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Measuring MLB's winners and losers in costs per win

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Major League Baseball

Every year we attempt to measure how well MLB teams did in spending money to procure wins. Here's this year's ranking, and, to no one's surprise, Oakland excels.

With the 2013 season completed, it's time to look at how well MLB team did in translating payroll to wins. Despite what many fans think, there's not necessarily a correlation between payroll and winning: as any New York Yankees fan knows, spending money doesn't guarantee a playoff berth. The more important measure is how efficiently a team managed their resources: coaxing the most wins for the least amount of money.

A very crude measure of this is cost per win, as presented here with payroll information from USA Today (playoff teams in bold):

TEAM PAYROLL WINS CPW
Houston Astros $22,062,600 51 $432,600
Miami Marlins $36,341,900 62 $586,160
Tampa Bay Rays $57,895,272 92 $629,296
Oakland Athletics $60,664,500 96 $631,922
Cleveland Indians $77,772,800 92 $845,357
Pittsburgh Pirates $79,555,000 94 $846,330
San Diego Padres $67,143,600 76 $883,468
Atlanta Braves $89,778,192 96 $935,190
Kansas City Royals $81,491,725 86 $947,578
Colorado Rockies $71,924,071 74 $971,947
New York Mets $73,396,649 74 $991,847
Seattle Mariners $72,031,143 71 $1,014,523
Baltimore Orioles $90,993,333 85 $1,070,510
Arizona Diamondbacks $89,100,500 81 $1,100,006
Milwaukee Brewers $82,976,944 74 $1,121,310
Minnesota Twins $75,802,500 66 $1,148,523
St. Louis Cardinals $115,222,086 97 $1,187,857
Cincinnati Reds $107,491,305 90 $1,194,348
Texas Rangers $114,090,100 91 $1,253,737
Washington Nationals $116,056,769 86 $1,349,497
Boston Red Sox $150,655,500 97 $1,553,149
Chicago Cubs $104,304,676 66 $1,580,374
Toronto Blue Jays $117,527,800 74 $1,588,214
Detroit Tigers $148,414,500 93 $1,595,855
Los Angeles Angels $127,896,250 78 $1,639,696
San Francisco Giants $140,264,334 76 $1,845,583
Chicago White Sox $119,073,277 63 $1,890,052
Philadelphia Phillies $165,385,714 73 $2,265,558
Los Angeles Dodgers $216,597,577 92 $2,354,321
New York Yankees $228,835,490 85 $2,692,182

Not a bad measure: put together a young team with a low payroll, add a savvy older manager to the mix, and you've got a pretty good shot at making the playoffs. Conversely, if you're a major-market team, you have a pretty good shot at spending enough to be competitive. With the Yankees and the Phillies, spending on payroll is a given; the cost-per-win numbers probably aren't causing any loss of sleep for executives from those teams. if you're Jerry Reinsdorf, you should be questioning what you get for your money.

But there's a better way to evaluate how well MLB spent their money. The late Doug Pappas put together a formula to measure Marginal Dollars per Marginal Win. The assumption is that a terrible team in baseball, made up entirely of minimum-wage players, would still manage to win a third of their games, so the true measure of success is how efficiently a team spent to procure wins past that minimum. In short, a successful team would spend the fewest marginal dollars to procure the most marginal wins; conversely, an unsuccessful team would overspend to procure a relatively few number of wins. They wasted their money.

Here are the numbers for the 2013 season. The formulas are not too complex, but they bear some explanation.

We begin with payroll numbers from the USA Today database, considered to be the most reliable out there. We then list the team's winning percentage. MWs refers to Marginal Wins: the assumption is that a terrible team made up of minimum-wage players would win a third of their games, and the Houston Astros came dangerously close to this baseline. The formula, as set forth by Pappas: ((Pct - .300) x 162). We're calculating 25 players on an active roster plus three on injured reserve, with an MLB minimum salary of $490,000. MP refers to Marginal Payroll; the amount a team spends beyond the MLB minimum of $490,000 per player on a 25-man roster with three on injured reserve (in other words, the total payroll minus $13,720,000 -- the cost of a team totally comprised of minimum-payroll players.) CPMW refers to cost per marginal win: marginal payroll divided by marginal wins. In this ranking, the poorest-performing teams are at the bottom; the better-performing teams are at the top.

TEAM PAYROLL WIN %
MWs MP CPMW
Oakland Athletics $60,664,500 0.593 47.47 $46,944,500 $989,013
Tampa Bay Rays $57,895,272 0.564 42.77 $44,175,272 $1,032,905
Pittsburgh Pirates $79,555,000 0.580 45.36 $65,835,000 $1,451,389
Cleveland Indians $77,772,800 0.568 43.42 $64,052,800 $1,475,327
Atlanta Braves $89,778,192 0.593 47.47 $76,058,192 $1,602,372
Miami Marlins $36,341,900 0.383 13.45 $22,621,900 $1,682,426
Kansas City Royals $81,491,725 0.531 37.42 $67,771,725 $1,811,013
San Diego Padres $67,143,600 0.469 27.38 $53,423,600 $1,951,333
St. Louis Cardinals $115,222,086 0.599 48.44 $101,502,086 $2,095,505
Baltimore Orioles $90,993,333 0.525 36.45 $77,273,333 $2,119,982
Cincinnati Reds $107,491,305 0.556 41.47 $93,771,305 $2,261,075
Colorado Rockies $71,924,071 0.457 25.43 $58,204,071 $2,288,436
Arizona Diamondbacks $89,100,500 0.500 32.40 $75,380,500 $2,326,559
New York Mets $73,396,649 0.457 25.43 $59,676,649 $2,346,334
Texas Rangers $114,090,100 0.558 41.80 $100,370,100 $2,401,428
Seattle Mariners $72,031,143 0.438 22.36 $58,311,143 $2,608,299
Milwaukee Brewers $82,976,944 0.457 25.43 $69,256,944 $2,723,006
Washington Nationals $116,056,769 0.531 37.42 $102,336,769 $2,734,669
Boston Red Sox $150,655,500 0.599 48.44 $136,935,500 $2,827,026
Detroit Tigers $148,414,500 0.574 44.39 $134,694,500 $3,034,480
Houston Astros $22,062,600 0.315 2.43 $8,342,600 $3,433,169
Minnesota Twins $75,802,500 0.407 17.33 $62,082,500 $3,581,545
Los Angeles Angels $127,896,250 0.481 29.32 $114,176,250 $3,893,877
Toronto Blue Jays $117,527,800 0.457 25.43 $103,807,800 $4,081,458
San Francisco Giants $140,264,334 0.469 27.38 $126,544,334 $4,622,118
Los Angeles Dodgers $216,597,577 0.568 43.42 $202,877,577 $4,672,876
Chicago Cubs $104,304,676 0.407 17.33 $90,584,676 $5,225,838
New York Yankees $228,835,490 0.525 36.45 $215,115,490 $5,901,660
Philadelphia Phillies $165,385,714 0.451 24.46 $151,665,714 $6,200,054
Chicago White Sox $119,073,277 0.389 14.42 $105,353,277 $7,307,066

The lesson: spending on payroll certainly doesn't equal success. The top five teams on the list made the playoffs; committing to youth and keeping payrolls down made the teams financial successes when it came to performance on the field.

In this case, the clear leader is the Oakland Athletics, as GM Billy Beane managed once again to put together a winner with limited resources. Also a clear winner: the Pittsburgh Pirates, who built through the draft throughout the years and made the playoffs with a young team augmented with veterans like Justin Morneau and Marlon Byrd.

At the bottom of the list, the 10 teams spending the most per marginal win had to be disappointed with their seasons, save the Dodgers. The Yankees really are impervious to analyses like these; the team's payroll is what it is and the team's revenue structure makes spending on marginal wins a meaningless number. The same goes for Philadelphia.

But for the White Sox, Cubs and Giants, these numbers are deadly. All three teams had disappointing seasons at the box office, and all three team are in markets where there's lots of competition, so efficient spending on winning is all.

Obviously there are limits to this kind of analysis. Payroll is a crude measure; just as important, we'd argue, is revenue, but MLB teams zealously guard revenue data, so we can't throw it into the equation. In general, a large-market team will generate more revenue than a small-market team -- duh! -- but there are many shades between a New York Yankees and a Kansas City Royals when it comes to revenues, and there's some fluidity in where a team ranks in revenue production among its peers. Of course, that's a whole other can of worms.

RELATED STORIES: Follow the money: How efficiently MLB teams spent money this season; Measuring the 2011 financial winners and losers in MLB

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