Exploring NBA Contracts Based on Performance, Rather Than Potential

The nature of professional athlete contracts, or employment contracts in general, is inherently flawed because they’re made on potential. As in, we’re going to sign you for five years, and we sure hope you’re going to keep doing your job well all those years. It’s rare to have a player’s performance exceed the value of their contract, because contracts are almost invariably built on the highest possible expectations a player can achieve.

While talking to my dad today, he suggested an idea he’d heard on the radio—that there’s not enough accountability in the NBA, that players aren’t motivated enough, and that only teams that win should get paid. We had a good chuckle about it, and how such a move would throw parity to the wind as top players would conglomerate on the top-winning teams to collect their paychecks.

We even bandied about the opposite, suggesting that only the losers get paid. The winners get the trophy, and everybody else gets a check—it could take parity to new heights, as top-earning players would flurry each year to the losingest teams, and to the teams providing the least amount of help in the supporting cast. But such a system is doomed to fail: free-market incentives have to serve self-interests, and this system knocks self-interest all out of whack.

While these concepts would never work in real life, they introduce the idea of salary based on past performance rather than future expectations. Many players have performance incentives built into their contracts, but they’re little things: more money for making the All-Star team, for example, and many are tied to team success in the playoffs or regular season. Some are downright goofy: Matt Bonner of the San Antonio Spurs will make an extra $100,000 this year if his field goal percentage, free throw percentage, and his 3-point percentage added together match or exceed 169 percent; if Carlos Boozer plays in 65 games, averages more than 32 minutes, and finishes in the league’s top 12 in rebounds, he nets an extra $333,333.

But those statistical measures are arbitrary. What every team really wants is players whose presence on the team makes them win more games. Which points to Win Shares.

Justin Kubatko over at Basketball-Reference.com, possibly with assistance from Stephen Hawking, has ported Win Shares over from baseball and done some very cool things with them as a statistic.

If you’ve been in hiding or are just uncool, Win Shares seek to accurately gauge an individual player’s responsibility for his team’s wins. LeBron James is clearly responsible for a lot of the Cleveland Cavaliers’ success, and they had a lot of it this past year in winning 66 games, so LeBron’s 08-09 Win Shares are very high. Kevin Garnett’s aren’t as high, as his teammates played a bigger role in the team’s success. The Miami Heat didn’t win an unworldly number of games last year, but Dwyane Wade was very important to each one—so his Win Shares are high, but not quite as high as LeBron’s.

The technical stuff is all here. Theoretically, a player whose presence on the floor causes his team to lose more games would have a negative Win Shares count.

The idea of attaching contract incentives to Win Shares is extraordinarily compelling, at least from a team’s point of view (obviously, a player’s agent is out to sign guaranteed money). The motivation is pure: if you help your team win more games, you get more money. The teams, in turn, get exactly what they pay for—exactly, since payment comes in retrospect.

The lists of the top salaries in 2008-09 and the top Win Shares earners have a handful of names in common, but with significant differences as well. Kobe Bryant raked in the league’s fourth highest salary, and was seventh in the league in WS. Dirk Nowitzki was 11th in salary and ninth in WS.

But the lists’ discrepancies are major. The top three salaries last year went to Kevin Garnett, Jason Kidd, and Jermaine O’Neal—and none of those three were in the league’s top 20 for Win Shares. Ray Allen, Paul Pierce and Rajon Rondo all made that top 20 list for their contributions to Boston Celtics’ wins, but Garnett did not.

Most of the players topping the Win Shares list are younger players: LeBron James, Chris Paul, Dwyane Wade, Dwight Howard, and Brandon Roy make the list at #’s 1, 2, 3, 5, and 6. The concept of Win Shares cuts out intangibles like leadership, motivation, and setting an example, and thus a KG who only played in 57 games falls back a bit. Young, healthy, dynamic players—let’s be honest, the players that are out there every night winning games for their team—top the list.

Do they, then, deserve to be paid less than Shaquille O’Neal, Allen Iverson (in his Detroit season), and Tracy McGrady (who played in a total of 35 games)?

The NBA’s salary structure allows for players who have been in the league longer to make bigger salaries. That’s how Shaq made almost $7 million more than LeBron last year—LBJ has a max contract for as long as he’s been in the NBA (notice that D-Wade’s, Bosh’s, and Melo’s are exactly the same), but that max contract continues to go up as experience goes up, and thus the Big Diesel pulls in an extremely Big Paycheck.

But does the NBA really need a retirement program? I’m of the capitalist-heavy opinion that the big payoffs should go to the players who worked the hardest and produced the most success. Win Shares do a good job of measuring a player’s actual impact—if they’re not making the impact, maybe they shouldn’t be making the money.

Having a contract entirely based on Win Shares would make injuries devastating—sitting a season out like Yao Ming would mean not getting paid. And since injuries are a fairly inevitable part of professional sports, and happen entirely outside of a player’s control, that seems unfair. Win Shares obviously have to be an incentive, over a base salary. It would be nice to see the base be lowish, almost like an NBA minimum wage (which would still be astronomical compared to us normal wage-earners… the rookie minimum this year is $457,588), and then the millions on top of that be commensurate to that player’s role in helping his team win.

Rookies, then, would still come in with salaries based on the league-wide rookie scale. And even a player with the mythical negative Win Shares would still earn the league minimum.

Tying the incentives to Win Shares instead of strictly-individual statistics like scoring, or arbitrary achievements like making the fan-selected All-Star team, cuts out selfish players who will run up their own statistics without contributing to the team’s win record. They’d only get the paycheck if their efforts turned into wins. The problem of not having (or having) a good supporting cast is negated as well, with a nice parity-promoting touch—a star player with good help is going to win a ton of games, but the star loses some in Win Shares because their teammates helped so much; thus, if the star is looking for a bigger paycheck the only option would be to go to a team with less help and try to still win a good number of games.

It’s all moot, really, seeing as how no player would ever be willing to sign a contract with so little money guaranteed—and there’s not really reason to overhaul how contracts operate across the league. But even as a pipe dream it gives us some insight into a contract structure that is more fair. A structure that ensures that the right people are getting the big paychecks, instead of the prima donnas.

If nothing else, consider the dialogue open.