Boston Red Sox: The Salary Payoff Pitch

By Mel Duvall  |  Posted 2004-05-14 Print this article Print

Keeping track of stats in the numbers-obsessed world of baseball is nothing new. But Boston Red Sox General Manager Theo Epstein has amassed a collection of personnel data utilizing the right blend of enterprise software and business intelligence applications other teams and corporate business managers can only dream about. This is the story of how success is created by blending intelligent analytical technology against employee performance management.

Boston Red Sox: The Salary Payoff Pitch

In addition to finding and developing talent, one of the key uses of a statistics system for personnel is figuring out how much to pay people.

The Red Sox, and for that matter any major league team, will not reveal exactly how they decide a player's worth. Market forces certainly play a major part, but teams must also decide whether paying tens of millions of dollars to a player will generate appropriate returns. Oakland A's GM Beane said recently at the conference in Chicago that he knows exactly what a player is worth to him based on how many wins he'll contribute to the team in a season. "But I'm not going to tell you it," he laughed.

However, the fact that the Sox hired Bill James provides some insights into how they may be tying their analysis to their checkbook. James has created several methods to estimate the value of a player, including a formula he published in 2002 called Win Shares. Win Shares takes a mathematical approach to evaluating the contribution of an individual player to a team's overall performance. It considers a variety of statistics, including pitching, hitting, walks and defensive contributions, and adjusts them for a particular ballpark and the league. Some parks are more hitter-friendly, such as Coors Field, home of the Colorado Rockies, where the thin air allows batted balls to carry farther.

At its basic level, a single Win Share is one-third of the credit for winning a game. So if the Red Sox win 95 games this year, there will be 285 Win Shares to spread among players. Spread across the 25-man roster, an average player might wind up with 10 Win Shares.

But consider the Sox' acquisition in the off-season of star pitcher Curt Schilling. According to James' system, Schilling achieved 24 Win Shares in the 2002 season and 15 in 2003, for an average of 19.5. To get Schilling, the Sox had to assume his $12 million salary. Other pitchers with similar Win Shares in 2003 were the Sox' Pedro Martinez (20 Win Shares, $17.5 million salary), the Yankees' Mike Mussina (19, $16 million) and Seattle's Jamie Moyer (18, $7 million). Schilling's $12 million price tag is at the low end of the range.

Alex Rodriguez led the league with 32 Win Shares in 2003 and the Sox would have loved to sign him, admits GM Epstein. The bottom line, however, is that the team would not cross its threshold of $20.25 million a year, and had to walk away from the table.

Corporations play out their own version of Win Shares every day. A new salesperson isn't hired unless it is calculated that he or she will bring in more revenue than the cost of that person's compensation. Boards of directors must determine whether paying $28 million for a new chief executive will provide an appropriate return in shareholder value. There just isn't the level of sophistication with business statistics as there is in baseball.

And the Sox are using all the data at their disposal and applying statistical analysis to find the best and brightest. It's how they decided to cut Jose Offerman and John Valentin, two underperforming infielders with combined salaries of $6 million, and were able to pick up sluggers David Ortiz and Kevin Millar for a combined $3.25 million. Together, Ortiz and Millar contributed 162 runs in 2003, while Offerman and Valentin had contributed 66 runs in 2002.

Indeed, stereotypes and conventional thinking are being tossed aside, unless the numbers back it up. As James states, the goal is to let the data take on the power of language— to let it determine what is true and what isn't.

The guidelines are being set because the data says it's the key to winning.

The baseball season is underway, and most Red Sox fans don't know or care what kind of computer or software Epstein and his crew are using behind the scenes. It's the results that matter. And only one is truly acceptable: a World Series title.

Contributing Editor
Mel Duvall is a veteran business and technology journalist, having written for a variety of daily newspapers and magazines for 17 years. Most recently he was the Business Commerce Editor for Interactive Week, and previously served as a senior business writer for The Financial Post.


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