MAJOR LEAGUE BASEBALL GENERAL MANAGERS: AN ANALYSIS OF THEIR RESPONSIBILITIES, QUALIFICATIONS AND CHARACTERISTICS

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1 MAJOR LEAGUE BASEBALL GENERAL MANAGERS: AN ANALYSIS OF THEIR RESPONSIBILITIES, QUALIFICATIONS AND CHARACTERISTICS 18 NINE: A Journal of Baseball History and Culture 74 (Spring 2010) Authors: 1 Glenn M. Wong, 2 Chris Deubert 3 I. Introduction...1 II. Major League Baseball General Managers: A Brief History and GM s in the 21st Century...2 A. The Business of Baseball...2 B. The 21st Century: The Job of General Manager in i. Preparation and Meetings...6 ii. Player Drafts...9 a. Abbreviated version of Major League Rule (MLR) 4 Draft...9 b. Abbreviated version of Major League Rule (MLR) 5 Draft...13 iii. Dealing With Agents...14 iv. Salary Arbitration...18 v. Media Responsibilities...20 vi. Crisis Management...24 vii. International Markets...26 viii. Contracts...26 ix. Rules...31 a. Waivers: MLR b. Options: MLR x. Major League Disabled List MLR 2(g)...36 III. The Changing Qualifications, Demographics and Characteristics of a MLB GM...36 A. Playing Experience...36 B. Coaching Experience...37 C. Education...38 D. Age...39 E. Gender/Race...40 F. Family Ties...41 i. The MacPhails...42 G. Career Path...43 IV. Conclusion...47 I. Introduction The 2008 World Series between the Philadelphia Phillies and Tampa Bay Rays was a study in contrast for the two teams front offices. The eventual champion Phillies were led by General Manager (GM) Pat Gillick, who had 45 years of experience in Major League Baseball (MLB) front offices. Gillick, 71, had previously been General Manager of the Toronto Blue Jays, Baltimore Orioles and Seattle Mariners after having broken into the industry in the scouting departments of the Houston Colt.45s and Astros and New York Yankees. The Phillies victory was Gillick s third World Series title as a GM, having guided the Blue Jays to championships in 1992 and In his 27 years a GM, Gillick s teams made the playoffs 11 times. 1 Electronic copy available at:

2 On the other hand, the Rays GM was 31-year old Andrew Friedman, who was only in his fifth year in MLB. Like Gillick, Friedman played college baseball. However, Friedman never made it to the minor leagues like Gillick. Instead, Friedman, who earned a B.S. in management with a concentration in Finance from Tulane University, worked on Wall Street, first for Bear Stearns then for MidMark Capital. Friedman got into baseball after he had a chance to meet Rays principal owner Stuart Sternberg, a fellow New Yorker who made his fortune on Wall Street. The two unique paths of Gillick and Friedman exemplify the increasingly divergent paths MLB GMs have taken to their positions. In any case, the obligations of a MLB GM are difficult and wide-ranging. The first part of this article will examine some of the duties of a GM, including representing the organization at league meetings, preparing for amateur player drafts, negotiating with agents, representing the club during salary arbitration, dealing with the media, managing the club s payroll, ensuring compliance with MLB rules and the collective bargaining agreement and of course creating and developing the clubs roster. The second part of the article will examine the characteristics and experiences of MLB GMs including playing experience, coaching experience, education, age, gender, race, family ties and career path. In addition, the article will provide a longitudinal study, showing how these traits have changed over 20 years, comparing GMs from 1989, 1999 and II. Major League Baseball General Managers: A Brief History and GM s in the 21 st Century A. The Business of Baseball I was not able to understand how it could be right to pay an actor, or a singer, or an instrumentalist for entertaining the public and wrong to pay a ball player for doing exactly the same thing. 4 Albert Spalding Ever since the days of Albert Goodwill Spalding in the late 19 th century, baseball has been run like a business. Spalding, an owner and prominent businessman, tried to export the game to other countries, realizing a great opportunity to sell his bats and balls to reap tremendous profits 5. Spalding was one of the original pioneers and advocates for professional baseball and was the first owner to cry in response to increasing salaries: Professional Baseball is on the wane Salaries must come down or the interest of the public must be increased in some way. If one or the other does not happen, bankruptcy stares everyone in the face. 6 In 1879, in response 2 Electronic copy available at:

3 to excessive player turnover among ball clubs, the reserve clause was enacted, which allowed each team to reserve or list five players each year that could not sign with another team. Eventually the reverse list expanded to the entire roster and was a important piece of the way business was done in Major League Baseball (MLB) for almost 100 years. In 1972, outfielder Curt Flood challenged the reserve system and lost in the Supreme Court of the United States 7, but paved the way for the Messersmith/McNally grievance, which allowed players to earn rights for free agency. The business of baseball was changed forever and became more complex. Baseball s reverse clause gave teams a perpetual option, i.e. that at the end of each season the team had the right to exercise their option on the player s contract for another season at the team s designated salary. Dave McNally, a pitcher with the Baltimore Orioles, and Andy Messersmith, a pitcher with the Los Angeles Dodgers, chose not to sign the contract exercising their option during the 1975 season. As a result, at the end of the season, arbitrator Peter Seitz ruled that Messersmith and McNally had played out their option years and were now free agents. With the potential for every player in MLB to be a free agent every year, MLB was forced to negotiate a new collective bargaining agreement with the Major League Baseball Players Association (MLBPA). Under the leadership of executive director Marvin Miller, a former negotiator for the United Steelworkers, the players won free agency and salary arbitration, depending on a player s service time. Since 1972, baseball has experienced three strikes (1972, 1981 and 1994) and at least one publicly known period of collusion under the helm of Commissioner Peter Ueberroth from In recent history, player salaries have generally benefited from free agency and salary arbitration: the average player salary increased over 41% from 1976 to 1977, from $52,300 to $74, In total, the average salary increased 316% in the 1970s, from $29,303 to $121, These type of increases are what led owners to collude during the mid 80s, to the point that the average salary actually decreased from 1986 to On average, salaries have increased at an average rate of about 17% per year since the advent of salary arbitration. As a result MLB has had a fairly contentious relationship with the MLBPA over issues involving the economics of the game, namely free agency, salary arbitration and revenue sharing. Prior to Messersmith/McNally, it was common for many GMs to exercise full control over the organization, including marketing, sales, public relations, promotions, stadium operations, the ticket office, etc. Terry Ryan, GM of the Twins since, described full control in 3

4 his experience as follows: He was responsible for all aspects of the baseball operation: scouting, the drafts, major league coaching staff, budgeting, dealing with the media, contract negotiations, arbitration background and preparation, and representing ownership. 12 Today, many GMs have full control over these same duties; however, in the past, these responsibilities were handled by one person, while today many organizations assign the daytoday aspects of these responsibilities to a few individuals. Lou Gorman, former General Manager of the Boston Red Sox, recalls his time with the expansion Kansas City Royals in their relatively small front office: The entire organization when I arrived on the scene was [General Manager Cedric] Tallis, his secretary Peggy Matthews, and another secretary, Irma Reed That was the entire organization on my first day in Kansas City. 13 Jon Schuerholz, former GM and current President of Baseball Operations of the Atlanta Braves, commented on his responsibilities when he became GM of the Braves in 1990: Among modern-day GMs, that (interacting with all departments) is certainly atypical. In the old days, twenty or more years ago, the Haywood Sullivans, the Frank Cashens, the Lee MacPhails, the Al Rosens, there was a lot of crossovers for GMs. Many had, in fact, direct responsibility for all facets of the organization. But by the 90s, baseball had become so sophisticated, so technically specific in each area, that it became impossible for a GM to manage it all. We re in that age of specialization. 14 The responsibilities of the front office have evolved over time, especially since the 1970s. The sheer number of employees has correspondingly increased across the league. MLB revenues exceeded $6 billion in 2008 and the need for skilled workers in the front office may continue to follow the trend. 15 Depending on an organization s resources, the total number of front office employees varies. Nonetheless, each organization strives to employ skilled people who have the ability to exercise full control when necessary. Ultimately, struggles between owners and players, GMs and agents, and the union and the MLB s Players Relations Committee (PRC) have dictated the business of the game. There is no question that the game has evolved into a much more complex landscape than it was when Mr. Spalding held the reigns. Owners invest hundreds of millions of dollars, if not billions, in teams and players. As a result, owners must constantly wonder if they are receiving the appropriate return on their investment. In today s information age, salaries and contracts are often made public and both the owners and players egos are on the line each season. The job for 4

5 GMs has become an extremely complex, stressful, 365 day a-year career that seems to clearly have its rewards and its drawbacks. B. The 21 st Century: The Job of General Manager in 2009 A General Manager of a MLB team is the ultimate decision maker who usually has the power to assemble a ball club to compete at the major league level. There are many factors that influence how a GM operates within a franchise; those factors dictate how much influence he or she has on managing the team. GMs must be able to identify the team s needs and provide solutions when applicable. They are responsible for building the team from the resources provided. GMs are constrained by the budgets presented by ownership, as well as the quantity and quality of the employees throughout the organization including scouts, coaches, managers, instructors, player development executives, baseball operations assistants and other various other members of the front office staff. Information is processed by all of the teams employees and directed through distinct departments, to the team executives (Scouting Director, Farm Director, and Assistant GM), and eventually to the GM. Sometimes, the onus falls on the GM to make the final decision on many (if not all) issues facing the club; other times, the GM delegates this responsibility to team executives. GMs commonly lean on others within the office for support and advice. John Schuerholz commented on his role as a GM: I am not the end-all and be-all from beginning to end-the alpha or the omega. I am the conductor of the orchestra who knows when to point his baton to each individual in our organization. On one particular occasion, I m going to point to the cellist because he knows this situation better. On another occasion, I m going to point to the drummer to give me something. But I know when and whom to point to for their involvement, for their intuition, for their judgment, for their recommendation. Who knows pitchers best? Who s the best judge of infielders? Who judges competitive personalities best? After all, that s the characterization of the orchestra conductor so that together we play this beautiful music of winning. 16 The GM has to provide the vision, mission and leadership necessary for an organization to operate efficiently. He or she may have to make the ultimate decisions; however, hiring the right people for the other key positions within the organization is as necessary as any decision. Theo Epstein, GM of the Boston Red Sox, comments on his time in San Diego as the Director of Baseball Operations: 5

6 At the time the Padres were a very small baseball operation. They only had, really, a handful of full-time people involved in the office. Padres GM Kevin Towers did a great job of surrounding himself with people that complimented him, and each brought a different skill set to the table. 17 Like any other business, major league clubs rely on skilled professionals to perform their specific job well. Because there are so many day-to-day responsibilities, GMs have to hire competent individuals and trust their judgment and character. Some GMs may claim that the hiring process is the most important part of the job. i. Preparation and Meetings Each organization is unique, and it would be erroneous to claim that all teams conduct their businesses the same way. However, since all teams compete in the same league and for the same purpose (to win a World Series, even though some may even question this), they have similar schedules and time constraints. Almost every organization plans meetings after the major league season and/or instructional league ends for assessment, information gathering, and evaluating, as well as boosting camaraderie and morale. While some teams may have allencompassing organizational meetings, some teams choose to have separate meetings with each department; scouting, player development, major league manager and staff, minor league managers, international scouts and player development. Subsequent to the specific department meetings, the team executives may convene to assess the clubs situation and plan for necessary adjustments. Some organizations are reported to find smaller interdepartmental meetings more efficient than an all-encompassing organizational meeting. Meetings can also provide the GM with a forum to communicate his or her vision for the organization s future. In the winter of 1990, when Schuerholz was hired as GM for the last place Atlanta Braves, he wanted everyone to know that they had a chance to win, stick out their chests, and be proud to be Atlanta Braves. 18 Communicating his values and ideals to the Braves organization was paramount for Schuerholz and many other GMs today. Because of the highly competitive nature of the business, it is crucial to implement a business plan, as in any other industry. Much of an organization s success depends on the GMs ability to clearly articulate his strategy or vision to the rest of the organization. Consequently, strong communication skills are essential to the position. 6

7 All-encompassing organizational meetings are rare; however team executives consistently contact directors from each department when necessary. Scheurholz used organizational meetings as a [vehicle] to renew our yearly goals and motivate the uniformed staff with about thirty member our our baseball staff when we gather for the start of each spring training. This presentation sets the tone, creates a working theme for that spring training and season. 19 Most organizations tend to meet after at the end of the MLB season, while some organizations plan to meet with many members of their own organization at the Winter Meetings in December. The Winter Meetings take place each December, typically in a warm climate city even though everyone spends the majority of time in a hotel or convention hall. Two of the largest concerns at the Winter Meetings are preparations for the Rule 5 draft and impending free agency. Largely due to media exposure, the Winter Meetings have evolved from a gathering of owners and GMs having drinks, conducting business and discussing the state of the game to a megaconvention with a job fair, trade show, and awards banquets. The lobbies are often filled with agents, team executives, field managers, reporters, media and job seekers. Teams set up headquarters in suites for negotiations and meetings, while the reporters investigate and stir up rumors to notify fans of possible trades and signings. Each organization is unique, and all executives have different agendas, but they must all be prepared to discuss the labor market with other teams in order to try to gain an edge on the competition. Depending on the time of year, each department will need to have meetings to discuss strategies and make decisions. For instance, prior to spring training the player development department must meet with the minor league managers, instructors, and field coordinators to design a plan for the upcoming season. Throughout the season, members of the front office are continually faced with events that warrant meetings. In an interview with Baseball Prospectus, Theo Epstein described the typical business cycle for a front office: In November and December, we re constantly on the phone with agents, constantly trying to assess the needs and wants of other organizations, constantly brainstorming trades. We re on the phone with other organizations, agents, figuring out our budget, making moves, setting up for the winter meetings, visiting free agents or players with no-trade clauses occasionally. November and December are very hectic and they re all about player acquisitions and player transactions. January is typically a month of contract negotiations and arbitration February and March move into spring training, and you take the time to get to know your big league staff and get to know 7

8 your big league club.in April and May, you prepare for the draft June and July you re focused on the needs of your big league team, what you need to do to make the right moves. In the last week of July you re constantly on the phone with all the clubs, negotiating trades. In August, your attention shifts back to the minor leagues In August and September, you re back for the playoff run, and then October comes around and you re back looking at minor league free agents and the whole cycle of the off-season starts again. 20 A GM s role is constantly is changing, as Theo Epstein described above. Besides personnel issues, there are meetings, drafts, and a myriad of transactions to keep the front office busy at all times. Like any business, there is a year-long cycle that requires focused attention and constant evaluation. Former Minnesota Twins GM Terry Ryan explained how evaluating players and the organization as a whole is a collaborative process: It is a combination. I don t think any club would tell you it was one department or another; it has to be in unison. All groups are in it together and one good thing we have going here is the scouting department has respect for the minor leagues, the minor league department has respect for scouting and the major league respects them both. Consequently, we are all on the same page, which has allowed us to have some success with all of us contributing. 21 Every organization must work cohesively within their system and account for who is producing results (players, scouts, managers, front office). J.P. Ricciardi, the GM of the Toronto Blue Jays, commented in an interview with Baseball Prospectus, that [t]he most important thing you can have as a GM is your ability to evaluate. Everyday you evaluate someone, whether it s the coach, a manager or a player - the players are obviously the most important you have to feel confident as far as the decisions you have to make. 22 Additionally, considering the number of responsibilities GMs, it is important that GMs have an ability to scout the scouts. It is impossible for a GM to observe the hundreds or thousands of potential major league players so he must rely on the judgments of the various talent evaluators in the organization. In this vein, it is not uncommon for a GM to trade for prospects that he himself has never seen personally, instead relying on his scouts. Preparation and meetings play a crucial role in this process and help ensure organizational progression through the season. 8

9 ii. Player Drafts During the business cycle, teams have the opportunity to acquire players in two distinct drafts: the Rule 4 Draft, or First-Year Player Draft, held annually in June and the Rule 5 Selection Meeting held each year in December, usually at the Winter Meetings. It is important to distinguish between the two drafts and discuss the importance and impact on clubs for each draft. a. Abbreviated version of Major League Rule (MLR) 4 Draft 23 The Rule 4 First-Year Player draft is the selection process whereby teams select players from high schools and colleges who are residents from the United States (including Puerto Rico) and Canada. The draft shall not exceed fifty rounds, not including supplemental rounds. Major League Clubs are responsible for determining the eligibility of selected players. Clubs may not transfer their draft position to another Club, as in other American professional sports. The order of priority alters between American League and National League teams (based on whether the year is odd or even). Clubs then select in reverse order of the previous year s standings. Once a player is selected, that Club has exclusive negotiation rights with that player for the next year up until seven days (Closed Period) before the next year s First-Year Player Draft, unless the player is a fifth-year senior and qualifies under MLR 4 Section (F). If a player does not sign prior to the Closed Period following the First-Year Player Draft at which the player was selected, the Club must notify the commissioner s office at which point the player becomes eligible in that upcoming season s draft. Also, if a player returns to school in the fall without signing a contract, the player will be subject to selection at the next First-Year Player Draft. The first Rule 4 Draft took place in Originally, the draft was implemented to curb signing bonuses because the most affluent teams could purchase the best talent at the college and high school levels. This continues to be a problem today, because agents such as Scott Boras have found loopholes in the rules, which have allowed for player holdouts and resulted in exorbitant signing bonuses. 24 MLB has rewritten and tightened some of the language in the rules; however, small market teams with priority in the draft have been forced to avoid certain prospects because of signability issues. Nonetheless, the draft system strives to provide opportunities for weaker clubs with awarding them priority in the draft. 9

10 The responsibility of selecting players for the Rule 4 Draft mostly falls on the shoulders of the Scouting Director. GMs may have influence over the first few rounds; however, because the GM has likely not had the time to travel and see all of the amateur players, he will most likely defer to the Scouting Director. Regarding his role in the draft, Oakland Athletics GM Billy Beane commented: We bring all of our scouts in for the draft, and once they come in there is a lot of interaction on certain parts, but my involvement is mainly on the higher round guys. Usually through the first three or four rounds, and once we get deeper in the draft, that s when you are really relying heavy on your area scouts, and the scouting director will coordinate that a lot as the draft goes along. 25 Throughout the year, scouts are evaluating and communicating with high school and college players throughout North America, trying to gauge the potential of each and every player. The draft is a critical process that many teams feel can help sustain long term success. Because of the competitive nature of baseball and the draft, it is imperative to be prepared and have a solid understanding of the available players abilities and character or makeup. As previously discussed, organizational philosophies vary considerably. With respect to the Rule 4 Draft, some teams prefer to draft younger players with more athletic upside out of high school, while some like to mitigate the risk associated with younger players and opt for players with more maturity but perhaps closer to their athletic ceilings from the collegiate ranks. However, there are also some teams that stress the fact that their preference is purely for the best player available at the point of selection. Asked about her preferences regarding high school versus college talent, Assistant GM of the Los Angeles Dodgers Kim Ng replied, I d take the best available, signable player. 26 Describing his preference for selecting high school or college players, GM of the Cleveland Indians Mark Shapiro said: One thing with the draft: There is no black and white, only a series of grays. Every study you do is a piece of revisionist history. That said, we do have tendencies, and our tendencies have evolved. Investing huge dollars in high school right-handed pitching as a top draft pick might not be something we d want to do Anytime you have the ability to take a 21-year-old instead of an 18 year old, a lot of the mystery is gone and the time frame becomes more predictable there s that definite benefit to picking college players in high rounds. But there s also less romance. You don t get to daydream as much about what a player could be in four or five years

11 There is no doubt that there is a tradeoff between high school and college talent; however, it is important to understand that each team s system is unique and currently there is limited evidence to claim that drafting one way or another works better in the long run. While the A s favor a similar strategy to the Indians, the Atlanta Braves, who have boasted 14 consecutive Division Championships entering the 2006 season are notorious for drafting high school pitchers and developing them into major leaguers. Also, successful franchises, such as the Yankees, have to adjust their strategies because they will likely be choosing players towards the end of rounds. New York Yankees Vice President of Baseball Operations, Marc Newman discussed a study the Yankees conducted regarding draft slots: We did a study where we looked at 10 year-slices of the draft, to see where players end up based on where they re drafted. The lion s share of major league regulars and upper-level players are drafted above the 20 th pick below 20 th, 25 th it gets more difficult. We made some choices that didn t work out. We also signed some major league free agents, and that cost us some high picks. The last few years, 2003, 04, 05, I think we ve done better. 28 There are a number of factors that affect player development, and certain organizations are better at developing talent than others. That fact notwithstanding, all GMs and scouts should try to select the best players available in the draft that are most likely to succeed in their system while making sure that they have the resources available to sign them. Brian Kohlscheen, a scout for the Atlanta Braves from , said: We focused on high-ceiling athletic baseball players with good makeup We felt if we could get the high school kid in particular, into the system, our player development people could take this piece of clay and mold them into the type of player and person to have success on and off the field. 29 Drafting philosophies will differ depending on several factors including, but not limited to, an organization s financial resources, free agent signings (compensation or supplemental picks), player development systems, roster depth, team success, and overall organizational vision. Once a team selects a player, the challenge of signing the player begins. Many cases are settled because both sides understand and recognize the term slot money, a term that MLB uses to describe pre-arranged bonus figures for every single drafted player. For instance if the 11

12 60 th pick signed for $600,000 and the 62 nd pick signed for $580,000, then the 61 st slot should get somewhere in between those two values, i.e. around $590,000. Other sports rookie compensation systems work similarly. However, because of the varying degree of club resources, the presence of agents, and asymmetric information, slotting does not always occur efficiently. Players can use slot money as a bargaining chip to ward off certain teams. In Scouts Honor, author Bill Shanks describes how Jeff Francoeur wrote to teams notifying them he was going to cost a considerable amount above slot money if he was chosen prior to the 23 rd pick (Braves position) because he wanted to be a Brave or attend Clemson on a football scholarship. 30 In most cases, if a scouting director wants to pay above slot money he must get approval from the GM and owner, and then present his reasoning to a representative from the commissioner s office, which will most likely discourage overspending. 31 The struggle between player and scouting director is more of a reflection of his agent (ultimately the MLBPA), and the Commissioner (ultimately MLB). This struggle is clearly displayed in numerous cases involving Scott Boras clients, where many talented individuals are avoided early in the draft. In 1997, J.D. Drew, a Boras client, was selected with the second overall pick by the Philadelphia Phillies. Boras and Drew asked for a contract package that totaled $11 million, a number that Philadelphia staunchly refused to consider. 32 As a result, Drew re-entered the draft in The Phillies had the first pick in the draft and therefore could have drafted Drew again. The Phillies instead drafted Pat Burrell, who was not a Boras client. Many have speculated that Burrell, while an extremely talented college athlete was a slightly less talented and less expensive signing, i.e. that Burrell was in fact more signable. The Phillies signed Burrell to a five year deal totaling $8 million. 33 Drew was selected 5 th overall that same draft by the St. Louis Cardinals, who signed Drew to a deal worth approximately $8.5 million over 4 years. 34 In recent years, Boras has arguably caused teams to pass on drafting Boras clients due to contract and signing bonus demands. In 2007, Rick Porcello, arguably the best high school pitching talent available in the draft, dropped all the way to the Detroit Tigers, picking 27 th, due to contract demands. Eventually, Porcello signed a four year guaranteed contract worth $7 million, the highest ever given to a player drafted out of high school. 35 However, there is another opportunity for teams to select players much more inexpensively and under extremely different circumstances in the Rule 5 Draft. 12

13 b. Abbreviated version of Major League Rule (MLR) 5 Draft 36 Major League Clubs may claim contracts of players who are on Minor League Reserve Lists (MLR 2) and who are subject to selection as set forth in MLR 5. There are three phases of the Rule 5 draft: 1) Major League phase 2) Class AAA phase, and 3) Class AA Phase. Players selected in this draft must be placed in one of the three phases in which the player was selected. With respect to Reserve Lists, only players from a lower classification are eligible for selection. For example, a Class AAA player will be selected and added to the Major League Reserve Lists and a Class AA player can be placed on either the Major League Reserve List or AAA Reserve List. The team selection process is similar to Rule 4, which states that American League and National League teams alter priority for selection in odd and even years, respectively. Also, teams have priority based on the previous year s standings. If a team does not exercise its right of selection when called, the team no longer participates in the draft. To be eligible for selection in the Rule 5 draft players must be on the Minor League Reserve Lists, but not protected on the Major League 40-Man Roster and are entering their 4 th Rule 5 draft if they were 19 or older on the June 5 th preceding the signing of their original contract. Players are also eligible if they are entering their 5 th Rule 5 draft if they were 18 or younger on the June 5 th preceding the signing of their original contract. Therefore, teams must leave or make room on their 40-man rosters if they want to select players in this draft. Teams must submit their 40-man rosters in late November. Teams who select players in the Rule 5 draft must pay $50,000 to the team from whom they are taking the player and must keep the player in the major leagues (25 man roster) for the entire season or offer the player back to his former team for half of the $50,000 selection price. Teams can select players for $12,000 and $4,000 at the AAA and AA phases, respectively. The Rule 5 draft was enacted to prevent teams from stockpiling talent in their minor league systems. For example, in today s game, it gives a first baseman in the Cardinals system (behind Albert Pujols) or a second baseman in the Red Sox system (behind Dustin Pedroia), a chance to be selected by other teams who could use their services. Teams that chose not to select any players focus on making sure that their best potential Rule 5 prospects are protected on the 40 Man Roster. Alternatively, a team that selects a player must think he can contribute immediately at the major league level. Usually, players are 13

14 selected during the Rule 5 Draft. Many teams ignore the potential for drafting a player because they do not want to take on the risk associated with keeping a player in the major leagues for an entire season. Teams prepare prior to the Rule 5 draft by meeting with their professional scouts, farm directors and GMs. Dean Taylor, Assistant General Manager of the Kansas City Royals, commented on the Rule 5 draft: Early in the year, we alert our pro scouts to those players that will be eligible for the Rule 5 draft so we can gather scouting judgements of them during the minor league seasons. After the 40-man rosters are determined on November 20, we prioritize all of the players we like that are left unprotected and then make final decisions at the Winter Meetings on the player(s) we want to draft. If we have a high pick in the Rule 5 and don t have a player we want to draft, we will consider requests from other clubs who want us to draft a player for them in exchange for another player from their organization who we feel can help us in the future. 37 Many teams have had success with adding a Rule 5 selection. For example, in December 2006 the Cincinnati Reds chose Josh Hamilton with a Rule 5 pick, via the Chicago Cubs. Hamilton, the #1 overall pick by the Tampa Bay Devil Rays in 1999 had struggled through the minor leagues, largely due to a recurring drug problem. Nevertheless, Hamilton appeared to have turned a corner and in 2007 hit.292 with 19 home runs in only 90 games for the Reds. After 2007, Hamilton was traded to the Texas Rangers, where he proceeded to have a breakout 2008 campaign, batting.304 with 32 home runs and 130 RBI. Other recent examples include Dan Uggla, selected by Florida in 2005 from Arizona, and Joakim Soria, selected by Kansas City in 2006 from San Diego. Uggla is now a two time All-Star (2006, 2008), making it in his Rule 5 season, and Soria made the AL All-Star team in 2008, his second with the Royals. The most well-known example of a Rule 5 selection may be Roberto Clemente, who was selected by the Pirates in 1954 from the Brooklyn Dodgers. Ultimately, the Rule 5 Draft offers teams the ability to take a chance on a player who can end up paying huge dividends for minimal financial costs. Therefore, more small market teams may find it in their best interest to focus more time and preparation towards to the Rule 5 Draft. iii. Dealing With Agents The Messersmith/McNally decision forever changed baseball salaries. Players now had 14

15 the ability to test the open market and owners essentially had the power to pay for major league talent each and every year. However, it was the agents who predominantly helped facilitate the salary increase. Agents often feel pressure to obtain the highest value contract for his player, to gain respect from the MLBPA and also to appease his client, who may be being solicited from other agents who claim they can do a better job. Pioneer agents, such as Jeremy Kapstein (then known as Jerry), were disliked by many owners and GMs because they did not care for the shrewd statistical analysis and tough negotiating tactics used by the agents during salary arbitration and free agency negotiations. 38 During the first few years of free agency in the late 1970s, several agents gathered up and helped many players sign as lucrative deals as possible. 39 Therefore, many GMs were discouraged to deal with agents. On Kapstein, Cincinnati Reds GM Dick Wagner recalled that [h]e almost hypnotized his players. In fact, Wagner actually got rid of some of Kapstein s clients on the Reds just to get rid of Kapstein. 40 However, today there is certainly a varying degree of appreciation and comfort between GMs and agents. For instance, Mark Shapiro, whose father was a prominent agent, believes that because clubs and agents both want what s best for a player, there s no reason to not find common ground. 41 On the other hand, many more experienced executives like Jon Schuerholz, who have been around the business from the time of the reserve clause, feel otherwise. According to Jerry Crasnick, author of License to Deal, Schuerholz has two main objections to agents: one, he feels that they drive a wedge between players and teams as a buffer to communication. If the team has a message for a player, management has to communicate through the agent and vice versa. Two: Schuerholz also feels that agents reap excessive commissions on negotiated contracts. Schuerholz believes that with systems like salary arbitration and free agency in place, agents do not necessarily have to do much to earn the 3-5% commission. 42 Today, hundreds of agents flood the markets in competition for the best talent available. Though almost every major league player has an agent, it is important to understand that the agent market is a diverse landscape full of lawyers, MBAs, and businessmen and women with an enormous variance of resources. Therefore, GMs and front office executives have to deal with a myriad of personalities on a daily basis. Crasnick observes: By my latest count there are about 410 agents certified by the Players Association, which means there has been a substantial increase in recent years. I find that surprising. Given the prominence 15

16 of groups such as Scott Boras' agency, SFX, Octagon and IMG, you'd think the small proprietor would be getting squeezed out rather than proliferating. 43 In most daily situations, assistant GMs deal with agents; however, according to many people in the industry, the participants in the team-agent relationship all depend on the player, and thus the agent. Certain GMs have better relationships with agents than others. Houston Astros President of Baseball Operations Tal Smith commented today, the relationships are much different; they re not as adversarial. There are exceptions where an agent doesn t get along with club personnel and visa versa, but for the most part it s not as adversarial as it was in the early days. 44 Nonetheless, dealing with agents is necessary in this business and it is important for GMs to be prepared for negotiating with agents of all different styles. Former Dodgers GM Fred Claire mentions the importance of the club and agent relationship: When I think about my experience dealing with agents there are several key thoughts that come to mind. I always viewed both the team and the agent as part of the player s support team. This isn t an easy goal in that the general manager and agent are on different sides of the table in contract negotiations but it still should be the primary objective. After all, the idea in a contract negotiation is to work out a deal that benefits both the player and the team. And when a player encounters problems or health issues, the team and agent clearly should be working together. 45 A distributive negotiation refers to one in which the parties compete over the distribution of a fixed sum of value. The key question in a distributed negotiation is who will claim the most value? In distributive negotiations, a gain by one side is made at the expense of the other. 46 Negotiations over MLB contracts are exactly this type of negotiations. Conversation between team and agent can often times be very informal, however some agents are very formal with negotiations. The key is to always be focused on the fundamentals of the negotiation and to remember the ultimate goal. How well a team and agent can communicate will dictate the negotiations and typically a healthy relationship between the two sides leads to a quicker and more productive negotiation. Long-time baseball agent Randy Hendricks discussed what agents look for when negotiating for a player in his book Inside the Strike Zone. Hendricks writes: 16

17 To calculate the dollar value of a player, the agent must factor in the specific talents of the player, the availability in the marketplace of players with similar skills, the unique makeup of the player, and the demand for such a player by major league teams. 47 Hendricks also discussed a number of factors (health, peak market value, physical condition) that influence the valuation of a player s worth. Therefore, it is important to understand that a player salary is a function of numerous factors which are independent of the players previous history and ability. Agents and GMs must try to forecast what a player will be worth to the ball club down the line. Both the agent and the GM are involved in a distributive negotiation. Each side will do whatever it takes to move towards their optimal value. Agents continually try to push the salary as high as and for as long a term as possible to protect their client s future. Likewise, a GM needs to pull the salary as far down as possible and sometimes for shorter terms to protect their investment. The push and pull that agents and GMs face in each and every negotiation reflects a much larger picture that involves MLB and the MLBPA. Player salaries are dictated by the market, and the Labor Relations Department (LRD) of MLB and the MLBPA try to control the market by advising teams and agents during negotiations. During spring training in 1987, Roger Clemens, with support from his agent, Randy Hendricks, held out of Boston Red Sox camp in hopes of receiving a larger salary. During the holdout, Boston Globe reporter Dan Shaughnessy quoted Hendricks: It s becoming clear to me that the Boston Red Sox are not negotiating. It s Park Avenue (MLB) and New York City (PRC) negotiating. They (Red Sox) are always huddling to call us back after a day or two. We have reliable information from a number of sources that the idea is to hold Roger Clemens salary down as a means of holding down all young players salaries for the next couple of years. What is disturbing is that the Boston Red Sox are not negotiating on their own. They are negotiating as a pawn of an industry-wide policy. And the people who ll suffer are the Boston Red Sox, their fans and Roger Clemens. 48 This holdout occurred during the same time that MLB owners were found to be in collusion; however, it is possible that the LRD and MLBPA continue to exercise some control over the markets in order to control costs or, in contrast, elevate salaries. 49 Regardless of whether or not the LRD or MLBPA aid in a negotiation, each and every contract signed has an effect on other players salaries. As players sign newer and more lucrative contracts, those contracts serve 17

18 as benchmarks for future negotiations at the same position. The big picture involving the LRD and MLBPA is also evident in such examples as salary arbitration. iv. Salary Arbitration A means of alternative dispute resolution, salary arbitration is a procedure designed to give players who have accumulated a certain number of service days an opportunity to have their salaries set by a neutral third party. Service days are accumulated by being on the major league team s 25-man roster. Established in 1973, salary arbitration has contributed tremendously to the sharp rise in MLB salaries. 50 One of the pioneers in the arbitration process, Tal Smith, said on the subject, some people embraced it and other didn t understand it a lot of the problem is that Clubs are responsible for the actions of others, whether deemed appropriate or not. 51 In order to qualify for salary arbitration, a player must have accrued at least three but less than six years of service time, or be labeled a Super Two, which means that the player has accumulated at least 86 days of service during the immediately preceding season and ranks in the top 17% of the players in MLB with at least two years, but less than three years of service time. 52 In MLB, arbitrators use a final offer or last-best-offer system, which means that the arbitrator must choose one of the figures proposed by either side. The arbitrator cannot split the difference as he can in NHL salary arbitration cases. For instance, if a player proposes a $2 million salary and the team proposes $1 million, the arbitrator has to decide if the player is worth more or less than the midpoint of $1.5 million and award either the $2 million or $1 million figure accordingly. Each year, players and clubs exchange salary arbitration figures in January and then have until February, when the hearings are scheduled, to settle and come to agreement. Arbitrators can base their decision only on the following criteria listed in Article VI, Section F(12) of the Collective Bargaining Agreement: 1. Player s contribution to his Club during the past season (including but not limited to his overall performance, special qualities of leadership and public appeal) 2. Length and consistency of his career contributions 3. Record of the Player s past compensation 4. Comparative baseball salaries 5. The existence of any physical and mental defects on the part of the Player 6. Recent performance record of the Club, including but no limited to its League standing and attendance as an indication of public appearance 18

19 Arbitrators must not consider any other factors than those listed above when deciding on a player s value during salary arbitration. Even though the following information may aid either party s case, neither party may is permitted consider the following: Financial position of the Player and the Club, Press comments, testimonials or similar material bearing on the performance of either the Player or the Club, Offers made by either Player or Club prior to arbitration, The costs to the parties of their representatives, attorneys, etc., Salaries in other sports or occupations. Most players who are eligible for salary arbitration do not end up going to arbitration. The majority of cases are settled, largely due to the last-best-offer system and because the arbitration process can be detrimental to both the short-term and long-term relationship between club and player. In almost every arbitration case, the player sits in a room with his agent, Michael Weiner of the MLBPA, the team s representatives, Frank Coonelley of the LRD, and the arbitrator. 53 The team must present a case to show why the player is not worth the asking price. Thus, the experience could certainly be damaging to a player s ego and cause resentment towards management. For this reason GMs must be careful about participating in the salary arbitration process. On the other hand, if the player wins the case, the team may be disinterested in renewing his contract in the following year because they will most likely again have to increase the player s salary. Because of the final-offer structure of choosing one of the two figures (team or player), and negative implications on relationships, most salary arbitration cases are settled prior to the hearings. Regardless of whether or not a case is filed and heard by an arbitrator, it is imperative for both sides to prepare the case for the player. Noted Tal Smith, I just [had] a sense of what s important in establishing a player s value and tried to present it in a well-organized, orderly fashion to an arbitrator. 54 Depending on the organization, preparation is done in-house or through outside counsel. It has been estimated by several sources that about half of MLB teams contract with outside counsel for presentations during the hearings. However, most teams prepare the information for the cases themselves, and then deliver the content to the outside counsel who will then present it to the arbitrator. Others teams may let the outside counsel handle all aspects of the process, while some may handle everything internally. Kim Ng, 19

20 Assistant GM of the Los Angeles Dodgers, discussed her role with salary arbitration and hiring outside practitioners in an interview with Baseball Prospectus: The White Sox do arbitration cases in house, while the Yankees had an outside practitioner come to handles cases. The Yankees had to take a different approach than most teams, since they had such tremendous post-season success. That definitely factors into cases-it s a huge factor. Playing in the post-season in New York is the ultimate stage, and players tend to do well in arbitration if they succeed on that stage. 55 Like teams, certain agents who lack the expertise and experience to handle salary arbitration provide outside consultants for their players during salary arbitration. 56 The arbitration process requires a combination of a strong analytical ability and knowledge of statistics, and not all agents possess these skills. When a player wins an arbitration case, another salary benchmark may have been set for in the player market. Clubs have dialogue with the MLB LRD about appropriate player values. However, it is ultimately the organization s decision and responsibility to determine the best salary for its players. The bottom line for GMs is that you must be prepared for salary arbitration and determine what may be the best course of action based on the player, resources, time and expertise. v. Media Responsibilities For the first half century of professional baseball, games could only be watched live at the stadium. However, in the late 1930 s teams began to comprehend the importance and power of the radio. Before this time, MLB clubs relied heavily on gate receipts, and they felt that the radio would allow fans to gain access to games for free and devalue the stadium experience. However, while leading the Brooklyn Dodgers front office, Larry MacPhail pioneered the movement to broadcast live games on the radio. Soon after the Dodgers negotiated radio broadcasting deals, the first of which was $1,000 for each game, all 16 MLB teams adopted the strategy. 57 There was a debate as to whether or not fans would be interested in following their team on the radio and at the park, or would instead elect to sit back, listen and no longer attend the games. Based on the popularity of sports today, it is clearly evident that the former ensued. Today, the media is a diverse landscape that primarily covers radio, television, and the 20