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April 1, 2009
Marginal Dollars Per Marginal Win
Hoops Style

by Kevin Pelton


Of all the important research done by Baseball Prospectus, none may ultimately have been more influential than the late Doug Pappas' work with regard to team salary and performance. The metric Pappas created, Marginal Dollars per Marginal Win, showed the plucky Oakland Athletics to be doing a better job managing their (limited) financial resources than anyone else. Author Michael Lewis took note, began investigating what the A's were doing differently from the rest of baseball, and you know the outcome.

Pappas' logic can be extended to the NBA, a project I first undertook five years ago at Hoopsworld.com. It's been some time since I've revisited the NBA version of Marginal Dollars per Marginal Win, though my friend Kevin Broom did take a look the following season for RealGM.com and Bradford Doolittle used a similar measure as part of his GM study last season here at BP.

A quick explanation of my method: The NBA makes the computation of a minimum salary easy because in addition to the salary cap, there's also a salary floor that rarely comes into play. (I believe the Clippers had to make a trade to get over the floor early in the decade, but it hasn't been an issue any time since.) The minimum salary is 75 percent of the salary cap each year, so we can simply use that figure. As for the wins side, I've used ten wins as the floor. Only once in the NBA's history--the 1972-73 Philadelphia 76ers--has a team failed to reach ten wins, though the 11-71 1992-93 Dallas Mavericks made an impressive run at the record. While a team entirely made up of replacement players might be able to do worse, in practical terms ten wins is as bad as anyone is ever going to get.

Of course, because of the mechanics of the NBA's combination of a soft salary cap and guaranteed contracts, it can be difficult to change a team's payroll dramatically in a hurry. So it is that the Oklahoma City Thunder, for example, have a payroll around $68 million this season. GM Sam Presti has maneuvered the Thunder in position to be under the cap starting this summer, but because the contracts of players like Malik Rose, Donyell Marshall and Joe Smith are still on the books (the latter two players having been bought out), Oklahoma City technically has an average payroll.

All of that salary-cap weirdness makes the Marginal Dollars per Marginal Win concept a little more difficult to apply in the NBA on a single-season basis. In essence, by acquiring ending contracts and draft picks, the Thunder is paying now in order to improve its Marginal Dollars per Marginal Win in future years. Keep that in mind as we look first at this year's results before taking the longer-range view.

Team       Payroll       Win%       M$/MW

ORL      $69,672,979    0.750    $  498,310
UTA      $65,841,407    0.625    $  529,246
SAS      $67,993,153    0.658    $  546,092
NOH      $66,842,294    0.625    $  553,510
DEN      $69,422,003    0.649    $  588,388
LAL      $78,245,793    0.795    $  620,768
ATL      $68,168,841    0.581    $  641,692
HOU      $72,981,100    0.649    $  670,795
CHA      $62,507,774    0.452    $  683,369
BOS      $79,188,973    0.747    $  686,732

Team       Payroll       Win%       M$/MW

PHI      $67,242,522    0.514    $  722,879
MIA      $69,952,802    0.534    $  767,352
NJN      $62,666,523    0.411    $  787,241
CHI      $67,705,816    0.480    $  807,078
CLE      $90,833,539    0.822    $  815,780
POR      $79,887,114    0.630    $  860,956
DET      $71,084,287    0.493    $  889,479
PHO      $76,001,311    0.541    $  932,030
IND      $69,668,818    0.419    $1,053,692
MEM      $55,093,507    0.250    $1,055,572

Team       Payroll       Win%       M$/MW

MIL      $71,088,614    0.419    $1,111,996
GSW      $67,416,431    0.342    $1,294,447
DAL      $94,830,398    0.589    $1,326,856
TOR      $73,197,890    0.384    $1,360,610
MIN      $65,980,450    0.284    $1,655,614
LAC      $62,174,296    0.243    $1,826,302
OKC      $68,341,605    0.274    $1,951,876
NYK      $96,643,646    0.397    $2,331,466
SAC      $68,739,818    0.222    $3,007,681
WAS      $70,542,500    0.227    $3,089,965

Who would have guessed, when the Magic signed Rashard Lewis to a lucrative deal and extended Jameer Nelson's contract, that a season later they would be the most economically efficient team in the NBA? Yet with the pieces fitting together perfectly and Orlando getting production from bargain youngsters like Courtney Lee and Marcin Gortat, GM Otis Smith has put together a championship contender for a payroll that comes in right around average. The other three elite teams in the league are all well into luxury-tax territory, though the Lakers and Boston have still spent their money very effectively, all things considered.

Few teams manage their cap better than the Jazz does, although that position may be tested when Paul Millsap hits the free-agent market this summer and Carlos Boozer has the option of joining him. San Antonio has also done a great job of winning championships without breaking the bank. Having Tim Duncan, Manu Ginobili and Tony Parker all on reasonable contracts has helped that process.

At the other end of the spectrum, the Knicks have some company in terms of poor return on their money. Sacramento and Washington aren't well above that ten-win floor, and both are near average in terms of payroll. The Kings took steps at the deadline to get under the cap this summer, but Washington projects to be over the luxury tax. The hot rumor in February was that the Wizards would package their lottery pick with some of their bad contracts in order to keep together a core that has won a playoff series as currently constructed. Interesting.

In addition to looking at this year's results, I also went back through 2005-06 to fill in the gap through what had previously been done. Here are the best Marginal Dollars per Marginal Wins figures in that span:

Team     Year     Payroll       Win%       M$/MW

CHA      2007    $41,689,161    0.402    $ 79,909
NOH      2006    $41,277,617    0.463    $148,308
TOR      2007    $50,581,694    0.573    $290,012
CLE      2006    $50,836,871    0.610    $342,797
ATL      2006    $42,944,553    0.317    $363,722
LAC      2006    $50,931,212    0.573    $373,141
PHO      2006    $53,626,924    0.659    $375,044
CHI      2007    $54,754,904    0.598    $382,145
ORL      2008    $58,107,045    0.634    $390,108
DET      2006    $59,619,275    0.780    $416,561

Note that I've thrown out the 2005-06 Bobcats because, in their second year as an expansion team, they were working with a reduced salary cap that throws off the calculation. Even in year three, Charlotte was very efficient, winning a respectable 33 games with a payroll not far above the salary floor. Alas, adding additional wins has proven more challenging and far more costly the last two seasons. The 2005-06 New Orleans Hornets benefited from adding some rookie named Chris Paul. The best management job on this list might have been the 2006-07 Raptors. In his first full year in Toronto, Bryan Colangelo imported low-cost contributors Jose Calderon, Jorge Garbajosa and Anthony Parker to get the Raptors back to the playoffs. Alas, things have fallen apart quickly since then.

At the less fortunate end of the spectrum:

Team     Year     Payroll       Win%       M$/MW

NYK      2006    $126,610,272    0.280    $6,883,482
MIA      2008    $ 74,640,045    0.183    $6,583,509
NYK      2008    $ 96,190,114    0.280    $4,189,816
NYK      2007    $117,024,192    0.402    $3,355,345
WAS      2009    $ 70,542,500    0.227    $3,089,965
SAC      2009    $ 68,739,818    0.222    $3,007,681
NYK      2009    $ 96,643,646    0.397    $2,331,466
MIN      2008    $ 69,043,895    0.268    $2,276,783
POR      2006    $ 59,966,214    0.256    $2,076,474
OKC      2009    $ 68,341,605    0.274    $1,951,876

Hey, look at that--some Knicks teams! Who would have guessed? Yes, the 2005-06 Knicks set a standard for cap excess that may never again be challenged in this new era of fiscal sanity, spending nearly $7 million for each of their 13 marginal wins. Despite a significantly lower payroll, last year's Miami Heat squad, which finished 15-67, were little more efficient in winning just 15 games.

If we combine the entire four-year period, here are the rankings:

Team              M$/MW

Charlotte      $ 313,755
New Orleans    $ 426,128
Atlanta        $ 520,246
Detroit        $ 525,177
San Antonio    $ 542,044
Utah           $ 555,992
Phoenix        $ 590,975
Chicago        $ 653,830
Orlando        $ 678,597
Cleveland      $ 714,002

Team              M$/MW

Denver         $ 726,874
Houston        $ 731,334
Boston         $ 763,179
New Jersey     $ 779,338
Golden State   $ 783,611
L.A. Lakers    $ 816,520
L.A. Clippers  $ 823,069
Toronto        $ 834,060
Washington     $ 864,023
Miami          $ 920,392

Team              M$/MW

Memphis        $1,030,466
Sacramento     $1,031,337
Oklahoma City  $1,056,389
Indiana        $1,080,728
Milwaukee      $1,094,432
Philadelphia   $1,149,942
Dallas         $1,178,501
Portland       $1,186,816
Minnesota      $1,433,801
New York       $3,824,774

If we discount the Bobcats, the Hornets have spent their money the most efficiently in the last four years, a span which, not coincidentally, includes the entirety of Chris Paul's rookie contract. With Paul more appropriately valued next season, New Orleans has financial issues arising from Peja Stojakovic's big pact and the midlevel deals handed out to Morris Peterson and James Posey the last two summers. That appeared to cost the Hornets Tyson Chandler, and may yet do so this summer. That's how thin the line is between salary cap success and failure in the NBA.

Detroit, San Antonio, Utah and Phoenix get credit as the teams that have consistently won without high payrolls. The Suns are beginning to slip in this regard and face their own tax woes after also ending up quiet at the trade deadline for very different reasons from the Hornets.

At the bottom, we find as expected the three biggest luxury-tax payers in the league--Dallas, Portland and New York. The Blazers have become much more fiscally responsible and should be much more efficient next season when the contracts of Steve Francis and Raef LaFrentz are off the books. The Mavericks have hardly struggled in the last four years, advancing to the NBA Finals in that span, but Mark Cuban has spent a lot of money on his team.

The surprise here is that Minnesota snuck in as the second-worst spenders of the last four years, ahead of only the Knicks. They've been bad without ever being able to cut their payroll a la Memphis or Atlanta. Something similar is true of Milwaukee, while Philadelphia has had above-average payrolls without above-average results before this season.

Alas, these numbers don't reveal anyone as singularly effective as the A's in baseball. Because the salary cap tends to cluster payrolls together and because young players are under team control for less time, it's harder to build a consistently build a contender on the cheap. Nonetheless, smart cap management and salary efficiency is a big reason why teams like Detroit and San Antonio have extended their runs as long as they have.

Kevin Pelton is an author of Basketball Prospectus. You can contact Kevin by clicking here or click here to see Kevin's other articles.

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