Low-Risk Pitcher Signings — Any Reward?

While it makes big headlines when a team signs a free-agent superstar, there are at least as many cases of a team signing an average—or below-average—player in hopes that his performance will exceed his modest salary requirements. Here, I investigate “low-risk” pitcher signings of this type, to see if and when they work out.

Without fail, each offseason brings with it a multitude of personnel concerns for each team. Players lost to free agency need to be replaced; those no longer effective require upgrades; and it seems that every team has the worst bullpen in the league. While the big-name, big-money acquisitions hog the headlines, the majority of transactions involve less money given to average, slightly above-average, or risky players.

These moves have come to be known as “low-risk, high-reward.” If little money is being committed, it seems to be a worthwhile investment to take a flyer on a formerly successful veteran; he may be able to regain past form. If not, the club will not suffer much because their commitment was not great in the first place. With these signings becoming more prominent each year I decided to investigate, with respect to pitchers, whether or not teams are actually rewarded highly for their low-risk signings.

DEFINING LOW RISK, HIGH REWARD

The first aspect of these signings refers to contract length. “Low risk” implies a lack of commitment to the duration of a contract. When discussing the contract duration I am going to consider the following situations to be of low risk:

• minor-league deal
• waiver claim
• 1-year deal
• 1-year deal with option

The second part of low-risk signings involves offering the pitcher a lesser contract in exchange for his getting another shot at playing in the major leagues. When we determine monetary criteria, the major factor to take into account is the differential in team payrolls. It would not be fair to set a maximum dollar value at, say, $4 million, because for different teams that would account for a different percentage of total payroll.

Four million dollars would equate to 3.96 percent of the payroll of the 2007 Chicago White Sox. It would account for as much as 10.71 percent of the payroll of the 2004 Washington Nationals. Clearly the figure was more significant to the Nationals, because it represented a higher percentage of their payroll. Then you’ve got instances of 2008 Alex Rodriguez making as much as the 2007 Florida Marlins!

And so to use percentages of team salary makes more sense than to use raw figures. In order to qualify as a low-risk, high-reward pitcher signing, one must meet the aforementioned duration criteria as well as account for no more than 5.25 percent of the team payroll. On a team of 25 players, each will average 4.0 percent; I allowed an extra 1.25 percent to give some leeway to small-market teams in rebuilding phases. For consistency’s sake, though, I evaluated all of these signings on a case-by-case basis in order to determine if any truly should not merit inclusion. For the most part the moves I logged consisted of salaries below 4.0 percent.

LOGGING TRANSACTIONS

Using the ESPN.com transaction archive, I logged all of the moves from October 2002 through August 2007 that met the contract-duration criteria. Through the USA Today Salary Database, I determined individual and team salaries. After entering all of the data, I removed any signing in excess of the 5.25 percent. This left me with 352 pitcher signings to examine.

It is interesting to see the frequency, or lack thereof, per team. For instance, the Cleveland Indians made 22 such moves in this span,whereas the San Francisco Giants made only two: Al Levine in 2005 and Russ Ortiz in 2007. I expected to have five pages consisting solely of Athletics transactions but found only eight qualifying moves. It then dawned on me that Billy Beane has an undying love of young arms, and his low-risk signings were more on the offensive front.

As for individual players, a fair number had been low-risk signings as many as three times. However, only three pitchers achieved the feat four or more times: Terry Mulholland (5), Pedro Astacio (4), and James Baldwin (4). For the record, of the thirteen total seasons between these three pitchers, only Astacio’s 2005 with the Padres and Mulholland’s 2004 with the Twins actually produced significantly positive results. Table 1 shows the number of low-risk pitcher signings per team.

DETERMINING THE AMOUNT OF REWARD

With everything logged, I decided to use Keith Woolner’s VORP (value over replacement player) statistic to gauge the actual reward levels of these signings. VORP made the most sense to me since the statistic acknowledges the contributions made by league-average players; though these players are not superstars, it would not be fair to deem them ineffectual in a zerosum game like baseball. Other statistics will use average players as the 0.0 baseline, but VORP uses a below-average player.

In its simplest definition VORP measures the amount of runs contributed above what a replacement-level player would produce in the same percentage of team plate appearances. With respect to pitchers, it refers to the amount of runs saved above what a slightly belowaverage pitcher would give up if given the same amount of opportunities.

It does not account for defense in the way that Win Shares does but, because we are measuring pitchers, the amount of runs saved vastly outweighs this. I am not sure any general manager has ever signed a pitcher primarily for his defensive ability.

In terms of logging statistics, only the VORP total(s) for the duration of the low-risk contract qualified. For instance, if a player signed a low-risk deal in 2003 and then went on to have productive seasons with the same team in 2004 and 2005, only the 2003 VORP was recorded. The 2004 and 2005 seasons were under different contracts unlikely to meet the 5.25 percent maximum. Additionally, due to the productivity of the initial low-risk season, the risk no longer exists; the team understands what type of production the pitcher could provide. Signing him to a deal still 5.25 percent or less of the team’s salary would not necessarily qualify as low-risk but rather as a reasonable upgrade over the low-risk contract.

ANALYZING VORP

In order to determine if these signings worked out, the question of what constitutes reward must be answered. Clearly, anything 0.0 or below would be detrimental, as 0.0 would imply no reward to the team, and a value less than that would imply that the pitcher’s effect on the team was actually negative. Additionally, players never called up to the big leagues after signing a low-risk deal provided no reward, as they were never given a shot.

While this would not necessarily be negative on the scale of Jose Lima’s 2005 season, it would still suggest that no reward was earned. The question then becomes: How do we analyze positive VORPs?

After some careful thought it was determined that, while anything above 0.0 is technically positive, there are different levels of positive rewards. A pitcher could provide low reward, medium reward, or high reward. Here is the reward criteria in terms of VORP totals:

• Negative Reward: VORP < 0.0
• No Reward: VORP = 0.0 or N/A
• Low Reward: VORP = 0.1 to 9.99
• Medium Reward: VORP = 10.0 to 19.99
• High Reward: VORP = 20.0 +

 

Table 1. “Low-Risk” Pitcher Signings, 2002–2007

Arizona	12		Milwaukee	13
Atlanta	10		Minnesota	8
Baltimore	9		NY Mets	20
Boston	14		NY Yankees	10
Chicago (AL)	6		Oakland	8
Chicago (NL)	8		Philadelphia	9
Cincinnati	20		Pittsburgh	11
Cleveland	22		San Diego	13
Colorado	19		San Francisco	2
Detroit	8		Seattle	9
Florida	10		St. Louis	19
Houston	17		Tampa Bay	15
Kansas City	15		Texas	9
LA Angels	5		Toronto	12
LA Dodgers	10		Washington	9

 

LOW-RISK BREAKDOWN

Of the 352 low-risk pitcher signings in this five-year span:

• 16 were high-reward
• 47 were medium-reward
• 101 were low-reward
• 96 were no-reward (0.0 VORP or never called up) 92 were negative-reward

By combining the five subjects into two—medium-reward or higher-reward, and then everything else— we are left with 63 significant rewards and 289 instances of little, no, or negative rewards. Essentially, from September 2002 to August 2007, these low-risk pitcher signings have truly worked out approximately one-sixth of the time (17.8 percent).

The highest reward belonged to Chris Carpenter, who recovered from Tommy John surgery and had a then career year in 2004 with the Cardinals. Jaret Wright had the second-best reward, during his 2004 season with the Atlanta Braves. (Incidentally, Wright also had the second-worst VORP of low-risk pitcher signings, during his 2003 season with the Padres. Wright’s 2003 VORP was –15.7, a distant second-to-last from Jose Lima’s –31.6 in 2005.)

VORP TO WAR

Using the rule of thumb that 10 VORP runs equates to one win above replacement (WAR) allows us to quantify the results in a form more suitable in determining team contribution. Carpenter’s 40.5 VORP equates to

4.05 wins; his production in saving runs relative to the amount a replacement-level pitcher would surrender resulted in a contribution of about four wins. The numbers essentially stay the same as they are merely being scaled down, but converting saved runs to wins helps in determining whether or not these moves are worth the risk.

Here are the low-risk pitchers accounting for two or more wins above replacement:

 

Chris Carpenter (2004)	4.05	Kenny Rogers (2003)	2.54
Jaret Wright (2004)	3.99	Russ Springer (2007)	2.51
Jeremy Guthrie (2007)	3.82	John Thomson (2003)	2.51
Paul Byrd (2005)	3.54	Todd Jones (2004)	2.49
Takashi Saito (2006)	3.36	Tom Gordon (2003)	2.11
Jeff Suppan (2003)	3.25	Darren Oliver (2006)	2.10
David Bush (2006)	3.09	Mike Timlin (2003)	2.04
David Riske (2007)	2.77	Steve Trachsel (2007)	2.03

WORTH THE LOW RISK?

Now that the results are there, we can use them to determine whether the low-risk signing is a sound strategy. By simply looking at the breakdown of reward types shown earlier, we can deduce that, in this span of five years, only a small percentage of low-risk pitcher signings have provided a significant reward. This does not necessarily undermine the strategy, however, as it is important to analyze the results with the mindset of a prospective general manager unable to know whether his low-risk pitcher will work out.

When we try to determine whether the strategy is worth continuing, the ideas of betting and probability come into play. The Cardinals gambled on Chris Carpenter and their strategy paid off immensely. However, the success of the strategy depends on how often it pays off overall, not on how well certain select moves pay off. If you make five low-risk pitcher signings and only one of them works out, no matter how much that pitcher produced, the strategy does not look very sound—80 percent of those signings were not worth it. The key here is to find the sum total of salaries and wins above replacement among these pitchers and then calculate how much each win costs. With this group of 352, the salaries add up to $214.2 million, and they combine for 1 0.4 WAR. This results in a salary of approximately $1.94 million per win. Generally speaking, the more reliable free agents will cost somewhere between $4 million and $7 million per win above replacement. Signing low-risk pitchers appears to be a sound strategy because a general manager is paying significantly less money per win. If the low-risk pitchers had cost somewhere near the aforementioned range or even more, then the strategy would not make sense. If you are going to end up paying a similar amount per win, then it is a much safer investment to sign a pitcher who brings with him less of a question mark.

When it comes to these signings, though, it is important to remember that for every Chris Carpenter there are four Bruce Chens. It might make sense to take a flyer on a pitcher to fill out a rotation, but to build the majority of a rotation with these pitchers would not be a good use of payroll.