MAJOR LEAGUE BASEBALL GENERAL MANAGERS: AN ANALYSIS OF THEIR RESPONSIBILITIES, QUALIFICATIONS AND CHARACTERISTICS
18 NINE: A Journal of Baseball History and Culture 74 (Spring 2010) Authors:1 Glenn M. Wong,2 Chris Deubert3
I. Introduction...1
II. Major League Baseball General Managers: A Brief History and GM’s in the 21st Century ...2
A. The Business of Baseball...2
B. The 21st Century: The Job of General Manager in 2009...5
i. Preparation and Meetings ...6
ii. Player Drafts ...9
a. Abbreviated version of Major League Rule (MLR) 4 Draft...9
b. Abbreviated version of Major League Rule (MLR) 5 Draft...13
iii. Dealing With Agents...14
iv. Salary Arbitration ...18
v. Media Responsibilities...20
vi. Crisis Management ...24
vii. International Markets ...26
viii. Contracts ...26
ix. Rules ...31
a. Waivers: MLR 10 ...31
b. Options: MLR 11 ...33
x. Major League Disabled List MLR 2(g) ...36
III. The Changing Qualifications, Demographics and Characteristics of a MLB GM...36
A. Playing Experience...36 B. Coaching Experience...37 C. Education...38 D. Age...39 E. Gender/Race...40 F. Family Ties...41 i. The MacPhails ...42 G. Career Path...43 IV. Conclusion ...47 I. Introduction
The 2008 World Series between the Philadelphia Phillies and Tampa Bay Rays was a study in contrast for the two teams’ front offices. The eventual champion Phillies were led by General Manager (GM) Pat Gillick, who had 45 years of experience in Major League Baseball (MLB) front offices. Gillick, 71, had previously been General Manager of the Toronto Blue Jays, Baltimore Orioles and Seattle Mariners after having broken into the industry in the scouting departments of the Houston Colt .45s and Astros and New York Yankees. The Phillies victory was Gillick’s third World Series title as a GM, having guided the Blue Jays to championships in 1992 and 1993. In his 27 years a GM, Gillick’s teams made the playoffs 11 times.
On the other hand, the Rays GM was 31-year old Andrew Friedman, who was only in his fifth year in MLB. Like Gillick, Friedman played college baseball. However, Friedman never made it to the minor leagues like Gillick. Instead, Friedman, who earned a B.S. in management with a concentration in Finance from Tulane University, worked on Wall Street, first for Bear Stearns then for MidMark Capital. Friedman got into baseball after he had a chance to meet Rays principal owner Stuart Sternberg, a fellow New Yorker who made his fortune on Wall Street.
The two unique paths of Gillick and Friedman exemplify the increasingly divergent paths MLB GMs have taken to their positions. In any case, the obligations of a MLB GM are difficult and wide-ranging. The first part of this article will examine some of the duties of a GM,
including representing the organization at league meetings, preparing for amateur player drafts, negotiating with agents, representing the club during salary arbitration, dealing with the media, managing the club’s payroll, ensuring compliance with MLB rules and the collective bargaining agreement and of course creating and developing the clubs roster.
The second part of the article will examine the characteristics and experiences of MLB GMs including playing experience, coaching experience, education, age, gender, race, family ties and career path. In addition, the article will provide a longitudinal study, showing how these traits have changed over 20 years, comparing GMs from 1989, 1999 and 2009.
II. Major League Baseball General Managers: A Brief History and GM’s in the 21st
Century
A. The Business of Baseball
I was not able to understand how it could be right to pay an actor, or a singer, or an instrumentalist for entertaining the public and wrong to pay a ball player for doing exactly the same thing.4 Albert Spalding
Ever since the days of Albert Goodwill Spalding in the late 19th century, baseball has
been run like a business. Spalding, an owner and prominent businessman, tried to export the game to other countries, realizing a great opportunity to sell his bats and balls to reap tremendous
profits5. Spalding was one of the original pioneers and advocates for professional baseball and
was the first owner to cry in response to increasing salaries: “Professional Baseball is on the wane… Salaries must come down or the interest of the public must be increased in some way. If
to excessive player turnover among ball clubs, the “reserve clause” was enacted, which allowed each team to “reserve” or list five players each year that could not sign with another team. Eventually the reverse list expanded to the entire roster and was a important piece of the way business was done in Major League Baseball (MLB) for almost 100 years.
In 1972, outfielder Curt Flood challenged the reserve system and lost in the Supreme
Court of the United States7, but paved the way for the Messersmith/McNally grievance, which
allowed players to earn rights for free agency. The business of baseball was changed forever and became more complex. Baseball’s reverse clause gave teams a perpetual option, i.e. that at the end of each season the team had the right to exercise their option on the player’s contract for another season at the team’s designated salary. Dave McNally, a pitcher with the Baltimore Orioles, and Andy Messersmith, a pitcher with the Los Angeles Dodgers, chose not to sign the contract exercising their option during the 1975 season. As a result, at the end of the season, arbitrator Peter Seitz ruled that Messersmith and McNally had played out their option years and were now free agents. With the potential for every player in MLB to be a free agent every year, MLB was forced to negotiate a new collective bargaining agreement with the Major League Baseball Players Association (MLBPA). Under the leadership of executive director Marvin Miller, a former negotiator for the United Steelworkers, the players won free agency and salary arbitration, depending on a player’s service time.
Since 1972, baseball has experienced three strikes (1972, 1981 and 1994) and at least one publicly known period of collusion under the helm of Commissioner Peter Ueberroth from
1985-1990.8 In recent history, player salaries have generally benefited from free agency and salary
arbitration: the average player salary increased over 41% from 1976 to 1977, from $52,300 to
$74,000.9 In total, the average salary increased 316% in the 1970s, from $29,303 to $121,900.10
These type of increases are what led owners to collude during the mid 80s, to the point that the
average salary actually decreased from 1986 to 1987.11 On average, salaries have increased at an
average rate of about 17% per year since the advent of salary arbitration. As a result MLB has had a fairly contentious relationship with the MLBPA over issues involving the economics of the game, namely free agency, salary arbitration and revenue sharing.
Prior to Messersmith/McNally, it was common for many GMs to exercise “full control” over the organization, including marketing, sales, public relations, promotions, stadium
his experience as follows: “He was responsible for all aspects of the baseball operation: scouting, the drafts, major league coaching staff, budgeting, dealing with the media, contract negotiations,
arbitration background and preparation, and representing ownership.”12
Today, many GMs have “full control” over these same duties; however, in the past, these responsibilities were handled by one person, while today many organizations assign the day-today aspects of these responsibilities to a few individuals. Lou Gorman, former General
Manager of the Boston Red Sox, recalls his time with the expansion Kansas City Royals in their relatively small front office: “The entire organization when I arrived on the scene was [General Manager Cedric] Tallis, his secretary Peggy Matthews, and another secretary, Irma Reed…That
was the entire organization on my first day in Kansas City.”13
Jon Schuerholz, former GM and current President of Baseball Operations of the Atlanta Braves, commented on his responsibilities when he became GM of the Braves in 1990:
Among modern-day GMs, that (interacting with all departments) is certainly atypical. In the old days, twenty or more years ago, the Haywood Sullivans, the Frank Cashens, the Lee MacPhails, the Al Rosens, there was a lot of crossovers for GMs. Many had, in fact, direct responsibility for all facets of the organization. But by the ’90s, baseball had become so sophisticated, so technically specific in each area, that it became impossible for a GM to manage it all. We’re in that age of specialization.14
The responsibilities of the front office have evolved over time, especially since the 1970s. The sheer number of employees has correspondingly increased across the league. MLB revenues exceeded $6 billion in 2008 and the need for skilled workers in the front office may continue to
follow the trend.15 Depending on an organization’s resources, the total number of front office
employees varies. Nonetheless, each organization strives to employ skilled people who have the ability to exercise “full control” when necessary.
Ultimately, struggles between owners and players, GMs and agents, and the union and the MLB’s Players Relations Committee (PRC) have dictated the business of the game. There is no question that the game has evolved into a much more complex landscape than it was when Mr. Spalding held the reigns. Owners invest hundreds of millions of dollars, if not billions, in teams and players. As a result, owners must constantly wonder if they are receiving the appropriate return on their investment. In today’s information age, salaries and contracts are
GMs has become an extremely complex, stressful, 365 day–a-year career that seems to clearly have its rewards and its drawbacks.
B. The 21st Century: The Job of General Manager in 2009
A General Manager of a MLB team is the ultimate decision maker who usually has the power to assemble a ball club to compete at the major league level. There are many factors that influence how a GM operates within a franchise; those factors dictate how much influence he or she has on managing the team. GMs must be able to identify the team’s needs and provide solutions when applicable. They are responsible for building the team from the resources provided. GMs are constrained by the budgets presented by ownership, as well as the quantity and quality of the employees throughout the organization including scouts, coaches, managers, instructors, player development executives, baseball operations assistants and other various other members of the front office staff. Information is processed by all of the teams’ employees and directed through distinct departments, to the team executives (Scouting Director, Farm Director, and Assistant GM), and eventually to the GM. Sometimes, the onus falls on the GM to make the final decision on many (if not all) issues facing the club; other times, the GM delegates this responsibility to team executives. GMs commonly lean on others within the office for support and advice. John Schuerholz commented on his role as a GM:
I am not the end-all and be-all from beginning to end-the alpha or the omega. I am the conductor of the orchestra who knows when to point his baton to each individual in our organization. On one particular occasion, I’m going to point to the cellist because he knows this situation better. On another occasion, I’m going to point to the drummer to give me something. But I know when and whom to point to for their involvement, for their intuition, for their judgment, for their
recommendation. Who knows pitchers best? Who’s the best judge of infielders? Who judges competitive personalities best? After all, that’s the characterization of the orchestra conductor so that together we play this beautiful music of winning. 16
The GM has to provide the vision, mission and leadership necessary for an organization to operate efficiently. He or she may have to make the ultimate decisions; however, hiring the right people for the other key positions within the organization is as necessary as any decision. Theo Epstein, GM of the Boston Red Sox, comments on his time in San Diego as the Director of Baseball Operations:
At the time the Padres were a very small baseball operation. They only had, really, a handful of full-time people involved in the office. Padres GM Kevin Towers did a great job of surrounding himself with people that complimented him, and each brought a different skill set to the table.17
Like any other business, major league clubs rely on skilled professionals to perform their specific job well. Because there are so many day-to-day responsibilities, GMs have to hire competent individuals and trust their judgment and character. Some GMs may claim that the hiring process is the most important part of the job.
i. Preparation and Meetings
Each organization is unique, and it would be erroneous to claim that all teams conduct their businesses the same way. However, since all teams compete in the same league and for the same purpose (to win a World Series, even though some may even question this), they have similar schedules and time constraints. Almost every organization plans meetings after the major league season and/or instructional league ends for assessment, information gathering, and
evaluating, as well as boosting camaraderie and morale. While some teams may have
all-encompassing organizational meetings, some teams choose to have separate meetings with each department; scouting, player development, major league manager and staff, minor league managers, international scouts and player development. Subsequent to the specific department meetings, the team executives may convene to assess the clubs’ situation and plan for necessary adjustments. Some organizations are reported to find smaller interdepartmental meetings more efficient than an all-encompassing organizational meeting.
Meetings can also provide the GM with a forum to communicate his or her vision for the organization’s future. In the winter of 1990, when Schuerholz was hired as GM for the last place Atlanta Braves, he wanted everyone to know that they had a chance to win, stick out their chests,
and be proud to be Atlanta Braves.18 Communicating his values and ideals to the Braves
organization was paramount for Schuerholz and many other GMs today. Because of the highly competitive nature of the business, it is crucial to implement a business plan, as in any other industry. Much of an organization’s success depends on the GMs ability to clearly articulate his strategy or vision to the rest of the organization. Consequently, strong communication skills are
All-encompassing organizational meetings are rare; however team executives consistently contact directors from each department when necessary. Scheurholz used
organizational meetings as a “[vehicle] to renew our yearly goals and motivate the uniformed staff…with about thirty member our our baseball staff when we gather for the start of each spring training. This presentation sets the tone, creates a working theme for that spring training
and season.”19 Most organizations tend to meet after at the end of the MLB season, while some
organizations plan to meet with many members of their own organization at the Winter Meetings in December.
The Winter Meetings take place each December, typically in a warm climate city even though everyone spends the majority of time in a hotel or convention hall. Two of the largest concerns at the Winter Meetings are preparations for the Rule 5 draft and impending free agency. Largely due to media exposure, the Winter Meetings have evolved from a gathering of owners and GMs having drinks, conducting business and discussing the state of the game to a mega-convention with a job fair, trade show, and awards banquets. The lobbies are often filled with agents, team executives, field managers, reporters, media and job seekers. Teams set up headquarters in suites for negotiations and meetings, while the reporters investigate and stir up rumors to notify fans of possible trades and signings. Each organization is unique, and all
executives have different agendas, but they must all be prepared to discuss the labor market with other teams in order to try to gain an edge on the competition.
Depending on the time of year, each department will need to have meetings to discuss strategies and make decisions. For instance, prior to spring training the player development department must meet with the minor league managers, instructors, and field coordinators to design a plan for the upcoming season. Throughout the season, members of the front office are
continually faced with events that warrant meetings. In an interview with Baseball Prospectus,
Theo Epstein described the typical business cycle for a front office:
In November and December, we’re constantly on the phone with agents, constantly trying to assess the needs and wants of other organizations, constantly brainstorming trades. We’re on the phone with other organizations, agents, figuring out our budget, making moves, setting up for the winter meetings, visiting free agents or players with no-trade clauses occasionally. November and December are very hectic and they’re all about player acquisitions and player transactions…. January is typically a month of contract negotiations and arbitration… February and March move into spring training, and you take the time to get to know your big league staff and get to know
your big league club….In April and May, you prepare for the draft… June and July you’re focused on the needs of your big league team, what you need to do to make the right moves. In the last week of July you’re constantly on the phone with all the clubs, negotiating trades. In August, your attention shifts back to the minor leagues… In August and September, you’re back for the playoff run, and then October comes around and you’re back looking at minor league free agents and the whole cycle of the off-season starts again.20
A GM’s role is constantly is changing, as Theo Epstein described above. Besides
personnel issues, there are meetings, drafts, and a myriad of transactions to keep the front office busy at all times. Like any business, there is a year-long cycle that requires focused attention and constant evaluation. Former Minnesota Twins GM Terry Ryan explained how evaluating players and the organization as a whole is a collaborative process:
It is a combination. I don’t think any club would tell you it was one department or another; it has to be in unison. All groups are in it together and one good thing we have going here is the scouting department has respect for the minor leagues, the minor league department has respect for scouting and the major league respects them both. Consequently, we are all on the same page, which has allowed us to have some success with all of us contributing.21
Every organization must work cohesively within their system and account for who is producing results (players, scouts, managers, front office). J.P. Ricciardi, the GM of the Toronto
Blue Jays, commented in an interview with Baseball Prospectus, that “[t]he most important thing
you can have as a GM is your ability to evaluate. Everyday you evaluate someone, whether it’s the coach, a manager or a player - the players are obviously the most important… you have to
feel confident as far as the decisions you have to make.”22 Additionally, considering the number
of responsibilities GMs, it is important that GMs have an ability to “scout the scouts.” It is impossible for a GM to observe the hundreds or thousands of potential major league players so he must rely on the judgments of the various talent evaluators in the organization. In this vein, it is not uncommon for a GM to trade for prospects that he himself has never seen personally, instead relying on his scouts.
Preparation and meetings play a crucial role in this process and help ensure organizational progression through the season.
ii. Player Drafts
During the business cycle, teams have the opportunity to acquire players in two distinct drafts: the Rule 4 Draft, or First-Year Player Draft, held annually in June and the Rule 5
Selection Meeting held each year in December, usually at the Winter Meetings. It is important to distinguish between the two drafts and discuss the importance and impact on clubs for each draft. a. Abbreviated version of Major League Rule (MLR) 4 Draft23
The Rule 4 First-Year Player draft is the selection process whereby teams select players from high schools and colleges who are residents from the United States (including Puerto Rico) and Canada. The draft shall not exceed fifty rounds, not including supplemental rounds. Major League Clubs are responsible for determining the eligibility of selected players. Clubs may not transfer their draft position to another Club, as in other American professional sports.
The order of priority alters between American League and National League teams (based on whether the year is odd or even). Clubs then select in reverse order of the previous year’s standings.
Once a player is selected, that Club has exclusive negotiation rights with that player for the next year up until seven days (Closed Period) before the next year’s First-Year Player Draft, unless the player is a fifth-year senior and qualifies under MLR 4 Section (F). If a player does not sign prior to the Closed Period following the First-Year Player Draft at which the player was selected, the Club must notify the commissioner’s office at which point the player becomes eligible in that upcoming season’s draft. Also, if a player returns to school in the fall without signing a contract, the player will be subject to selection at the next First-Year Player Draft.
The first Rule 4 Draft took place in 1965. Originally, the draft was implemented to curb signing bonuses because the most affluent teams could purchase the best talent at the college and high school levels. This continues to be a problem today, because agents such as Scott Boras have found loopholes in the rules, which have allowed for player holdouts and resulted in
exorbitant signing bonuses.24 MLB has rewritten and tightened some of the language in the rules;
however, small market teams with priority in the draft have been forced to avoid certain prospects because of signability issues. Nonetheless, the draft system strives to provide opportunities for weaker clubs with awarding them priority in the draft.
The responsibility of selecting players for the Rule 4 Draft mostly falls on the shoulders of the Scouting Director. GMs may have influence over the first few rounds; however, because the GM has likely not had the time to travel and see all of the amateur players, he will most likely defer to the Scouting Director. Regarding his role in the draft, Oakland Athletics GM Billy Beane commented:
We bring all of our scouts in for the draft, and once they come in there is a lot of interaction on certain parts, but my involvement is mainly on the higher round guys. Usually through the first three or four rounds, and once we get deeper in the draft, that’s when you are really relying heavy on your area scouts, and the scouting director will coordinate that a lot as the draft goes along.25 Throughout the year, scouts are evaluating and communicating with high school and college players throughout North America, trying to gauge the potential of each and every player. The draft is a critical process that many teams feel can help sustain long term success. Because of the competitive nature of baseball and the draft, it is imperative to be prepared and have a solid understanding of the available players’ abilities and character or makeup.
As previously discussed, organizational philosophies vary considerably. With respect to the Rule 4 Draft, some teams prefer to draft younger players with more athletic upside out of high school, while some like to mitigate the risk associated with younger players and opt for players with more maturity but perhaps closer to their athletic ceilings from the collegiate ranks. However, there are also some teams that stress the fact that their preference is purely for the best player available at the point of selection. Asked about her preferences regarding high school versus college talent, Assistant GM of the Los Angeles Dodgers Kim Ng replied, “I’d take the
best available, signable player.”26 Describing his preference for selecting high school or college
players, GM of the Cleveland Indians Mark Shapiro said:
One thing with the draft: There is no black and white, only a series of grays. Every study you do is a piece of revisionist history. That said, we do have tendencies, and our tendencies have evolved. Investing huge dollars in high school right-handed pitching as a top draft pick might not be something we’d want to do… Anytime you have the ability to take a 21-year-old instead of an 18 year old, a lot of the mystery is gone and the time frame becomes more predictable—there’s that definite benefit to picking college players in high rounds. But there’s also less romance. You don’t get to daydream as much about what a player could be in four or five years.27
There is no doubt that there is a tradeoff between high school and college talent; however, it is important to understand that each team’s system is unique and currently there is limited evidence to claim that drafting one way or another works better in the long run. While the A’s favor a similar strategy to the Indians, the Atlanta Braves, who have boasted 14 consecutive Division Championships entering the 2006 season are notorious for drafting high school pitchers and developing them into major leaguers. Also, successful franchises, such as the Yankees, have to adjust their strategies because they will likely be choosing players towards the end of rounds. New York Yankees Vice President of Baseball Operations, Marc Newman discussed a study the Yankees conducted regarding draft slots:
We did a study where we looked at 10 year-slices of the draft, to see where players end up based on where they’re drafted. The lion’s share of major league regulars and upper-level players are drafted above the 20th pick—below 20th, 25th it gets more difficult. We made some choices that didn’t work out. We also signed some major league free agents, and that cost us some high picks. The last few years, 2003, ’04, ’05, I think we’ve done better.28
There are a number of factors that affect player development, and certain organizations are better at developing talent than others. That fact notwithstanding, all GMs and scouts should try to select the best players available in the draft that are most likely to succeed in their system while making sure that they have the resources available to sign them. Brian Kohlscheen, a scout for the Atlanta Braves from 1991-2000, said:
We focused on high-ceiling athletic baseball players with good makeup… We felt if we could get the high school kid in particular, into the system, our player development people could take this piece of clay and mold them into the type of player and person to have success on and off the field.29
Drafting philosophies will differ depending on several factors including, but not limited to, an organization’s financial resources, free agent signings (compensation or supplemental picks), player development systems, roster depth, team success, and overall organizational vision.
Once a team selects a player, the challenge of signing the player begins. Many cases are settled because both sides understand and recognize the term “slot money”, a term that MLB uses to describe pre-arranged bonus figures for every single drafted player. For instance if the
60th pick signed for $600,000 and the 62nd pick signed for $580,000, then the 61st slot should get somewhere in between those two values, i.e. around $590,000. Other sports rookie compensation systems work similarly. However, because of the varying degree of club resources, the presence of agents, and asymmetric information, “slotting” does not always occur efficiently. Players can
use “slot money” as a bargaining chip to ward off certain teams. In Scouts Honor, author Bill
Shanks describes how Jeff Francoeur wrote to teams notifying them he was going to cost a
considerable amount above “slot money” if he was chosen prior to the 23rd pick (Braves position)
because he wanted to be a Brave or attend Clemson on a football scholarship.30 In most cases, if
a scouting director wants to pay above “slot money” he must get approval from the GM and owner, and then present his reasoning to a representative from the commissioner’s office, which
will most likely discourage overspending.31 The struggle between player and scouting director is
more of a reflection of his agent (ultimately the MLBPA), and the Commissioner (ultimately MLB). This struggle is clearly displayed in numerous cases involving Scott Boras’ clients, where many talented individuals are avoided early in the draft. In 1997, J.D. Drew, a Boras client, was selected with the second overall pick by the Philadelphia Phillies. “Boras and Drew asked for a contract package that totaled $11 million, a number that Philadelphia staunchly refused to
consider.”32 As a result, Drew re-entered the draft in 1998. The Phillies had the first pick in the
draft and therefore could have drafted Drew again. The Phillies instead drafted Pat Burrell, who was not a Boras client. Many have speculated that Burrell, while an extremely talented college athlete was a slightly less talented and less expensive signing, i.e. that Burrell was in fact “more
signable.” The Phillies signed Burrell to a five year deal totaling $8 million.33 Drew was selected
5th overall that same draft by the St. Louis Cardinals, who signed Drew to a deal worth
approximately $8.5 million over 4 years.34
In recent years, Boras has arguably caused teams to pass on drafting Boras clients due to contract and signing bonus demands. In 2007, Rick Porcello, arguably the best high school
pitching talent available in the draft, dropped all the way to the Detroit Tigers, picking 27th, due
to contract demands. Eventually, Porcello signed a four year guaranteed contract worth $7
million, the highest ever given to a player drafted out of high school.35
However, there is another opportunity for teams to select players much more inexpensively and under extremely different circumstances in the Rule 5 Draft.
b. Abbreviated version of Major League Rule (MLR) 5 Draft36
Major League Clubs may claim contracts of players who are on Minor League Reserve Lists (MLR 2) and who are subject to selection as set forth in MLR 5. There are three phases of the Rule 5 draft: 1) Major League phase 2) Class AAA phase, and 3) Class AA Phase. Players selected in this draft must be placed in one of the three phases in which the player was selected. With respect to Reserve Lists, only players from a lower classification are eligible for selection. For example, a Class AAA player will be selected and added to the Major League Reserve Lists and a Class AA player can be placed on either the Major League Reserve List or AAA Reserve List.
The team selection process is similar to Rule 4, which states that American League and National League teams alter priority for selection in odd and even years, respectively. Also, teams have priority based on the previous year’s standings. If a team does not exercise its right of selection when called, the team no longer participates in the draft.
To be eligible for selection in the Rule 5 draft players must be on the Minor League
Reserve Lists, but not protected on the Major League 40-Man Roster and are entering their 4th
Rule 5 draft if they were 19 or older on the June 5th preceding the signing of their original
contract. Players are also eligible if they are entering their 5th Rule 5 draft if they were 18 or
younger on the June 5th preceding the signing of their original contract. Therefore, teams must
leave or make room on their 40-man rosters if they want to select players in this draft. Teams must submit their 40-man rosters in late November.
Teams who select players in the Rule 5 draft must pay $50,000 to the team from whom they are taking the player and must keep the player in the major leagues (25 man roster) for the entire season or offer the player back to his former team for half of the $50,000 selection price. Teams can select players for $12,000 and $4,000 at the AAA and AA phases, respectively.
The Rule 5 draft was enacted to prevent teams from stockpiling talent in their minor league systems. For example, in today’s game, it gives a first baseman in the Cardinals system (behind Albert Pujols) or a second baseman in the Red Sox system (behind Dustin Pedroia), a chance to be selected by other teams who could use their services.
Teams that chose not to select any players focus on making sure that their best potential Rule 5 prospects are protected on the 40 Man Roster. Alternatively, a team that selects a player must think he can contribute immediately at the major league level. Usually, 10-15 players are
selected during the Rule 5 Draft. Many teams ignore the potential for drafting a player because they do not want to take on the risk associated with keeping a player in the major leagues for an entire season. Teams prepare prior to the Rule 5 draft by meeting with their professional scouts, farm directors and GMs. Dean Taylor, Assistant General Manager of the Kansas City Royals, commented on the Rule 5 draft:
Early in the year, we alert our pro scouts to those players that will be eligible for the Rule 5 draft so we can gather scouting judgements of them during the minor league seasons. After the 40-man rosters are determined on November 20, we prioritize all of the players we like that are left unprotected and then make final decisions at the Winter Meetings on the player(s) we want to draft. If we have a high pick in the Rule 5 and don’t have a player we want to draft, we will consider requests from other clubs who want us to draft a player for them in exchange for another player from their organization who we feel can help us in the future.37
Many teams have had success with adding a Rule 5 selection. For example, in December 2006 the Cincinnati Reds chose Josh Hamilton with a Rule 5 pick, via the Chicago Cubs.
Hamilton, the #1 overall pick by the Tampa Bay Devil Rays in 1999 had struggled through the minor leagues, largely due to a recurring drug problem. Nevertheless, Hamilton appeared to have turned a corner and in 2007 hit .292 with 19 home runs in only 90 games for the Reds. After 2007, Hamilton was traded to the Texas Rangers, where he proceeded to have a breakout 2008 campaign, batting .304 with 32 home runs and 130 RBI. Other recent examples include Dan Uggla, selected by Florida in 2005 from Arizona, and Joakim Soria, selected by Kansas City in 2006 from San Diego. Uggla is now a two time All-Star (2006, 2008), making it in his Rule 5 season, and Soria made the AL All-Star team in 2008, his second with the Royals.
The most well-known example of a Rule 5 selection may be Roberto Clemente, who was selected by the Pirates in 1954 from the Brooklyn Dodgers. Ultimately, the Rule 5 Draft offers teams the ability to take a chance on a player who can end up paying huge dividends for minimal financial costs. Therefore, more small market teams may find it in their best interest to focus more time and preparation towards to the Rule 5 Draft.
iii. Dealing With Agents
the ability to test the open market and owners essentially had the power to pay for major league talent each and every year. However, it was the agents who predominantly helped facilitate the salary increase. Agents often feel pressure to obtain the highest value contract for his player, to gain respect from the MLBPA and also to appease his client, who may be being solicited from other agents who claim they can do a better job. Pioneer agents, such as Jeremy Kapstein (then known as Jerry), were disliked by many owners and GMs because they did not care for the shrewd statistical analysis and tough negotiating tactics used by the agents during salary
arbitration and free agency negotiations.38 During the first few years of free agency in the late
1970s, several agents gathered up and helped many players sign as lucrative deals as possible.39
Therefore, many GMs were discouraged to deal with agents. On Kapstein, Cincinnati Reds GM Dick Wagner recalled that “[h]e almost hypnotized his players.” In fact, Wagner actually got rid
of some of Kapstein’s clients on the Reds just to get rid of Kapstein.40
However, today there is certainly a varying degree of appreciation and comfort between GMs and agents. For instance, Mark Shapiro, whose father was a prominent agent, believes that because clubs and agents both want what’s best for a player, there’s no reason to not find
common ground.41 On the other hand, many more experienced executives like Jon Schuerholz,
who have been around the business from the time of the reserve clause, feel otherwise.
According to Jerry Crasnick, author of License to Deal, Schuerholz has two main objections to
agents: one, he feels that they drive a wedge between players and teams as a buffer to communication. If the team has a message for a player, management has to communicate through the agent and vice versa. Two: Schuerholz also feels that agents reap excessive commissions on negotiated contracts. Schuerholz believes that with systems like salary
arbitration and free agency in place, agents do not necessarily have to do much to earn the 3-5%
commission.42
Today, hundreds of agents flood the markets in competition for the best talent available. Though almost every major league player has an agent, it is important to understand that the agent market is a diverse landscape full of lawyers, MBAs, and businessmen and women with an enormous variance of resources. Therefore, GMs and front office executives have to deal with a myriad of personalities on a daily basis. Crasnick observes:
“By my latest count there are about 410 agents certified by the Players Association, which means there has been a substantial increase in recent years. I find that surprising. Given the prominence
of groups such as Scott Boras' agency, SFX, Octagon and IMG, you'd think the small proprietor would be getting squeezed out rather than proliferating.”43
In most daily situations, assistant GMs deal with agents; however, according to many people in the industry, the participants in the team-agent relationship all depend on the player, and thus the agent. Certain GMs have better relationships with agents than others. Houston Astros’ President of Baseball Operations Tal Smith commented “today, the relationships are much different; they’re not as adversarial. There are exceptions where an agent doesn’t get along with club personnel and visa versa, but for the most part it’s not as adversarial as it was in the early days.”44
Nonetheless, dealing with agents is necessary in this business and it is important for GMs to be prepared for negotiating with agents of all different styles. Former Dodgers’ GM Fred Claire mentions the importance of the club and agent relationship:
When I think about my experience dealing with agents…there are several key thoughts that come to mind. I always viewed both the team and the agent as part of the player’s support team. This isn’t an easy goal in that the general manager and agent are on different sides of the table in contract negotiations but it still should be the primary objective. After all, the idea in a contract negotiation is to work out a deal that benefits both the player and the team. And when a player encounters problems or health issues, the team and agent clearly should be working together.45
A distributive negotiation refers to one in which the parties compete over the distribution of a fixed sum of value. The key question in a distributed negotiation is “who will claim the most
value?” In distributive negotiations, a gain by one side is made at the expense of the other.46
Negotiations over MLB contracts are exactly this type of negotiations.
Conversation between team and agent can often times be very informal, however some agents are very formal with negotiations. The key is to always be focused on the fundamentals of the negotiation and to remember the ultimate goal. How well a team and agent can communicate will dictate the negotiations and typically a healthy relationship between the two sides leads to a quicker and more productive negotiation.
Long-time baseball agent Randy Hendricks discussed what agents look for when
To calculate the dollar value of a player, the agent must factor in the specific talents of the player, the availability in the marketplace of players with similar skills, the unique makeup of the player, and the demand for such a player by major league teams.47
Hendricks also discussed a number of factors (health, peak market value, physical condition) that influence the valuation of a player’s worth. Therefore, it is important to
understand that a player salary is a function of numerous factors which are independent of the players’ previous history and ability. Agents and GMs must try to forecast what a player will be worth to the ball club down the line.
Both the agent and the GM are involved in a distributive negotiation. Each side will do whatever it takes to move towards their optimal value. Agents continually try to “push” the salary as high as and for as long a term as possible to protect their client’s future. Likewise, a GM needs to “pull” the salary as far down as possible and sometimes for shorter terms to protect their investment. The “push and pull” that agents and GMs face in each and every negotiation reflects a much larger picture that involves MLB and the MLBPA. Player salaries are dictated by the market, and the Labor Relations Department (LRD) of MLB and the MLBPA try to control the market by advising teams and agents during negotiations.
During spring training in 1987, Roger Clemens, with support from his agent, Randy Hendricks, held out of Boston Red Sox camp in hopes of receiving a larger salary. During the holdout, Boston Globe reporter Dan Shaughnessy quoted Hendricks:
It’s becoming clear to me that the Boston Red Sox are not negotiating. It’s Park Avenue (MLB) and New York City (PRC) negotiating. They (Red Sox) are always huddling to call us back after a day or two. We have reliable information from a number of sources that the idea is to hold Roger Clemens’ salary down as a means of holding down all young players’ salaries for the next couple of years. What is disturbing is that the Boston Red Sox are not negotiating on their own. They are negotiating as a pawn of an industry-wide policy. And the people who’ll suffer are the Boston Red Sox, their fans and Roger Clemens.48
This holdout occurred during the same time that MLB owners were found to be in collusion; however, it is possible that the LRD and MLBPA continue to exercise some control
over the markets in order to control costs or, in contrast, elevate salaries.49 Regardless of whether
or not the LRD or MLBPA aid in a negotiation, each and every contract signed has an effect on other players’ salaries. As players sign newer and more lucrative contracts, those contracts serve
as benchmarks for future negotiations at the same position. The “big picture” involving the LRD and MLBPA is also evident in such examples as salary arbitration.
iv. Salary Arbitration
A means of alternative dispute resolution, salary arbitration is a procedure designed to give players who have accumulated a certain number of service days an opportunity to have their salaries set by a neutral third party. Service days are accumulated by being on the major league team’s 25-man roster. Established in 1973, salary arbitration has contributed tremendously to the
sharp rise in MLB salaries.50 One of the pioneers in the arbitration process, Tal Smith, said on the
subject, “some people embraced it and other didn’t understand it…a lot of the problem is that
Clubs are responsible for the actions of others, whether deemed appropriate or not.”51 In order to
qualify for salary arbitration, a player must have accrued at least three but less than six years of service time, or be labeled a “Super Two”, which means that the player has accumulated at least 86 days of service during the immediately preceding season and ranks in the top 17% of the
players in MLB with at least two years, but less than three years of service time.52
In MLB, arbitrators use a final offer or last-best-offer system, which means that the arbitrator must choose one of the figures proposed by either side. The arbitrator cannot split the difference as he can in NHL salary arbitration cases. For instance, if a player proposes a $2 million salary and the team proposes $1 million, the arbitrator has to decide if the player is worth more or less than the midpoint of $1.5 million and award either the $2 million or $1 million figure accordingly. Each year, players and clubs exchange salary arbitration figures in January and then have until February, when the hearings are scheduled, to settle and come to agreement. Arbitrators can base their decision only on the following criteria listed in Article VI, Section F(12) of the Collective Bargaining Agreement:
1. Player’s contribution to his Club during the past season (including but not limited to his overall performance, special qualities of leadership and public appeal)
2. Length and consistency of his career contributions 3. Record of the Player’s past compensation
4. Comparative baseball salaries
5. The existence of any physical and mental defects on the part of the Player
Arbitrators must not consider any other factors than those listed above when deciding on a player’s value during salary arbitration. Even though the following information may aid either party’s case, neither party may is permitted consider the following:
• Financial position of the Player and the Club,
• Press comments, testimonials or similar material bearing on the performance of either the Player or the Club,
• Offers made by either Player or Club prior to arbitration,
• The costs to the parties of their representatives, attorneys, etc.,
• Salaries in other sports or occupations.
Most players who are eligible for salary arbitration do not end up going to arbitration. The majority of cases are settled, largely due to the last-best-offer system and because the arbitration process can be detrimental to both the short-term and long-term relationship between club and player. In almost every arbitration case, the player sits in a room with his agent,
Michael Weiner of the MLBPA, the team’s representatives, Frank Coonelley of the LRD, and
the arbitrator.53 The team must present a case to show why the player is not worth the “asking”
price. Thus, the experience could certainly be damaging to a player’s ego and cause resentment towards management. For this reason GMs must be careful about participating in the salary arbitration process. On the other hand, if the player wins the case, the team may be disinterested in renewing his contract in the following year because they will most likely again have to increase the player’s salary. Because of the final-offer structure of choosing one of the two figures (team or player), and negative implications on relationships, most salary arbitration cases are settled prior to the hearings.
Regardless of whether or not a case is filed and heard by an arbitrator, it is imperative for both sides to prepare the case for the player. Noted Tal Smith, “I just [had] a sense of what’s important in establishing a player’s value and tried to present it in a well-organized, orderly
fashion to an arbitrator.”54 Depending on the organization, preparation is done in-house or
through outside counsel. It has been estimated by several sources that about half of MLB teams contract with outside counsel for presentations during the hearings. However, most teams prepare the information for the cases themselves, and then deliver the content to the outside counsel who will then present it to the arbitrator. Others teams may let the outside counsel handle all aspects of the process, while some may handle everything internally. Kim Ng,
Assistant GM of the Los Angeles Dodgers, discussed her role with salary arbitration and hiring
outside practitioners in an interview with Baseball Prospectus:
The White Sox do arbitration cases in house, while the Yankees had an outside practitioner come to handles cases. The Yankees had to take a different approach than most teams, since they had such tremendous post-season success. That definitely factors into cases-it’s a huge factor. Playing in the post-season in New York is the ultimate stage, and players tend to do well in arbitration if they succeed on that stage.55
Like teams, certain agents who lack the expertise and experience to handle salary
arbitration provide outside consultants for their players during salary arbitration.56 The arbitration
process requires a combination of a strong analytical ability and knowledge of statistics, and not all agents possess these skills.
When a player wins an arbitration case, another salary benchmark may have been set for in the player market. Clubs have dialogue with the MLB LRD about appropriate player values. However, it is ultimately the organization’s decision and responsibility to determine the best salary for its players. The bottom line for GMs is that you must be prepared for salary arbitration and determine what may be the best course of action based on the player, resources, time and expertise.
v. Media Responsibilities
For the first half century of professional baseball, games could only be watched live at the stadium. However, in the late 1930’s teams began to comprehend the importance and power of the radio. Before this time, MLB clubs relied heavily on gate receipts, and they felt that the radio would allow fans to gain access to games for free and devalue the stadium experience. However, while leading the Brooklyn Dodgers’ front office, Larry MacPhail pioneered the movement to broadcast live games on the radio. Soon after the Dodgers negotiated radio broadcasting deals, the first of which was $1,000 for each game, all 16 MLB teams adopted the
strategy.57 There was a debate as to whether or not fans would be interested in following their
team on the radio and at the park, or would instead elect to sit back, listen and no longer attend the games. Based on the popularity of sports today, it is clearly evident that the former ensued. Today, the media is a diverse landscape that primarily covers radio, television, and the
internet. Revenue streams from each of the three properties have fueled the growth of each of the major sport leagues tremendously. Fans, athletes, and reporters want instant access to all the news and information involving their teams and leagues. Because of the demand for this information, and its importance in the foundation of professional sports, athletes, managers, coaches, owners, and members of the front office have a responsibility to deal with the media on a regular basis. For many, this can be a difficult task.
Typically, the GM will have to field daily questions from beat reporters who cover the team all year in the papers, on-line and on the radio. Since the beat writers need information immediately and have the ability to establish a relationship with members of the front office, they generally speak directly to the GM. However, if there is breaking news, an update or
message for national news, the Director of Media Relations is responsible for setting up plans for an announcement. When discussing his role with the media, Jon Schuerholz said:
I have a responsibility, as the principal spokesman for the organization, to interact with the media every day. And they can color the opinions of fans and our sponsors and our supporters and our potential season ticket holders in ways that can reflect badly or well on us. Quite often, its is the former.58
Kim Ng responded to a question about how the media’s increasing role has changed a GM’s job:
It’s become such a huge part of being a GM. The electronic age, the information that is out there has grown exponentially in the last 10 years. The relationship you have with the media is important to any organization, and you can run into problems if you don’t maintain a good one… You have to be open and up-front. But if the information you have, if sharing it has a chance of hurting your deal, you’d not want it to get out.59
Ng describes the fine line that many GMs and front office members must observe when they are discussing certain topic such as negotiations, roster management, player’s health and off-the-field issues. Dealing with the media is a daily challenge with which every GM has to deal. Nonetheless, agents and front office members can use the media as a negotiation tactic.
The media can be used as a forum for either side to announce their initial offer and establish an anchor for further negotiation. Also, players or agents may try to gain the favor of
the media, fans and team by making statements about loyalty, fairness, respect, career, and family to the media.
The media is a powerful tool that both sides may be able use to benefit their negotiations. However, there are many cases where careless use of the media can result in terrible
consequences. Agents posture to the media to drive up the value of their contracts. Boras has reportedly used this tactic recently to his benefit, but also to his detriment. In 2008, in
negotiations for his client Mark Teixeira, Boras reportedly leaked offers from the Red Sox, Nationals, and Orioles to the media in order to set the market for his player. This allowed the New York Yankees to evaluate what they would have to offer to attain his services and make their late, winning bid. However, that same offseason, Boras seemingly tried to fabricate a market for another client, Manny Ramirez. Boras floated several teams like the San Francisco Giants as being interested in Ramirez to gain leverage in negotiations with the Los Angeles Dodgers. When these teams denied the reports that they were interested, Boras lost a lot of his
power because the Dodgers were essentially competing against themselves.60
The Boston Red Sox learned their lesson on public posturing and revealing too much information when a proposed trade for Alex Rodriguez, then of Texas Rangers, fell through in December 2003. The Red Sox proposed a trade with the Rangers and Rodriguez which called for his contract to be restructured substantially. In response to the proposed salary reduction, the MLBPA rejected the trade, and when the Red Sox tried to engage in discussions with the Rangers to resurrect the deal, Red Sox President Larry Lucchino produced this diatribe against the MLBPA veto:
It is a sad day when the Players’ Association thwarts the will of its members. The Players
Association asserts that it supports individual negotiations, freedom of choice and player mobility. However, in this high-profile instance, their action contradicts this and is contrary to the desires of the player.61
Lucchino’s comments only made the situation worse for the Red Sox and the trade was not successful. Prior to the 2004 season, GM Theo Epstein acknowledged in an interview with
Baseball Prospectus that the Boston Red Sox organization was too open in discussion with the
manage in order to be successful. For some, it may cost them appeal, notoriety or even a promotion. Lou Gorman commented on handling the intense scrutiny of the Boston media:
If you are a chief executive, the general manager or manager of the Red Sox, or any sports enterprise professional or collegiate, you had better learn to live with the media and their coverage in all its forms, for better or for worse. It comes with the territory. The lesson to be learned, however, is simply that the media should never, ever influence management decisions.63
Media scrutiny differs from city to city; however, all GMs are faced with having to field questions regarding the status of their club, their players and their direction moving forward. Therefore, it is imperative to be prepared to deal with the media and understand what
information is proprietary and what information can be revealed. vi. Crisis Management
As a leader of any organization, a GM must be able to adapt to unexpected situations on a daily basis. If a starting closer goes down with an elbow injury or a young prospect is arrested for driving while under the influence, the GM must respond immediately and manage the crisis
at hand. In Built to Win, Jon Schuerholz devotes an entire chapter to his experiences dealing with
crisis management, outlining the John Rocker scandal and Rafael Furcal DUI arrest. GMs must be ready to assess the circumstances of a particular situation and decide the best course of action for the individual and the club. Each organization has a different protocol when dealing with crisis situations; however, almost all teams understand the need to address the situation instantly in order to avoid confusion and delay the inevitable consequences. For example, with cases involving off-field actions, the Red Sox baseball operations department will most likely consult with ownership, discuss the issue at hand, and decide if there is a need to investigate the case further. On the other hand, the Indians staff would not have to include ownership in the decision process in a similar situation and would instead wait until the legal process has run its course before taking further action. John Schuerholz explains how he has dealt with unexpected events as a “crisis management leader”:
First, by displaying strength and confidence in our ability to confront these circumstances in a calm and confident fashion – void of displayed panic no matter how damaging the situation. Next, by communicating to our involved staff in a clear, precise, and confident manner how we will confront the issue and work to repair it.64
GMs must notify the media when appropriate, and, if applicable, try to be supportive of the player(s) involved while restoring order to the ball club. Nonetheless, at times, certain team cancers must be traded or released. For example, the Braves knew the team would be better off without the services of John Rocker after he made numerous offensive comments in a 2000
Sports Illustrated article. In this day and age, many GMs have to ask themselves if they would be better off with or without certain players found guilty of breaking the league’s performance enhancing drug policy. This is an area worthy of careful consideration, and organizations will continue to address this problem until the game is relatively clean and free of performance enhancing drugs.
With regard to on-the-field issues, GMs must constantly communicate with club managers and discuss the best remedy for roster changes. Roster depth at the major league and minor league levels provide GMs with a cushion when minor player injuries occur. Nonetheless, it is inevitable that GMs will be faced with long-term injuries that will require them to make trades or decide to extend minor league call-ups from within the organization. These unexpected situations can create stress for the leaders of any ball club, and it is imperative to understand the magnitude of the crisis so the GM can take the appropriate action.
Each GM will have a different style of handling situations, but the first step for all GMs when facing a crisis situation is to identify how the situation affects the club and act accordingly in the most efficient manner possible to avoid exacerbating the crisis at hand.
vii. International Markets
Baseball has become a global game, and as interest continues to spread into new areas, international markets are becoming satiated with inexpensive talent. The competitive nature of the business of baseball drives organizations to scout, sign and develop players in the most efficient and cheapest way possible; for this reason, major league organizations have established academies and leagues in South American countries such as the Dominican Republic and
Venezuela in order to help facilitate the process of procuring young international talent. Players from these countries have traditionally not had the resources or knowledge to negotiate free agent contracts above the minimums offered, and teams have taken advantage of this situation by executing a Branch Rickey philosophy in getting “quality out of quantity.” Over the years,
“buscones”, coach/agent/mentor type figures, have acted like agents for Latin players by
providing these young men with an opportunity to play organized baseball.65 However, players
now have less playing experience and are often taken advantage of and surrender larger portions
of their signing bonuses to the unregulated buscones than they would to traditional agents.66
MLB teams must deal with buscones and other controversial environmental conflicts when scouting and developing players in international markets. The situation in many academies in Latin America presents a double-edged sword whereby organizations benefit from acquiring the players but at the same time may become party to ethical and moral failings. Some MLB teams offer to educate Latin American players in the off-season or once they have completed their careers with the organization. However, there is a question of how much social
responsibility MLB should exhibit when employing and benefiting from the academies in Latin America.
In an article regarding the potential downfalls to MLB’s involvement in Latin America, Al Avila, Assistant General Manager of the Detroit Tigers, talked about the good that MLB can do for Dominican teens:
Baseball is the best way out of poverty for most of these kids and their families. They see on television and read in the newspapers how many of their countrymen have made it. For parents that have kids, they have them playing early on. The numbers show that the dream is within reach. And even if they don’t make it, these Dominican academies house, feed, and educate these kids in English. They become acclimated to a new culture, which is always positive. At the very least, even if they don’t make it as a player, they could get different doors open, like becoming a coach.67
MLB organizations understand the impact and necessity of the international market. It provides a high risk and high reward relationship because of the investment of time and money. Competition among clubs, the draft system, and economics have forced many clubs to search outside of the professional free agent market and instead in emerging international markets. The main focus of international scouting has traditionally been in Latin American countries like the Dominican Republic, Panama, and Venezuela. Asia is another area where teams have searched for talent, and after Japan’s victory in the inaugural 2006 World Baseball Classic and repeat victory in 2009, it is possible that more teams will focus on talent in Japan (more expensive due to laws), South Korea and perhaps China. In fact, in 2003, MLB signed a deal with the China
Baseball Association to allow Major League teams to scout and draft players as well as build
academies and teach the game of baseball to the Chinese.68 New markets may continue to open in
untapped areas like Africa and Europe. The Netherlands proved that talent exists outside of the traditional foreign markets with their unexpected success in the 2009 WBC.
Every MLB organization had international scouting and player development employees; however, each team does not invest their resources equally. Mark Shapiro comments on the changing Latin American markets from a place where quantity could be found to a place where efficiency is key:
I think that was true years ago and everyone reacted to that by throwing money down there and it has become more competitive by money on top of that money and the signing bonuses escalated as well as the cost of doing business down there escalated, then it became less and less efficient. We’re getting to the point now where I’m not sure if it is an efficiency any more. You might have more efficiency in the draft than you do in Latin America at this point.69
Obviously, international markets are extremely important for organizations and can provide a sustainable competitive advantage if operated efficiently and successfully. Many executives have stressed the value and importance of these areas, but it is clear that some teams have a greater interest in some areas than others.
viii. Contracts
Since the 1976 Collective Bargaining Agreement was struck, baseball salaries have skyrocketed. The advent of free agency and salary arbitration led to the emergence of the agency business and lucrative contracts throughout all professional sports. GM and player relations have evolved since the days of the reserve clause and today are vital to establishing the foundation for each organization.
Negotiating player contracts is a major responsibility primarily handled by the GM. Each team has to work within the budget allocated by ownership in the most effective way possible. Some teams have the financial flexibility to entertain offers in the free agent market, while others have to rely on younger, less expensive players to fill out the roster. Regardless of team payrolls, each team has to determine when it is in the best interests of the club to sign a player to a long-term deal. Players are commonly secured with long-long-term deals in the free agent market, however,
deciding whether or not to invest in a player over the long-term, GMs must account for a myriad of factors that will influence the value and length of the deal. A list of the common themes that GMs consider when offering long term deals include: character, health, projectability, age, position, makeup, market conditions, team budgets, and consistency of play. Some GMs may value character and makeup more than other attributes, but a common theme is the ability to consistently produce on the field.
Usually, GMs battle with agents on terms of the contract because when a team signs a free agent to a long-term deal, that team is taking on more risk, since there is always the chance that a player may be permanently injured early on in the deal. There is a constant tradeoff associated with long-term deals where the player and team have to balance money and years. Typically, longer contracts result in lower annual salaries.
It is important to note how MLB long-term contracts differ from those in the other major American sports leagues: the National Football League (NFL), National Basketball Association (NBA) and the National Hockey League (NHL). Almost all MLB contracts are fully guaranteed and the amounts and lengths of deals are constantly growing as owners and GMs feel pressure in a competitive marketplace for players’ services. On the other hand, the NBA and NHL CBAs have specific provisions which set a maximum annual contract value and a maximum contract length. The NFL CBA does not specifically limit veteran contract lengths, nor establish
maximum salaries, yet its salary cap rules make many of the larger contracts in MLB impractical or impossible in the NFL. In addition, base salaries in the NFL are not guaranteed as they
generally are in MLB, the NHL and the NBA. Instead, NFL players receive lesser guarantees mainly through the use of bonuses. Likewise, signing bonuses have become increasingly popular and important in MLB contracts, especially for recently drafted players, who want as much money upfront as possible.
When describing how the Blue Jays decide whether or not to offer a long-term deal through a player’s arbitration years, J.P. Ricciardi said
The number one thing for us is cost certainty. We’ll try to do this with players we like, at numbers that are going to fit for us. The arbitration process starts rewarding people quickly, and it
sometimes rewards more for time in the big leagues than for ability… If these guys (in regards to Eric Hinske and Vernon Wells) go out and have career years, that becomes a steal for us. If they
have years they’ve had this year (2004), we’re still saving money—we believe they’re going to be able to produce.70
Signing a player through his arbitration years does not necessarily save money in the long-run. However, securing a young talented player through arbitration years can benefit the club and the player. The player, having earned his first major pay day, will more likely be
comfortable and relaxed, have less stress, will not be thinking about money, and ultimately might have a better mental approach to the game.
Negotiating contracts has to be done on a case-by–case basis, but many teams generally try to get a discount on long-term deal with pitchers. In general, pitchers are more likely to be injured or require surgery than position players and thus carry more risk when considered for a long-term deal. According to Shapiro:
It’s a significant challenge for us in the market that we operate within because our threshold for risk has to be so much more finite than a large market team. We have to be so much more careful and cognizant of what an injury on a large contract or a drop in performance will do to our ability to sustain a championship caliber team.
Like any market for any good or service, discounted prices are based on market
conditions. The labor market for major league baseball players acts similar to other commodity markets. Most GMs seek to uncover inefficiencies in the market and strive to acquire players at a relatively low price and trade or release players when they become overvalued. As discussed previously, because of the rules established in the collective bargaining agreement that guarantee player contracts, GMs must be careful when purchasing player services over the long-run. The price for a player is a function of several factors. Player production (measured by statistics), team success, health, age, uniqueness and market conditions are some of the factors which influence the player’s price. Basic economics of supply and demand dictate market conditions. An
example that illustrates how player behavior responds to the labor market occurred during spring training in 2006 when recently acquired Nationals infielder Alfonso Soriano refused to play the outfield. Personally, Soriano may not have felt comfortable making the adjustment in the outfield; however, financially, Soriano knew that his production at second base is worth more than his production as an outfielder, where there are more players whose hitting and running
