For example, baseball. They have stats for every damn thing you can think of. What if management started offering contracts based on those stats?
Example: Joe Blow is a hot shot first baseman. He comes up for renewal and wants 20 million clams over the next 4 years. Management hits him with a contract along these lines:
Guaranteed 10% payment. He gets 500k per year, come hell or high water.
The other 90% he has to earn. For example, his batting average is .276 and his on-base average is .310. If he meets or exceeds those numbers, he gets another 10%. His fielding average is .981; another 10% for meeting that. He commits an average of 5 errors a year; if he does NOT exceed that, another 10%. And so forth and so on.
And the numbers are revised each season to reflect the average of the preceeding three seasons. Allowances made for injuries, etc. Apart from having the union howl like dogs, what’s wrong with this concept?
The unions would never have to worry about it because the other teams would simply out bid that crappy offer. Players get paid what the market will bear. The only way something like that happens is if there were collusion between all the teams and then the union would howl and Congress would yank it’s anti-trust exemption.
It also makes everything that happens on the field into a mercenary matter. You would distort the cost/benefit ratio of nearly every coaching decision in the game. You distort the choices players make.
Think WRs bitch about not getting the ball thrown at them enough? Wait until every catch is worth ten grand.
Think a batter is going to like taking strikes so somebody else can steal bases (and get paid for each one)?
Aren’t most pro atheletes already dripping with performance bonuses? I know it’s prominent in the NFL, but I seem to recall hearing about it in the NHL as well, at least. I am wrong about that?
Or is the OP talking the entire salary being performance based? What about “locker room” players and veterans that are kept on (or even brought in) to help with the morale and mentoring of younger players? Shouldn’t off-field performance with the team have some value, too?
It’s common but it usually only amounts to a small fraction of the deal. Rarely have I heard of performance bonuses accounting for even 25% of a contracts value. Even still, it’s not even close to “most” who have such clauses of any kind.
His example implied that 90% of the deal would be performance based. So yeah, a much different situation that exists now. It’s pretty clear that the negatives outweigh the positives in that scenario, even if it were remotely plausible.
It could conceivably work in baseball, since individual success is rarely (if ever) any different from team success (no such thing as a selfish double, and you could structure things like stolen base incentives so that the ratio of success to failure is what matters). I can’t think of any other sport, however, in which this could be a good idea for teams. There are just so many ways that players contribute to team success that don’t show in the box score, but which a player could sacrifice for a more tangible, but less efficient, contribution.
I suppose it’s possible for improved stats to make the OP’s idea *less *impractical, but even then I think it’s a big longshot. (See this excellent Michael Lewis article on Shane Battier and the Houston Rockets’ front office to get an idea of what I mean.)
Well, even if we assume that some sort of performance-based contract would get off the ground, it would have to be VERY different from the scenario you outline here.
I know you were just throwing numbers out as examples, but your figures give an opportunity to show how these things would need to be thought through. For example, while defense is an important factor in baseball, overall defense is so good that a few extra points, of a couple of errors (more or less) on an individual’s performance is definitely NOT worth 10% of a contract.
Most players, especially the sort who attract 8-figure salaries on the free agent market, contribute far, far more to a team with offense than they do with defense (obviously i’m talking about position players here, not pitchers). Look at Florida shortstop Hanley Ramirez. He has been a monster with the bat over his first three seasons, so much so that he’s the #1 rated pick in just about every fantasy baseball league. But his fielding is truly dire; he has been a below-average fielder every year, and will probably be shifted to the outfield at some stage in his career. With a player like that, you can’t simply assign 10% to his batting and 10% to his fielding, because his batting alone is worth an extra 8-10 wins each years for the Marlins, even though he’s not a great fielder.
Even if you do assign a value to fielding, errors (or fielding percentage) probably isn’t the way to do it. Baseball analysts have recognized for quite a while now that counting errors is a very poor way to evaluate a player’s defensive contributions. This is because errors are counted based on balls that players get a glove to and miss, but take no account of the fact that some players get to far more balls than other players.
As for offense, you’d also have to go past the standard stats to work out a player’s value. Batting average isn’t an especially reliable indicator of a player’s value, and while OBP is better, you still need to take into account a player’s power, which is where SLG comes in.
There is a way to arrive at better stats to evaluate players, and metrics such as VORP (Value Over Replacement Player) and WARP (Wins Above Replacement Player) go some way towards evaluating how much a player actually helps his team. VORP is an offense-only stat, and ignores fielding, while WARP takes in a player’s total contribution, including defense. Stats like VORP and WARP are not perfect, by any means, and past stats are also no guarantee of future performance, to say nothing of injuries and other problems outside the player’s control. But VORP and WARP are better than individual stats, because they are comprised of a whole different bunch of factors.
It’s worth noting, though, that sports contracts are, to a considerable extent, already performance-based. They are based on past performance, along with a projection of future performance based on factors like age, body type, etc., etc. Albert Pujols got a monster $100 million contract in 2004 because he had absolutely mashed the ball for the previous three seasons, and all reasonable predictions suggested that he would continue to mash it for the foreseeable future. And that’s exactly what has happened. The Cards paid Pujols about $13 million last year, which is, considering the numbers he put up, an absolute bargain compared to some other players in the major leagues.
This is not to say that such deals never go awry. Ask the Dodgers how they feel about signing Andruw Jones. Or ask the Giants if they’d like to take back the $100+ million they owe Barry Zito. Of course, some of these mistakes are more foreseeable than others. The guys at Baseball Prospectus, who do all the calculations for this VORP and WARP stuff, called Jones’ 2-year, $36 million deal a “bargain” for the Dodgers when it was made. Obviously, they were wrong. But they were much more dubious about the Zito acquisition, saying:
I don’t think they expected him to be as awful as he was in 2008, but they didn’t think he was worth almost $18 million a year over 7 years.
What brings this to mind is an item I saw about ten years ago. Saints running back Ricky Williams’ incentive-laden, seven-year contract that guaranteed him $11.6 million over that time. Not a huge, huge amount back then for a top rookie. However, if all the bonuses are exercised, it could have been worth $68.4 million, the most lucrative deal ever for an NFL rookie at the time. Williams’ contract included an $8.84 million signing bonus and base salaries that range from $175,000 to $400,000 over the course of the deal. Also included is $1.6 million in annual bonuses of $100,000 for doing such things as participating in off-season workouts and keeping his weight below 240 pounds. Williams could have earned another $500,000 each year if he reached at least 10 of 26 goals worth $50,000 apiece.
There are also escalator clauses that jack up his salary based on his previous season’s rushing total. For example, Williams could earn $1 million for gaining 1,600 yards, $1.5 million for 1,800, $2 million for 2,000, $2.5 million for 2,100 and $3 million for eclipsing the NFL single-season rushing record. And those are just a few of the incentives.
All talk about statistics aside, Omniscient hit the nail on the head in Post #2: the players will be paid what the market will bear, insofar as the union agreement allows. If you offer Albert Pujols a contract filled with incentives, I’m just going to offer him the money guaranteed and then I’ll have Pujols and you won’t.
There ARE a lot of incentive-laden contracts out there but they tend to be used in the case of players who are old, or coming off injuries, or are marginal regulars, or some other think where a veteran player represents a risk or a long shot. They aren’t going to come into vogue, at least in sports with guaranteed contracts, for the big time stars because the big time stars can always find someone willing to shell out guaranteed dollars.
No athlete with good options would sign a contract based heavily on performance incentives.
In addition to all the other objections raised, there’s another factor: any athlete who signed such a contract would have to put a LOT of blind trust in management.
If a contract provided that a slugger would get an extra million bucks for hitting 50 homers, how would the slugger know that management wouldn’t bench him in September if the team were out of contention and he had 45 homers?
If a pitcher had a clause saying he’d get a huge bonus for winning twenty games, how could he be sure the team wouldn’t sit him for the last two weeks of the season, to avoid paying?
There’s all that, plus–what happens to the athlete who gets injured early on in a season (reference Tom Brady last year, out for the season in Week 1)? Putting the majority of your salary in performance bonuses is going to be a huge gamble.
This might come up next year with Tomlinson. He just renegotiated his contract; previously he was going to get $8M for 2010, but now he gets $5M, plus an extra million at each of 1,200, 1,300, and 1,400 yards rushing over the year. That might make things interesting at the end of the season. For example, this year he was at least a little hurt for most of the year, so had they clinched a playoff spot early, it would have been correct to rest him. He might not be happy with resting if he’s sitting at 1,299 yards :).