Can more bonuses improve the NBA?

by on February 23, 2006 at 7:38 am in Sports | Permalink

Rick Barry has an idea:

If every player had money on the line in every game based upon a victory, you’d see some unbelievable competition. Sports and team concept would change dramatically.

Of course "per-victory" contracts are possible now, but most incentive clauses are based on individual performance or a victory or playoff threshold.  Why? 

1. Star players might injure themselves too frequently if they try hard every game.  Their value to the league involves an external benefit which they do not internalize when deciding how much injury to risk.  Plus an owner wants them to conserve their energy for the playoffs or for critical opponents.

2. Most fans don’t know the difference between a good game and a bad one.  They want only to see the stars, and maybe a few slam dunks.  So why impose more pecuniary risk on the players?

3. Players already try hard on offense.  Making them play tough defense would deaden the game.  This doesn’t explain why a single team doesn’t use per-victory bonuses, but it does suggest there will be no league pressure to do so.

4. Per-victory compensation will lead the players to blame each other too much for particular losses.  Team morale and thus team productivity will decline.

5. Incentives of fame and approbation already impose this incentive structure, and in a more powerful way than money could do.

6. When bargaining over a contract, a player would reveal negative information about his self-estimated talent level by accepting high-powered incentives.  If you cut a deal with big bonuses, the team must think your low-effort state of output is pretty crummy.

I put weight on all of these, but on #6 least.  Of course this relates to the general question of why firms don’t use more high-powered incentives.  Could the lesson be that fewer business variables matter than you might think?  (A related question is why don’t more firms use idea futures.) 

Would Rick Barry’s idea improve the NBA?  Comments are open…

1 Matthew Cromer February 23, 2006 at 7:51 am

Tyler, you need to give up on the NBA and watch some good college teams play. That’s basketball! That’s the difference between a team sport and five individuals on each side showboating.

2 Erik February 23, 2006 at 8:37 am

In soccer (at least in Europe), players generally receive bonuses for each win as well as for achieving certain team goals. Performance incentives are rarely individual (except appearance-based bonuses for injury-prone players). Individual performance in basketball is, of course, much more easily observable than in soccer.

I bet that one of the outcomes of team-based incentives in basketball would be lots of good in-fighting: players blaming each other for their failure to perform. I’m all for it!

3 Sean February 23, 2006 at 9:08 am

#6 – the Master P/Ricky Williams contract with the Saints

4 James Grimmelmann February 23, 2006 at 9:15 am

AZ: The ultimate sports sin is placing a bet on your own team to lose, no?

5 AZ February 23, 2006 at 9:28 am

I suppose throwing games, whether or not you’ve bet on them, is the WORST thing you can do in the sports world, but even if you bet on your team to win it is looked at is sacrilegious. Even if you bet on other SPORTS it is frowned upon – look at Rick Neuheisel, who participated in an NCAA tournament bracket while a FOOTBALL coach at Washington. And the fact that Pete Rose allegedly bet on the Reds to WIN while he was the manager was also frowned upon.

6 ptm February 23, 2006 at 10:27 am

I’ve been an software and physics guy of various sorts at various firms. As for why more firms don’t use incentives, individuals don’t matter that much. The very best software people (say, top 5%) are extremely productive, those you can target with higher base pay. But the difference between a 55th percentile guy and an 80th percentile guy isn’t that big – in fact, it’s smaller than the differences in organizational structures. So it makes more sense to make sure you only hire from the top half, and then concentrate your efforts on effective management (good source control, design processes, bug tracking, etc).

That, and firms are stupid. I mean, if techies didn’t think so, would Dilbert be so popular?

7 Collin February 23, 2006 at 11:12 am

Chris — correlation or causality?

We cannot say that players aren’t status/fame-seeking just because money comes with it. However, (in your defense) we also cannot say that players aren’t money-seeking just because status comes with that.

8 Robert Schwartz February 23, 2006 at 12:56 pm

“There’s no I in TEAM.”

But there is a ME.

I once saw a slow break in a NBA game on TV in November. One player launched a very long jump shot that hit the rim and bounced all they way back to mid court. A player on the other team grabbed the rebound, and all ten players turned around and walked slowly to the other end of the court.

These days I only watch college basketball.

9 Brad Lehman February 23, 2006 at 1:19 pm

Of course “per-victory” contracts are possible now, but most incentive clauses are based on individual performance or a victory or playoff threshold. Why?

Ok, a few guesses, with a note that current incentives are usually nominal in scale to the overall contract:

1. Scale of incentive involves a framing effect. A 1% bonus for making an All-Star team seems like a “reward.” However, if too much salary became wrapped up in a win total (or any incentive), it looks more like a “non-guaranteed contract.”

2. Team win total depends on too many external/unpredictable factors, including: injury, coaching skill, performance of other players. There are only a handful of players so good that they can make any team a winner on their own.

3. Too much money in incentives will cause players to put themselves in greater risk of injury, not from playing “harder” but from trying to play when hurt. There would be less willingness to listen to team doctors.

There are a few other problems with this type of structure, although I doubt these are the holdback:

1. For teams that are out of contention (or already locked into a playoff spot), there may be additional pressure from the ownership to slack off (i.e. “rest” injured players, “test” unready rookies).

Why pay more for a 28-54 season than you would for a 22-60 season (or, for that matter, 62-20 versus 59-23, if your seeding is locked up)?

This is not that different than the rationale for having a draft lottery: minimize any incentive for management to lose.

2. There will be greater tendencies towards “dynasties.” Why would a free agent go to a losing team if he didn’t need to? If enough money is on the line in a contract, Player X will always choose the Lakers over the Warriors. The greater the proportion of the contract tied to wins, the stronger this tendency will be.

10 Kyle February 23, 2006 at 1:58 pm

How does this all play into the Alfie Kohn-type discussions of intrinsic/extrinsic motivations. Don’t we have at least some results that suggest that over-focus on results even with rewards can decrease result quality in every area you’re not specificilaly incentivizing?

11 Paul February 23, 2006 at 2:31 pm

The NBA is horrible. It’s only slightly more entertaining than professional wrestling, which is to day, not at all.

12 Paul February 23, 2006 at 2:35 pm

Okay, let me add something constructive. Cut the number of regular season games in half, then use per-victory contracts. Fewer games means fewer injuries and less fatigue. Then players can afford play harder. As it now stands, regular season games, especially any single game, don’t mean much so they are usually intensely boring.

13 MQ February 23, 2006 at 2:45 pm

You said it before I could, Paul. Shorter too.

14 Neema February 23, 2006 at 7:11 pm

If you were going to blow up the CBA and replace it as if you were the NBA despot, then it should look something like this:

1) Contracts are only guaranteed if it says so in the contract. A player and team would have the right to make a contract guaranteed over x years, but wouldn’t have to.

2) Soft cap with a progressive luxury tax. This way, small trangressions over the cap have little penalty, but if you’re the Knicks, then you’re paying out the wazoo.

3) Minimum payroll for each team. Currently the spread is $33 million (Charlotte) to $123 million (NY). This probably should be a two or three year average.

4) Remove all the salary cap/luxury tax exemptions. Making the salary cap simple will help GMs and fans alike. The cap should probably be raised to compensate.

5) Eliminate fixed rookie contracts. Chris Paul is underpaid. Dwayne Wade is underpaid. Darko is making $4.1 million this year and $5.2 million next year.

6) Bring the age-limit back to 18, or graduating high school. Should LeBron have had to go to college?

7) In response to (6), make the NBA DL viable, more like the MLB minor leagues. I love the college game, but some of these high school kids don’t belong there, don’t want to be there, and the fans know it. Put them in the NBA DL.

8) Shorten the schedule to 72 games. Make the first two playoff series best-of-five. These guys are playing way too often.

15 BigMacAttack February 23, 2006 at 9:36 pm

Cb,

Don’t mean to bum you out, but again, I mostly agree.

But what about the talent pool? Can you see Jason Richardson in goal for Man U?

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