Why an increase in payroll may not lead to sustained success

Last week, I discussed the issue of teams “going for broke” and how significant increases in payroll may affect overall success (win totals). One of the more interesting findings in that piece dealt with teams who had great success the season before they increased payroll.

I found that from 2001 to 2012 there were 28 teams who won at least 88 games in the year before they increased payroll by at least 20 percent. Of those 28 teams, only 14 teams were able to get back to that 88-win threshold in the subsequent season.

This result sounds surprising when taken at face value. In most cases, the assumption would be that the increase in payroll was an attempt to prevent regression and sustain, or build on, past success.

Based on the results I found in that piece, I concluded that the increase in payroll had no real effect on a team’s ability to sustain success.

Over at the Book Blog, Tom Tango pointed out a major flaw in that conclusion, namely the lack of a control group:

Specifically, in one test, he finds a bunch of playoff teams that adds alot of money, and he still finds that a good portions wins fewer games. But, even if they did not add alot of money, they would STILL win fewer games. That’s regression toward the mean at work. If you take a group of teams that win 88+ games, you will find, on average, that they will win less in the next season. This is because teams that win 88+ games are teams that have both more good players than bad players and more good luck than bad luck. The next season, the luck will cancel out, so, all other things equal, are expected to win fewer games.

Tango’s response brought me not to a different question, but instead a much better way of answering my original question. Instead of comparing successful teams that then increased payroll to themselves, I included every team that won 88 games from 2001-12 in the sample for a more illuminating comparison.

On average since 2001, the 113 teams that won at least 88 games in one season won 6.6 fewer games in the next season. This result was expected because of regression toward the mean that Tango discussed.

Despite this regression, 63 of the 113 teams (55.7 percent) were able to reach the 88-win threshold again in the subsequent season.

Does an increase in payroll have any effect on reducing the regression toward the mean?

As suggested by Tango, I broke the sample into three subsets:
{exp:list_maker}Teams who increased payroll considerably (15 percent or higher increase)
Teams who increased payroll somewhat (2 to 15 percent increase)
Teams who increased by a negligible or negative amount (Less than two percent increase){/exp:list_maker}I listed the results below.

Payroll Change Num. of Teams Avg. Change in Wins Percent >=88
> 15% 39 -7.02 56.4%
2-15% 38 -7.26 52.6%
<2 % 36 -5.42 58.3%

As you can see, the number of teams in each subset was pretty close to evenly distributed. Quite surprising, though, is the subset of teams that were the most successful in preventing regression toward the mean in the subsequent season.

The control group of teams that did not increase payroll or actually decreased payroll, had the smallest average drop-off in wins from the previous season.

The last column in the table shows the percent of teams in each subset that was able to get back to 88 wins after reaching that plateau in the previous season. The control group also lead in this category with the highest percentage of teams, 58.3 percent, that were able to (sort of) maintain their success.

The results for teams that substantially increased their payroll (by 15 percent or more), surprisingly, were below the average for the entire sample.

Interestingly, improving the structure of the test resulted in the exact same conclusion as the one from the original study. Based on the results found in this study, it seems that increasing payroll has no real effect on a team’s ability to sustain success and dodge the regression-toward-the-mean bullet in the subsequent season.

All payroll information comes courtesy of Baseball Prospectus’ Compensation Tables.

Print Friendly
 Share on Facebook0Tweet about this on Twitter0Share on Google+0Share on Reddit0Email this to someone
« Previous: 40th anniversary: R.I.P. Roberto Clemente
Next: A baseball card mystery: who’s sliding into Dick Green? »

Comments

  1. Nats Lady said...

    Is there any way to consider WHY payroll was increased?  For example, if it was due to arbitration or re-signing core players (something the Nats are faced with) or going out to sign “expensive” free agents because the minor-league system is not provided adequate players to promote or trade?

    I realize this further splinters your sample sizes, but it might provide insight.

  2. Glenn DuPaul said...

    I agree this is a factor to consider.  Are they giving raises to current players or to retain their current core? Or is the team going out and signing big free agents because of where the organization is on the win curve?

    It’s really tough to say. There are other factors to consider like the average age of the team, or average age per WAR of each individual.  If they have a lot of older players providing wins, those guys most likely will regress some. 

    The major problem is that many of these issues are tough to look at without some seriously tedious research, as well as, would further splinter the sample sizes like you said.

  3. Kyle Lobner said...

    As mentioned above, I think WHY payroll increased is almost as important as whether or not it did. The teams that didn’t increase payroll at all may not have had holes to fill, for example. Or they may have had bad contracts coming off the books.

  4. Kyle Lobner said...

    Also, I’m wondering if it may be helpful to simply remove the Yankees from this study. For most of the last 2-3 decades they’ve operated in an economic world completely separate from everyone else.

  5. Ian R. said...

    I think it’s quite interesting that the middle group, the teams with modest increases in payroll, did the worst of the three. My suspicion, without having done a case-by-case study, is that those modest payroll increases are driven by back-loaded free agent contracts and arbitration raises – in other words, the teams are paying more, but their players are declining or at best staying at about the same level. The teams with bigger payroll increases, meanwhile, probably made at least one major acquisition via FA or trade, and they did do somewhat better than the modest increase group.

    Meanwhile, the teams that had negligible payroll increases probably had many cost-controlled young players, some of whom may have actually improved in the second season. Again, this is guesswork, but it seems to make sense,.

  6. Rylan said...

    Does original size of payroll account for anything?
    eg. a “bad” 88 win club like the Orioles, low payroll, untalented roster, most wins based on luck. It would be easy for them to raise their payroll by 20% and obviously everyone here knows they will likely be a near .500 club. Take a club like the Yankees or Rays, both with fairly stable payrolls. Both can’t spend anymore, similar talented rosters year to year.

    Maybe the best way to success is slow and steady.

  7. Glenn DuPaul said...

    @Kyle

    Removing the Yankees really wouldn’t help.  They had appearances in all three categories, and in almost all cases had no real improvement or decline in wins.  I agree that WHY is more important than whether or not it did.  Although figuring out WHY is incredibly time consuming and tedious, and I don’t think I have that kind of time at the moment.

    @Rylan
    The Orioles actually don’t have that low of a payroll.  And the Rays have had fairly unstable payrolls dating back to 2008.  But I agree that it’s possible a team who keeps the same budget or “plan” year-to-year and doesn’t try to grasp at success and go for it, may be better off.  Trust the “process” or whatever.

  8. Vickey said...

    Hi! I’m at work surfing around your blog from my new iphone 4! Just wanted to say I love reading through your blog and look forward to all your posts! Keep up the outstanding work!

  9. onlineuniversityadvice.com said...

    You actually make it seem so easy with your presentation
    but I find this matter to be really something which I think
    I would never understand. It seems too complicated and extremely broad
    for me. I’m looking forward for your next post, I’ll
    try to get the hang of it!

  10. url shortener said...

    Its such as you read my thoughts! You seem to know so much about this, such
    as you wrote the guide in it or something. I think that you can do with some % to power the message house a little bit, however instead of that, this is magnificent blog. An excellent read. I will certainly be back.

  11. url shortener said...

    Its such as you read my thoughts! You seem to know so much about this, such
    as you wrote the guide in it or something. I think that
    you can do with some % to power the message house a little bit, however instead of that, this is magnificent blog. An excellent read. I will certainly be back.

  12. Jodi said...

    Superb website you have here but I was
    curious if you knew of any community forums that cover the
    same topics discussed in this article? I’d really like to
    be a part of community where I can get feedback from other knowledgeable individuals that share the same interest. If you have any
    recommendations, please let me know. Thank you!

  13. nexus 4 singapore said...

    2 Mbps data speeds of 2100MHz. The faceplate, sometimes thought of as the cell phone case, is another mobile accessory that
    is commonly used by owners. User may charge their
    mobile in car too by connecting a car charger with their
    mobile.

  14. nexus 4 singapore said...

    2 Mbps data speeds of 2100MHz. The faceplate, sometimes thought of as the cell phone
    case, is another mobile accessory that is commonly used by
    owners. User may charge their mobile in car too by connecting a car charger with their mobile.

  15. Tibet Travel Advince said...

    Hi i am kavin, its my first time to commenting anywhere, when i read this piece
    of writing i thought i could also create comment due to this sensible piece
    of writing.

  16. Tibet Travel Advince said...

    Hi i am kavin, its my first time to commenting
    anywhere, when i read this piece of writing i thought i
    could also create comment due to this sensible piece of writing.

Leave a Reply

Your email address will not be published. Required fields are marked *

You may use these HTML tags and attributes: <a href="" title=""> <abbr title=""> <acronym title=""> <b> <blockquote cite=""> <cite> <code> <del datetime=""> <em> <i> <q cite=""> <strike> <strong>

Current ye@r *