With the 2014 NBA draft now in the books, the next big date on the offseason calendar falls at the end of the day Monday. That's when the league's fiscal year ends, which also means free agency negotiations can begin. With the accounting for the 2013-14 season just about complete, let's take a look at which team spent their dollars efficiently, and which ones did not. This ties into the draft as well.
A hallmark of teams that combine winning with financial prudence is that they have rotation players on rookie contracts who are helping add wins to the bottom line. As Kevin Pelton pointed out in his critique of the trade that sent Omer Asik from Houston to New Orleans, the biggest bargains in terms of pay-to-production ratio are almost always former first-rounders laboring under their rookie-scale contracts.
Amin Elhassan has discussed this topic as well. The methodology used mirrors what we used at Basketball Prospectus, which in turn was based on the influential work of late Baseball Prospectus writer Doug Pappas. I've used team salary figures compiled by ShamSports.com, which are updated through the end of the season but aren't final until the close of the fiscal year. The key measurement is marginal dollars per marginal wins (MDMW), or how much it costs a team to win a game. The notion of marginal efficiency is a better way to look at the subject than just dollars per win for a couple of reasons.
First, with the collective bargaining agreement mandating a salary floor for each team (this season it was $52,811,000), every team by definition is going spend at least that amount. Also, teams always will win some games no matter how bad they are. So the measurement we're making is the amount of money spent above the floor, against the wins those dollars purchased above minimum expectation of 10 wins. Using marginal factors in our analysis lets us isolate the efficiency of each team's spending.
That said, this is never a straightforward topic when it comes to the NBA. For example, sometimes teams intentionally take on bad contracts in order to acquire future assets, even though they are aware the extra money isn't likely to result in wins. There are other examples of skewing factors that can make a simple ranking of team spending somewhat misleading. To work around that, I've divided the teams into the eight possible "buckets" of spending efficiency, and you can see them listed below. The buckets are listed in order from most desirable (playoff teams below the salary cap) to least desirable (teams over the tax apron that managed to miss the postseason).
Bucket 1. Below cap | 2013-14 result: playoffs
Atlanta Hawks (marginal dollars per marginal win: $198,480; overall rank: fourth)
While the Hawks as constructed don't have championship upside, it's hard to imagine a more successful transitional roster than the one constructed by Danny Ferry last summer. It's no coincidence that Ferry once worked in the San Antonio front office, because even though Al Horford missed most of the season, the Hawks made the playoffs and pushed top-seeded Indiana to seven games on the basis of fairly valued assets, a clear style of play and talent that fit that style. Best of all, Ferry's efficiency means that Atlanta has all sorts of flexibility to build off last season. Ferry accomplished this even though recent first-rounders Dennis Schroder, John Jenkins and overseas stash Lucas Nogueira didn't do much to contribute.
Bucket 2. Above cap, below tax | 2013-14 result: playoffs
San Antonio Spurs ($203,246; fifth); Portland Trail Blazers ($224,736; sixth); Houston Rockets ($251,479; seventh); Indiana Pacers ($300,616; ninth); Charlotte Hornets ($302,005; 10th); Oklahoma City Thunder ($365,006; 12th); Dallas Mavericks ($370,999; 13th); Toronto Raptors ($416,445; 14th); Golden State Warriors ($455,119; 16th); Chicago Bulls ($480,152; 19th); Washington Wizards ($514,414; 22nd)
Really, this is the group any hopeful contender outside of the mega markets wants to be in. The champion Spurs are there, and are the model organization in all of sports right now. Sure, they owe a lot to the willingness of Tim Duncan to work for far less than his market value, which set the tone for fellow foundation players Tony Parker and Manu Ginobili. But let's not forget that budding All-Star and Finals MVP Kawhi Leonard still is on rookie scale, earning about $1.9 million last season. The open market value of Leonard's 8.4 WARP is about $16.7 million. Remarkable.