Sportico is proud to partner with The Harvard Sports Analysis Collective, a student-run organization dedicated to the quantitative analysis of sports strategy and management, to bring our readers the excellent work coming from some of the brightest young minds in the country.
Powered by their MLB-best pitching staff, last year’s Tampa Bay Rays had one of the best seasons in franchise history. They won 96 games, and in the playoffs, pushed the best team in baseball to within one game of elimination. However, what makes the Rays’ accomplishments even more impressive is this: They ranked dead last in team payroll last year, spending $17 million less than the next-lowest team (the Miami Marlins, which finished 57-105).
When it comes to turning payroll dollars into wins, Tampa Bay was in a class of its own, though historically it has gotten what it’s paid for—that is to say, not much. But as teams are sure to feel a cash crunch given the circumstances of this shortened season, payroll efficiency could be top-of-mind in front offices across MLB.
To determine such a thing, we relied on two necessary metrics: wins and payroll. For every season dating back to 1988 (the farthest back the USA Today’s MLB salary database goes), each team’s wins and payroll above average were calculated. Then, the results were averaged across seasons to get a summary for each franchise. The preliminary results are displayed below:
Teams in the top right and bottom left quadrants fulfill their potentials, with big spenders like the New York Yankees being big winners on the field, and teams such as the Kansas City Royals investing (comparatively) little money and struggling to win. However, the teams in the top left and bottom right quadrants do not conform to expectations. Those in the bottom right, such as the Oakland A’s, are the most efficient: They consistently assemble winning teams despite low payrolls. Meanwhile, teams in the top left, like the Philadelphia Phillies, tend to have weaker teams despite carrying higher-paid players.
But even within a quadrant, there are degrees of efficiency, so we calculated an “efficiency score” by subtracting a team’s wins rank from its rank in payroll above the yearly average. Take the Atlanta Braves, for example. They ranked 10th in salary paid out to players since 1988, and 3rd in wins over the same time frame. Therefore, the Braves’ efficiency score is:
10 (payroll rank) – 3 (wins rank) = +7
The following graph plots each team’s efficiency score since 1988.
According to this measure, the Oakland A’s are far and away the most efficient team in baseball. Despite averaging the fourth lowest payroll in the league, the team has won more games than all but five teams. Cleveland boasts a similar success story, finishing seventh in wins and 21st in payroll above average. One reason that Cleveland has been so successful has been its ability to develop elite hitters from within. Jim Thome, a 13th round pick in 1989, helped the Indians win two pennants in the late 1990s, while the team’s most recent success (2016 World Series appearance) came with young stars Francisco Lindor and Jose Ramirez making close to the MLB minimum salary.
On the other end of the spectrum, the Detroit Tigers have not spent their money as prudently. Despite assembling some strong teams in the mid-2000s—reaching the World Series in 2006 and 2012—the Tigers have the second-worst winning percentage in baseball since 1988. They have rarely planned for the future, flipping future All-Stars for one-year rentals of veterans past their primes (Edgar Renteria and Alfredo Simon) and paying top dollar for aging relievers such as 39-year-old Joe Nathan. On top of this, the Tigers have gambled on high-priced stars, striking out with $200 million contracts for Prince Fielder and Miguel Cabrera. As a result of prioritizing outside spending over internal player development, the Tigers have carried the 7th highest payroll since 1988 while ranking 29th in wins.
By this metric, most big-market teams rank in the middle of the pack in terms of payroll efficiency. Since the Yankees rank 1st in wins and 1st in salary, and the Red Sox rank 2nd in both categories, the teams are tied with an efficiency score of 0. However, just because big-market teams top the league in both salary and wins does not mean that they are doing so by the same margins. If their payroll blows other teams out of the water, but they are barely beating opponents on the field, they might not be as efficient as an ordinal ranking analysis would suggest.
Since 1988, the Yankees have outspent a league average team by more than $1.7 billion, or about $54 million each year. Only the Red Sox ($1.1 billion total above average) have eclipsed even half of New York’s spending above average. The Yankees also succeed on the field, winning about 11 more games per season than the average team. However, their advantage in wins is much smaller.
In order to compare the Yankees’ advantages in both wins and payroll, and determine their magnitude, the two measures (wins and payroll) must be set on the same scale. This is possible using a technique called Z-Scores. Z-Scores are a method for standardizing scores with different units by seeing how far from the average they both are. For both wins and payroll, these standardized scores were computed for each team-season. Then, the results were averaged for each franchise, giving us a “final efficiency score.”
By incorporating the Z-Scores into the analysis, you get a much better picture of how much above average each team was, rather than just its rank:
Again, Oakland emerges as the most efficient team in baseball, followed by the Tampa Bay Rays. As featured in Michael Lewis’s Moneyball, the A’s were early adopters of analytics, and the Rays quickly followed suit. Although they both play in small markets, they have found ways to succeed by looking for arbitrage opportunities, identifying effective players and strategies that other teams miss.
Unlike the Tigers, who splurged on aging relievers, the A’s realized that relief pitchers tended to be inconsistent, so they developed their own relievers and sold high. More recently, Tampa Bay has been the most analytical team. Over the past decade, the Rays have been even more efficient than the A’s. For example, the Rays introduced the “opener”, or a short-term pitcher who faces the opponent’s top hitters to start the game. Since the first inning is almost always the highest scoring, it can make sense to use a shutdown reliever early on.
On top of their on-field strategy, both teams have stood out in their abilities to grow young, inexpensive players. Many teams tend to sign high-priced players during free agency. By contrast, the A’s have cultivated their own stars, such as all-around superstar Matt Chapman and Ramón Laureano, two players who haven’t even reached arbitration yet.
The Rays similarly excel at fostering talent. After developing pitcher Chris Archer into a Cy Young contender, the Rays sold high and sent him to Pittsburgh in exchange for outfielder Austin Meadows and pitcher Tyler Glasnow, who broke out in 2019. These players were initially seen as premier prospects, but languished in Pittsburgh’s system. Glasnow worked with the Rays coaches to reframe his approach, starting to throw his blazing fastball higher in the strike zone and “tunneling” (or following the same throwing motion) with his sweeping curveball. The results have devastated opposing hitters:
Tyler Glasnow, 84mph Curveball and 97mph Fastball, Individual pitches + Overlay with tails pic.twitter.com/KMFq6ALurG
— Rob Friedman (@PitchingNinja) July 27, 2020
Now, even the big market behemoths, like the Yankees and Red Sox, have started to hunt for market inefficiencies. However, for this long-term payroll efficiency analysis, these efforts have been too little, too late. Although they have been among the best on the field, they have completely lapped the rest of the league in terms of spending. The following graph displays each team’s Z-score for payroll (red) and wins (green) since 1988, and the gap (shaded gray) reflects each team’s “efficiency score” from the previous graph:
As demonstrated above, the spread in wins between teams is fairly small, especially when compared to the spread in payroll. Since their advantage on the field pales in comparison to their advantage in payroll, big spenders like the Yankees and Red Sox are not as efficient as they could be.
Nevertheless, it makes some sense for the top teams in the game to be seemingly inefficient with their spending. For teams that are consistently in the playoff hunt, each additional win is more valuable than it is for weaker teams. For example, going from 85 wins (and maybe sneaking into the postseason as a wild card) to 95 wins (and likely winning the division), can lead to millions of dollars in additional revenue over the next few years. By contrast, if a team moves up from 70 wins (and misses the playoffs) to 80 wins (and still misses the playoffs), the increase is less valuable. Even though the teams improved by the same number of wins, one situation is worth a lot more than the other. Given this perspective, it might actually benefit teams like the A’s to spend more and be less “efficient” if it secures a place in the postseason.
Another thing to consider: Routinely good teams tend to have more specific holes to fill, and those upgrades tend to be more expensive. For example, the market for players that would improve the Yankees, who only have a few small holes each year, is much more competitive than one for a team like Seattle, which has missed the postseason for 18 years running and could use an upgrade almost anywhere. The Mariners would not need to pay as much to get better. So while the “payroll efficiency” metric is valuable for determining which teams spend their money intelligently, it can be skewed by major outliers.