Roy Hibbert and the Quixotic Quest to Quantify Value

[youtube http://www.youtube.com/watch?v=Ug2hLQv6WeY]

The immediate choice facing the Pacers is simple: to match or not to match. The decision, however, is incredibly complex.

On the bright side, Portland’s max offer sheet to Indiana’s restricted free agent Roy Hibbert has pretty much guaranteed that we as observers will get to see the Pacer summer plans resolved by Friday the 13th. On the down side, it means that the freshly minted leadership team of Donnie Walsh and Kevin Pritchard only has until Friday the 13th to make some pretty far-reaching decisions for this franchise. That means that former team president Larry Bird’s well-used strategy of waiting for the right opportunity won’t be available to them.

So … what do you do?

The Pacers Will Match Because …

They have to.

After Miami eliminated the Pacers, the natural thought process was to ask what Indiana needed to do to improve enough to get past Miami and win a championship. The blue and gold made a huge leap forward in 2011-13 and now seem poised for another one. The squad is populated by young, improving players, and Indiana entered this offseason armed with a first-round draft pick and plenty of cap space.

Expectations have been set accordingly.

One thing, though.

As worthy and exhilarating as those thoughts and goals may be, they should not be — cannot be — the franchise’s top priority. The Pacers must steal an old Ford Motor Company slogan and ensure that “Quality is Job #1.” The imperative for Donnie Walsh and Kevin Pritchard this summer is simple: stay good.

There are those who aren’t going to be satisfied with what I’m about to say, but trying to “build a champion” is a fool’s errand for the vast majority of NBA franchises. There are magnet locations — like Los Angeles, New York, and Boston — that may be able to try to do it every so often, but most would have to rely on too many things beyond their control. There are too few players who are difference makers, and there is a not insubstantial amount of  luck and timing involved in hanging a banner.

Building a good team, however, is within the reach of all 30 NBA cities.

And in a small market like Indy, building a good team is absolutely crucial. The Pacers need to figure out how to become a perennial 50-game winner. Build a sound foundation to become a good franchise first. Then see if you can reach out for the ring after that. But right now, and probably forever, the Pacers’ priority is to put a quality product on the floor that the community can get behind.

And since that’s what they did this season, their offseason mission must become solidifying that foundation for success. Locking up Roy Hibbert and George Hill are steps 1 and 1A. These are good players, each of whom is well liked among the fan base. Losing one or both not only costs the team on the floor, but it costs them from a public-relations perspective. As a franchise that is finally breaking out from under a dark cloud, the Pacers cannot afford to go backwards.

The Pacers are catching something a break with the timing of Hibbert’s deal.

While the owners fell short of their goals during last season’s lockout, there were some meaningful improvements made. Specifically, the offer sheet Portland is giving is one year shorter and valued at about 30% less than it would have been under the previous CBA. (It will also qualify for the “stretch provision,” which is not entirely comforting, but could potentially mitigate the contract, if it goes horribly wrong.)

Moreover, matching a max deal for Hibbert would not entirely destroy the Pacers long-term flexibility. Hibbert would join George Hill and Miles Plumlee (and possibly Orlando Johnson) as the only players signed beyond the 2013-14 season. While that will certainly change, having that type of contract situation certainly makes it easier for the Pacers to sign Hibbert than otherwise it might be. When most teams decide to commit long-term to a player who isn’t a no-brainer for max money, they are adding that obligation on top of several others. For Indiana, only Hibbert and Hill will be set in stone as franchise mainstays.

Indiana has already secured George Hill. Now, they need to retain Roy Hibbert.

The Pacers Will Not Match Because…

It’s a bad contract.

Or, I guess a more accurate way to put it is, the Pacers consider it a bad contract.

The most likely reasoning in this scenario is that Walsh, Pritchard, and owner Herb Simon will look at Roy Hibbert and decide that he’s simply not a guy they see as the best player on a good team. If they believe that a contender requires at least two players as good as or better than Roy — perhaps even three — then paying him max money is prohibitive.

The Pacers had a highly successful season last year, but they did it by leveraging five to seven high-level players. Hibbert was an All Star, but somewhat by default given the talent scarcity at his position. Additionally, his production declined moderately over the second half of the regular season. He played well during the playoffs, but struggled to make an impact over the last three games of the Miami series and was generally unable to score on the tiny front lines of the Magic and Heat. While some of his struggles could certainly be laid at the feet of his teammates who could not get him the ball, it’s worth noting that fact also shows his reliance on the other players on the floor.

Pacers’ management may also have concerns about what effect the heightened expectations that come along with a max deal will have on Hibbert. Roy is very popular and very likable, but he isn’t the hasn’t always seemed the most stout individual. He is a hard worker, but he doesn’t always deal well with pressure, and he handles criticism poorly. Like it or not, the bigger salary will change how many people view him.

For the Pacers not to match, they will effectively have to weigh all of the factors, and decide that it simply isn’t worth the risk.

What Is Hibbert’s Value?

From what I can see, the vast majority of observers consider a four-year max deal (which pays out 25% of the team’s salary cap, or roughly an average of about $14.6 million per year) to be a least somewhat overpaying for Hibbert. Exactly how much of an overpayment is very difficult to determine.

And that fact creates a lot of difficulty in and of itself.

There is no sound mechanism of establishing a player’s value. None. In fact, it is difficult to get a clear consensus on what drives value. Value — when you’re speaking monetarily — goes beyond performance on the floor. It also speaks to marketability. Yao Ming was likely incredibly valuable to the Houston Rockets despite never even playing in a Western Conference Finals. Vince Carter was probably a cash cow for the Toronto Raptors.

So how do you measure and balance on-court (wins) and off-court (dollars) value?

Further, much of a player’s success is dependent on his environment and teammates. It’s no coincidence that Hibbert’s acclaim rose after the addition of David West and George Hill, and the improvement of Paul George and Darren Collison. So much of the NBA is about fit and opportunity, and the starting units for the Pacers were great environments for all of the players.

Some will say that the market determines value — that a player is worth whatever he can get someone to pay him. But, besides being overly cynical, that point of view is inaccurate. The market doesn’t determine the players’ value, so much as it determines his cost. Moreover, it’s not a particularly efficient mechanism. The market is at least heavily influenced — if not dictated — by the presence of existing bad contracts.

All of these things mean that you can’t dial in a contract perfectly. You speak in terms of “reasonable” and “unreasonable” based on a ballpark range. You create a vague number with wiggle room around it. The higher the number, the bigger the range on either side. You basically throw darts.

This becomes especially problematic when the market has other motives, as in the case of restricted free agents.

Over the last year or so, Larry Bird has mentioned a couple of times that Pacer owner Herb Simon was reticent to go after restricted free agents. This news was met with some consternation by many fans (and possibly Larry Bird), particularly in light of Indiana product Eric Gordon’s status as an restricted free agent this summer. I, on the other hand, consider it to be a pretty enlightened approach.

The big problem with chasing a restricted free agent is that it’s highly improbable — if not practically impossible — to sign said player to a reasonable contract. This is based on the assumption that if a team has tendered a qualifying offer, then they want to keep that player, so they’ll match any reasonable contract. Therefore, trying to sign an RFA away from his team is really an exercise trying to construct a contract offer that’s ugly enough for the player’s team to walk away from, but not so ugly that you choke on it.

It’s not exactly the type of environment that makes for good deals.

While the system was always set up to favor the team holding the RFA, the new CBA has made the advantages stronger by limiting raises and reducing signing bonuses. Offering teams can’t “trick up” contracts like they used to, so they basically are left with brute force.

This has played out not only with Portland’s expected offer sheet to Roy, but also in the offer that Phoenix is expected to make to Eric Gordon. In both of these cases, the expected contract of the player was high enough for the offering team to simply cut to the chase, presenting the players’ teams’ worst case scenarios – max Non-Bird offer sheets.

What Will the Pacers Decide?

This is deep into reading tea leaves without even being able to see the teacup. There are indications that could lead you in either direction, and prognostications from observers like Mike Wells, Bob Kravitz, and Chad Ford has been mixed.

Indiana has actively courted other free agents, most notably Chris Kaman, which could be considered an indication that they’re inclined not to match. However, that’s far from definitive. Bird’s departure may raise some questions about Herb Simon’s willingness to spend, but that, too, is heavy on speculation and light on actual proof.

Factors that mitigate towards Indiana matching include (1) my reasoning above, (2) the Pacers willing and concerted effort to make Roy Hibbert one of the most visible faces of the franchise, (3) and the newness of Walsh and Pritchard. Ultimately, matching the offer sheet is far and away the safest thing for a new leadership team to do — particularly since Simon has reportedly left it up to them.

While matching a max contract is risky, it has the advantage of being a somewhat known risk. Barring injury, Hibbert should be at least a relatively productive player. He may be disappointing in the context of the dollars, but it’s pretty unlikely he’ll be a disaster. If he goes, then you have to replace him — at least in production, if not in position.

Plus, it becomes a “forgivable mistake.” It is unlikely to be the type of error that gets either of them fired.

Without any sound basis for valuation, it becomes gut and guess. The idea of saying, “I’ll pay $X million, but not a penny more,” seems silly and arbitrary when then the stake you’ve just posted is hammered into thin air. And because of this, the calculus on the vast majority of these decisions comes down to one binary solution set: Either you have the guy, or you don’t.

And in that context, it’s easy to rationalize your way into overpaying. The other night, I tweeted that both matching and not matching were “very bad” for the Pacers, but I didn’t know what was worse.

This was a response from @HicksPD, who runs the basketball discussion forum Pacers Digest.

First, it’s probably fair to challenge me on the “very” part of the “very bad.” I go ’round-and-round with myself on how exactly to frame my view of a Hibbert max contract. I don’t think he is worth it, but I also have known (or at least strongly suspected) that this is what “the market would bear” for several months now. I understand why it is what it is, but understanding does not breed acceptance.

I did, however, want to address the question, and I wanted to do it without the constraint of 140 characters. “What (were) they gonna do with $3 million per?” is a valid question. That sum is not going to land a player — at least not an impact player.

So, what do you lose?

Well, that’s the trap in this entire situation. That $3 million doesn’t exist in a vacuum. You give $3 million more than you really want to Roy, you’re OK. But, then if you offer George Hill $2 million more than you really wanted to pay him, while you’re paying Danny Granger a couple million too much …well, now that $3 million is part of a $7 million problem.

Further, these “little” differences add to the general inflation in the marketplace as a whole. The contracts become rationalization for other contracts, and the market becomes “noisy,” for lack of a better word. There is a continual drift — and, to the delight of the players and the chagrin of small-market owners (and fans), the bias is upwards.

Therefore, the ultimate — and only — answer to Hicks’ question is that you just don’t know.

The CBA and cap rules create obstacles at certain levels, and these obstacles complicate the math. The implications are often obscured, and it makes it hard to see when the extra couple million you threw at Hill or Hibbert, or the extra year with a player option you gave to Dahntay Jones, means the difference between bidding on a player or not.

But while this line of reasoning is pretty sound from the perspective of operational discipline, it has some real practical limitations. First is the inability to actually quantitatively understand how much any player is over or underpaid with any reliability. It makes it impossible to say, “I have $X.X million dollars in waste in my payroll, and I’m going to cut that down by Y percent.”

Far more importantly, there is no incentive in the market for fiscal discipline. Or, perhaps more accurately, the incentives are often abstract and of uncertain value. However, in a concrete situation like the one the Pacers currently face with Roy Hibbert, the potential penalty for exercising “fiscal discipline” is clear and harsh.

People are fond of blaming stupid owners for offering bad deals, but the ones that stick out like sore thumbs aren’t the real issue. It’s the rocks you can’t see that are going to sink your ship. It is the sorta-bad-but-not-egregious deals that eat you up. Teams are continually forced to make the decision they have to make, and not the decision they want to make.

For there to be widespread fiscal sanity in the NBA, there needs to be a general consensus on how players are valued, one that everyone adheres to with a decent amount of discipline. However, absent any sound quantifiable valuation process, that simply can’t happen.

For now, I find it very difficult to predict exactly what the Pacers will do, simply because I don’t think they know, yet.

It’s clear they would prefer not to give Roy a contract like this — else he never would have gotten to free agency — but they can’t be sure what the alternative is. For many reasons, it behooves the Pacers to use every minute they have available before making that decision to fully flesh out every possible alternative. That isn’t failing to want to retain Hibbert — it’s simply due diligence.

In this sense, the offer sheet is blessing: it sets a clear deadline by which Indiana must either find an alternative or accept a tough-to-swallow contract.

Of course, getting too many of those kinds of blessings aren’t good for your health.

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Tags: Salary Central

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