.

[old nurse]

Two words: Players. Union.

 

****ing Obama!

 

The players Union was founded in 53. It gained strength in the early 70's. What does Obama have yo do with that? Nixon and Ford were president then.

[old nurse]

Do you understand how unions work? Honest question.

 

Do you have an idea how they work?

Anti player sentiment with so many on this board ripping Pohlads for making a profit. Funny.

[johnnydakota]

Do you understand how unions work? Honest question.

 

Do you have an idea how they work?

Anti player sentiment with so many on this board ripping Pohlads for making a profit. Funny.

robbie is that you?

[FrodaddyG]

Let me rephrase things. I don't see how it might not be in the players' benefit at all, based on performance. Why do we have 1 year deal with incentives (remember the Baker 3 million and 3 million in incentives that didn't work out?) for some pitchers and not for longer contracts?

 

I understand the Union's view on this. To give a better description that leans toward players. Imagine Shaun Marcum at a baseline 2/16 million dollar deal. Let's just assume that someone MIGHT pay 2/20 for him, with no incentives. If you incorporate four levels of incentives for a max of 2/25 million based on performance, wouldn't that benefit both parties. Say you have 4 levels for the 9 million--2.25 million apiece. Make the first two very reachable: 100, 150 IP with sub 4.10 ERA or whatever. The contract becomes 2/20.5 right there. Add in 180 innings with 4.00 ERA for another 2.25. And then 205 with 3.90 ERA for the full 12.5 million each year.

 

The general idea is that this minimizes risk for the team, while maximizing max return for the player.

In this case, any moderately competent agent's response would be: "If you're giving him such 'easily attainable' incentives, just include them in the guaranteed section." An agent is out for one thing, and that's maximum guaranteed money for their guy. If that means they throw out a couple theoretical millions in incentives (in this hypothetical you've put forward) to get an extra guaranteed couple million, they do it. They aren't in the business of "well, sure we're leaving a certain $4M on the table, but there's a 10% chance we get that back, plus more!" They're hustling to get the most guaranteed they can. Period.

 

They have no investment in the performance of their client beyond what it means for their next contract, and whatever "good feeling" would come from hitting incentives for a player is meaningless for an agent. Leaving millions on the table that could disappear in one snapped ligament is foolish for both the livelihood of their client and themselves. The union stance on maximizing salaries for their members at any cost does nothing to dissuade them from these kinds of thinking.

[old nurse]

Do you understand how unions work? Honest question.

 

Do you have an idea how they work?

Anti player sentiment with so many on this board ripping Pohlads for making a profit. Funny.

robbie is that you?

Are you really that much of an ass?

[Oxtung]

Imagine the clubhouse atmosphere towards the end of the season when during the pennant stretch you've got 9 players that need 100AB's a piece but there are only 75 AB's a piece remaining. Incentives don't support team play and working towards a common goal. Instead they foster an atmosphere of ME>Team. I don't believe that will help the team get to the WS. If people thought Baker took too long to divulge the seriousness of his arm injury last year imagine what it would be like if half his salary was riding on him meeting some number of innings pitched.

[Riverbrian]

Imagine the clubhouse atmosphere towards the end of the season when during the pennant stretch you've got 9 players that need 100AB's a piece but there are only 75 AB's a piece remaining. Incentives don't support team play and working towards a common goal. Instead they foster an atmosphere of ME>Team. I don't believe that will help the team get to the WS. If people thought Baker took too long to divulge the seriousness of his arm injury last year imagine what it would be like if half his salary was riding on him meeting some number of innings pitched.

 

I gotta agree with Ox. Add the toning it down on the field to avoid injury and therefore get to the bonus... in that light the true incentive of the contract incentives takes a negative twist.

[ericchri]

My first thought was, "doesn't A-rod have a ton of incentives in his contract?" But I think they're mostly milestone based incentives (600 HR, 700 HR, all time HR leader, etc...), not seasonal achievement incentives. So it's not unheard of to have incentives in the contract, just not the norm, and determining those incentives would be the tricky part, to make them appealing to the player over guaranteed money. It's not a bad idea in a sense, but I think people have already pointed out most any flaw I would be able to think of.

[powrwrap]

I like the idea of incentive laden contracts in theory. But FroDaddy nailed it. Agents want guaranteed money to insure against the debilitating injury. Also, as the owner, you aren't really going to know what other teams are offering so you would never really know if you overpaid with incentives.

[Shane Wahl]

My first thought was, "doesn't A-rod have a ton of incentives in his contract?" But I think they're mostly milestone based incentives (600 HR, 700 HR, all time HR leader, etc...), not seasonal achievement incentives. So it's not unheard of to have incentives in the contract, just not the norm, and determining those incentives would be the tricky part, to make them appealing to the player over guaranteed money. It's not a bad idea in a sense, but I think people have already pointed out most any flaw I would be able to think of.

 

Yeah fair enough.

[Guest USAFChief]

Two words: Players. Union.

 

****ing Obama!

 

The players Union was founded in 53. It gained strength in the early 70's. What does Obama have yo do with that? Nixon and Ford were president then.

 

Do you not watch fair and balanced news? The black liberation theology believing, muslim, athiest Obama thwarted an attempt to break the union by Nixon and Ford, in cahoots with Saul Alinsky, back in Obama's community organizer days. They used ACORN to rig the voting, and plan on instituting socialized healthcare on the owners to consolidate control of MLB at the federal level.

 

Sheesh, man. Try to keep up.

[DaveW]

Two words: Players. Union.

 

****ing Obama!

 

The players Union was founded in 53. It gained strength in the early 70's. What does Obama have yo do with that? Nixon and Ford were president then.

Whoa! No way? Thanks for clearing that up for me!

[Shane Wahl]

I assumed that SVD was joking about Obama.

 

Yes, I understand what the union does. I was trying to make a case for this situation being advantageous for both sides. That said, agents are a third side and they are the ones to lose the most in this.

[Shane Wahl]

Then I would change the initial idea in order to please the union. What about offering the baseline but then including the harder and harder incentives for more money. As the team, who cares about paying the extra money given that the player must have done very well to earn it. Let me give an example. Let's say that Shaun Marcum is looking at 2 year/18 dollar deals right now. Why not offer him that with one level of incentives (say 160 innings and sub 4.00 ERA) making it 2/21 and another level (200 innings, sub 4.00 ERA) making it 2/24?