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May 28, 2009 12:43 AM

How Does Total Payroll Correlate To Success?

Every year you hear the same arguments coming from the fans of small market teams to justify their team's futility.  They range from "we just do not have the payroll to compete" to "it is those darn Yankees and their $200 million payroll stealing all of our talent".  I have always felt that these arguments, while passionate, were completely unfounded.  I believe that when the first pitch is thrown to open Spring Training, any team has the chance to still be playing in October.  However, that is a difficult argument to make without any numbers to back it up.  So I decided to run the numbers and this is what I have come up with.
The Numbers
 

 

I started by listing every individual team since 1998 (the first year that MLB had thirty teams) by total payroll.  I then added wins, losses, playoff appearances and World Series titles.  For example, the row for the 1998 Atlanta Braves would have a $59.536 million payroll, 106 wins, 56 losses, a playoff appearance and no World Series.  Then year-by-year, starting in 2008, I ran regressions with payroll as my dependant variable.  What I found was that in no way was total payroll indicative of wins, losses or World Series titles.  There was, however, a very loose relationship between payroll and playoff appearances, but nothing substantial enough upon which to found an argument.  So to all the Yankees and Red Sox haters out there, I am sorry but there is not much in the numbers to back up your argument.

Of course, the data that Excel spits out is not the only way to interpret the information, so I decided to have a look with the naked eye as well.  Two things I can say for certain are that a high payroll does not equal success, and well-run teams can compete even with below-average payrolls.
 

[caption id="attachment_22" align="alignright" width="300" caption="Money Doesn't Buy Happiness"]Money Doesn't Buy Happiness[/caption]

What Were They Thinking?

 

 From 2001 to 2004, the New York Mets had payrolls that ranked 4th, 6th, 2nd and 4th in the league, with a final outcome of 294 wins, 352 losses, one season above .500 and as you can probably guess, no playoff appearances.  The 2003 squad was particularly inept; their 66-95 record the product of a $117 million payroll, second only to the Yankees.

From 1998 to 2000, the Baltimore Orioles were 24 games under .500 despite payrolls that ranked 1st, 8th and 3rd.  After this, ownership wisely decided to stop spending truckloads of money as it became clear the team was going nowhere.   

Bang For Their Buck

On the flipside, there are other teams that were consistently good over several years despite budget limitations.  Billy Beane's Moneyball A's made four consecutive playoff appearances from 2000 to 2003 despite a payroll in the bottom six in three of those years.  From 2001 to 2008,Terry Ryan's Twins were 117 games over .500 despite a payroll that never cracked the top seventeen, and three times found itself in the bottom six.

The Three Tiers

The final way I looked at my charts was to split the league into three tiers each year, with the top 10 payrolls occupying one tier, the middle ten another, and the bottom ten the final tier.  Here is how it played out.

Top Tier  
  • Payroll: $10.696 billion
  • Wins: 9,633
  • Losses: 8,175
  • Playoff Appearances: 53
  • Word Series Titles: 6
Middle Tier
  • Payroll: $7.124 billion
  • Wins: 8,840
  • Losses: 8,975
  • Playoff Appearances: 23
  • Word Series Titles: 4
Bottom Tier
  • Payroll: $4.381 billion
  • Wins: 8,240
  • Losses: 9,563
  • Playoff Appearances: 13
  • Word Series Titles: 1
As you can see, the top ten teams essentially spent as much money as the bottom twenty to win on average ten more games per year, make seventeen more playoff appearances and win one more World Series title.  On average, this means that the playoff pool consists of five teams from the top tier, two from the middle and one from the bottom.    

Conclusion

I think this helps proves that anyone has a chance to make the playoffs and win the World Series during any given year.  While low-payroll teams do not have success as often as the high-payroll teams, it is not impossible for a $55 million team to put together a winning season or even make the playoffs.  Fans of perpetually bad teams like the Pirates, Royals, Nationals and Orioles need to stop blaming cheap owners and payroll limitations, and start focussing their anger at poor management and bad drafts.

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