December 23, 2011 1 Comment
How do you evaluate the organizational strength of a baseball team?
The first, and most obvious factor is the caliber of players on the team. The better a team’s players, the better its chances of winning in the short term. Factor in the risk and upside of the current roster, and you can get a pretty good idea of the team’s present talent level. Obvious enough.
Next, you have the future talent. Prospect lists are a part of this, but so are players under team control beyond the upcoming season. If you have a good team with young players signed for a few years, that’s a good foundation for the team’s future as well as its present. Even veteran players on big contracts fall under this category; a player may be an undesirable asset if his contract pays him more than he’s worth, but as long as he’s still good enough to play at the MLB level, he’s still talent. Again, makes intuitive sense.
The third aspect is financial flexibility, which is essentially the gap between the team’s current financial obligations and its potential spending. This is also a little harder to figure out. One reason for this is that the financial information of teams – both how much they make and what their ultimate budgetary goals are – is relatively obscure. The team’s financial flexibility can improve in one of three ways; by increasing revenue, by decreasing cost, or by a shift in the mentality of ownership. A flexible payroll opens up options for the management, whether that means taking on a new contract, renewing an old one, or covering raises owed to players reaching arbitration.
I envision a concept similar to the triangle used to look at constraints in project management.
Here’s an illustration of the concept.
The present talent is the main factor in determining how likely it is a team will win in a given year, whereas the other two play a bigger role in the team’s ability to improve or sustain the talent level going forward. The future talent is a random but efficient method of improving the team going forward; you may have three good prospects and have one success out of them, but you don’t know which one will succeed until they prove themselves. Financial flexibility is a more immediate method of improving, but at a higher premium. In theory, the strength of an organization’s assets can be determined by looking at the area of the triangle, assuming the weighting of the three branches is correct.
Generally speaking, a team needs to make trade-offs in at least one of these areas in order to improve the others. Signing a free agent reduces financial flexibility, while improving the present talent and often the future talent. Trading a veteran for prospects improves the future talent and financial flexibility, while usually decreasing the current talent. Or, trading prospects for established players is a way to improve current talent at the expense of future talent, often at a lower financial cost that free agents.
The other variable here is time, which can cause a shift in all three categories. The draft is an opportunity every year to add “free” future talent at a minimal impact on financial flexibility. As prospects graduate and young players mature, the current talent improves for only a slow decrease in future talent. A team that wins, particularly if they earn postseason revenue, sees an increase in revenue leading to more financial flexibility. Time can also deteriorate the three elements. Players reach arbitration and the same talent costs more. Veterans age, reducing current talent. Service time is used up, reducing future talent.
A big part of building a competitive team is about balancing these three elements.
The easiest trade-off is financial flexibility for current talent. There are always players to be signed, as long as the team’s budget isn’t maxed out. However, generally speaking, free agents tend to decline in talent throughout the contract, meaning you typically get the most bang for the buck directly after the signing, with the value decreasing over time. It’s often an expensive way of adding talent, but it works in the short term. For that reason, teams usually do best to time their major free agent acquisitions when the talent will make the most difference. A winning team will usually see revenue increases to boost its spending capacity, but a team that uses up its budget too soon will find itself scrambling to cut costs before its revenue streams expand.
From a fan’s perspective, financial flexibility is a bit of a bugaboo. It’s important for a team to maintain enough financial flexibility to further invest when the team’s ready to contend, but until the team reaches that point, it’s hard to tell the difference between a management that chooses not to expend its financial flexibility for strategic reasons and an ownership who chooses not to spend its money because it’s cheap. It’s a particularly tough pill to swallow when an organization has gone through multiple rebuilds and an extended stretch without a postseason appearance, to see an ownership spending well below its perceived capacity on payroll, but staying frugal during the building process greatly improves a team’s agility for making the moves to reach the top level and stay there.
This brings me around the the position the Jays are in right now.
Over the last two years, the Jays have reduced costs and improved financial flexibility. They did so while maintaining, and arguably improving the level of current talent on the field certainly the present talent’s upside is better. And in the process, they radically improved the team’s future talent. He somehow managed to improve all three vertices of the organizational triangle without making trade-offs elsewhere. That’s not easy to do. They have a solid young core, with significant upside on the roster, and a ton of cost-controlled talent. It won’t take any breakout performances for them to reach the mid to high 80’s in wins, just reasonably good health. It’s the type of roster that could easily take a significant step forward with some realistic improvement, especially among young pitchers. It’s a team that’s teetering on the cusp, and one where an investment in free agent talent could conceivably put them in wildcard contention as soon as 2012. They’re at the position where a long term commitment is defensible, but risky. It’s a good position to be in.
It’s also a delicate position. Fans can see enough talent to get excited, but don’t yet have the results to build confidence. Is AA avoiding big ticket free agents because it feels the demands of the available players will limit their flexibility too much for the talent they bring, or simply because they refuse to spend big? Is he waiting to see which players demands drop as the offseason progresses? Does he feel the team’s roster has too much risk to go all-in now? Does he see some potential mid-season trade targets, when there’s less teams in need? Fans get impatient at times like this, but it’s critical that a good GM be able to ignore the criticism and continue on his course he feels puts the Jays in the best position to be a regular contender.
The worst thing a GM can do here is make a move he doesn’t believe is in the best interests of the organization for PR purposes. If that means he or the ownership need to endure criticism, so be it. In the end, the only lasting PR is winning, and the best way to build a sustained winner is to pay attention to all three vertices of the Organizational Triangle.