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Are general managers underpaid?

May 7, 2010, 12:15 PM EDT

Ken Rosenthal thinks so:

The GM is arguably the most important person in any organization — more
important, perhaps, than even a superstar player.

baseball’s dirty little secret is that the sport’s highest-ranking
executives are absurdly underpaid.

Most general managers earn
between $500,000 and $2 million annually, major league sources say. Only a few — notably, the Yankees’ Brian Cashman
Red Sox’s Theo Epstein and Tigers’ Dave Dombrowski — are believed to
make more than $2 million.

Rosenthal doesn’t think GMs are impoverished or anything, but he does believe that, given how critical the right GM is to an organization’s success, there should be greater competition over the best ones, and that in turn should lead to higher salaries.

I think he’s right (and I’ll add that lower-level front office people are criminally-underpaid, far more so than GMs are).  The problem, of course, is that the GM is the one guy who the owner himself hires, so for that decision he doesn’t have the insight of the sharpest guy in most organizations — the general manager.

Why wouldn’t there be a bidding war for a Brian Cashman or a Theo Epstein or guys like them?  Is there a gentleman’s agreement among owners not to do so?  Are they just dense?  Because it strikes me that paying a couple million more in order to get the right guy to run the team would more than pay for itself over time.

  1. Xpensive Wino - May 7, 2010 at 12:32 PM

    But since most of them prove to be mind-numbingly incompetent as a result of poor trades, bad free agent signings and the inability to establish a solid scouting department and developmental minor league program (especially with most teams now forced to grow their own players), wouldn’t the majority of GMs just be grossly overpaid? Aren’t they already?
    How many people are out on the streets right now worth millions of dollars to be a GM…….and how many are currently employed that are so phenomenal at their jobs that they deserve massive pay raises? There’s a few, but not that many. And, Cashman and Epstein have unlimited resources. They should be pretty good at what they do and their failures are masked more easily with the ability to throw more money at a problem.

  2. Old Gator - May 7, 2010 at 12:32 PM

    This is breaking my heart, three chambered or not. Then again, you can understand how Macondoans, inured as we are to the financial anality of Pennywise the Clown himself, none other than the munificent Scrooge McLoria, have thicker skins than most – we’ve just plumb cried ourselves out over the exploitation of the team as a whole and have no saline reservoirs left for our collective pathos over the exploitation of Larry Beinfest.
    But the revolution will come, sooner or later. The General Managers will rise up and these tightwad owners will be put up against the wall of the Weenter Palace and be granted their just desserts. Even Tom Hicks will be shit-out of excuses on that day. Alleleujah!

  3. Charles Gates - May 7, 2010 at 12:44 PM

    MLB front office personnel: baseball’s newest inefficiency to strategically improve.
    My resume is available upon request.

  4. Darryl - May 7, 2010 at 12:48 PM

    Being one of those criminally-underpaid lower level front office people myself, I have to say: Craig, this is possibly the best piece you’ve ever written.

  5. Craig Calcaterra - May 7, 2010 at 12:52 PM

    Darryl — when your massive raise comes, please feel free to forward my cut to NBC Sports c/o Craig Calcaterra. 😉

  6. Darryl - May 7, 2010 at 1:03 PM

    Charles, I don’t normally call people out on these forums……

  7. APBA Guy - May 7, 2010 at 1:35 PM

    You can’t say that Billy Beane is underpaid since he now is part of the A’s ownership group and also has a piece of that group’s soccer team in San Jose.
    I used to mock Billy for his love of all things Tottenham Hotspur, while myself, the more urbane Arsenal supporter, would chortle twice a year at the manner of pain and suffering inflicted by the Gunners on their North London neighbors. But not this year. Tottenham has cemented Champions League football. Could this possibly be success by association, and if so, does Beane get a piece of the Tottenham club also?
    He’ll never tell. We’re just glad his wife refused to move to the East Coast when the Red Sox made him an offer.

  8. Joey B - May 7, 2010 at 2:35 PM

    When you see the damage inflicted by the bad GMs, it should give ownership a better appreciation for the good GMs. I don’t think Bavasi ever had a good signing or a good trade. Not one. Minaya has a .535 record with the NYM despite inheriting two of the best prospects in BB and an almost unlimited budget. And a couple of others that have been in last for years. For all the talk about small market and big market, does anyone really think KC and PT have wallowed in last for 10 years for no other reason than ineptitude?

  9. Big Harold - May 7, 2010 at 2:41 PM

    This s a simple case of supply and demand, except no (players) union to back up GMs. Some guys sure seem better than others but how much of that is actually the scouts and coaches? Perhaps the scouts are the ones that are criminally under paid? Also, it’s a question of resources too. It’s a legitimate question to ask; how good would Cashman look if he were operating with the budget of the Pirate’s? and forget Theo “Gorilla Boy” Epstein. He doesn’t impress me a lick, even with his budget, considering SS has been a black hole for the Red Sox for as long as he’s been the GM.
    The bottom line is there are tons of guys, executive types, with baseball back grounds that could do a passable job at GM. If you fired every GM tomorrow there would be 3 decent candidates for every position. And, to a large extent the biggest factor on how well most do would be how much they have to spend, (of course the Mets run counter to this argument but they are the exception that proves the rule).
    GMs are in the field they’re in, for the most part, because they love baseball. The owners are aware of tis so it works against them in terms of compensation. Also, lets be clear, 500K a year isn’t exactly the low rent district. I work for a major corporation, where the director of my group has over 200 employees, worldwide responsibilities and 45-50 million dollar budget and he doesn’t even make the league minimum for a player, 400K per year. Finally, nobody ever paid a nickel to watch a GM do anything.

  10. Josh Fisher - May 7, 2010 at 3:09 PM

    I wrote about this a few months back…
    Surely, some are better than others. So, why aren’t general managers the elusive Moneyball-inspired market inefficiency? Wouldn’t the surest way for a struggling organization to ascend the ranks be to make a transcendently good general manager an offer he or she just couldn’t refuse? If teams are paying players $3.5 million per win this offseason, why not pay a general manager, say, $7 million each year? After all, a great general manager must be worth more than two wins over a replacement GM.
    General managers can’t be the new market inefficiency, because we can’t adequately quantify their performance. What makes one general manager better than another? Yes, return on investment is a great place to start. But it can’t be as simple to comparing how much one GM pays for a win compared to his peers. We can’t isolate the variables with GM spending like we can player performance. Theo Epstein and Andrew Friedman have different jobs; Dustin Pedroia and Ben Zobrist do not.

  11. Nick O - May 7, 2010 at 4:02 PM

    Salary doesn’t always correspond to value. You’ve got to consider the market forces that are at play. Every year there are 25 teams looking for good starting pitching, and they all pretty much agree on who the good starting pitchers are. Every year, there are one or two teams looking for a GM, and there’s very little agreement over who the best GM candidates are. There’s also the possibility of finding an unestablished GM and signing him for essentially the minimum (say, $500 K) and having him turn out to be Theo Epstein, whereas there’s almost no possibility in signing Russ Ortiz for the minimum and have him turn out to be Roy Halladay.

  12. Tony A - May 7, 2010 at 4:41 PM

    Rather than wax poetic, I’ll just say “No”.

  13. Ron - May 7, 2010 at 5:19 PM

    Has he heard of Dayton Moore?

  14. ChrisKol - May 7, 2010 at 6:23 PM

    Didn’t the Toronto Raptors steal Bryan Colangelo from the Phoenix Suns?

  15. InnocentBystander - May 7, 2010 at 8:27 PM

    They aren’t worth paying like the best players for 1 simple reason…they do not directly sell tickets. Nobody has ever gone to a game to watch a GM. It’s the same in the movie industry. Casting or the director may technically be more important in putting together the talent, but people pay to see the stars.

  16. Charles Gates - May 7, 2010 at 9:59 PM

    To clarify my comment; I didn’t mean to imply that MLB front offices were, by definition, inefficient. I was trying to hit on the MoneyBall concept of market inefficiency exploitation. So, Darryl, sorry if I offended you. My quip was meant to imply that with so much attention being allocated to the on the field members of the organization, there may be a financial, and potentially a W/L, benefit to running a better front office–even if that connection is as simple as a more efficient office increases the amount of dollars that can be reallocated to something like prospect development.
    I was watching an O’s broadcast a few nights ago and (I think) Jim Palmer commented on a conversation he had with Billy Beane about how his data team gave him run expectancy distributions based upon the number of rotations on a breaking pitch. That may have some scouting and draft impacts…but that data isn’t going to change the world. I’d rather look into real time concession sales data, and how sales vary based upon the type of inning is occuring. Do fans buy more beer/hotdogs/nachos etc during innings with a few BBs and a HR? Or do they spend more during innings consisting of a few singles and a bases clearing double? Then, take those findings and acquire players based on fan spend reactions knowing that you’ll receive a financial benefit.
    I’m not going to pretent I know about the atmosphere of a front office and the talent distrubutions they employ, but I’d be willing to bet that over the past decade as teams attempted to get more and more data savvy, they shifted to hiring more ‘computer nerds’ with PhD’s in statistics and uber-crazy SAS skillz. Now that the data/analysis playing field has become more level, teams probably need people with more business sense. People that not only know data, but know how to use it to drive a business forward. And believe me, those people do exist and would be interested in a potential opportunity.

  17. Charles Gates - May 7, 2010 at 10:26 PM

    I read your HBT article. You claim that General managers can’t be the new market inefficiency, because we can’t adequately quantify their performance yet at the same time make statements that indicate GM performance rank: But you can look at Johnny Damon and know how much to pay him, because you have a very good idea of his expected worth (unless you are Dayton Moore).
    I’m not sure these two statements reconcile. All GM’s are not created equal. We may not have a particular metric (that I’m aware of) that can perfectly rank order them, but we do have a good idea about which ones are good, which ones are average and which ones are, well, Dayton Moore-esque. If you’re a struggling organization, why not pay a higher salary and try to snag Theo from Boston? We may not be able to say that Theo is X% better than Moore and will yield Y incremental wins over the next two seasons, but we will be pretty sure he’ll have a positive impact. And you can buy that upside for a few hundred grand…I read somewhere that each win is worth some good chunk of change. An annuitized good-chunk-of-change relative to a few hundred grand is a good ivnestment.
    Given that general managers tend to oversee the quantitative side of organizations, any new-fangled analysis of general managers’ worth would surely never reach ownership’s ears
    Assuming this is true, this is just bad investment management by ownership. If ownership wants to maximize their return, they should be looking at all facets of the organization, not just direct financial links like year over year revenue growth. Revenue growth has drivers. And I believe that proper personnel have a positive impact on them, even if we don’t have a acronym’d stat that tells us so.

  18. Boo Hoo Florio picked on your team - GET OVER IT - May 8, 2010 at 7:35 AM

    The movie analogy hit it right on the head. There are very few movie directors who have a consistent strong pull at the box office. Not many of them stand out head and shoulders like Akira Kurosawa did.
    Like some doctors and nurses, it’ll have to be more about the intangibles, the emotional rewards rather than financial pay in doing a job well.

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