NBA Free Agency: Following the Heat and Spurs Team Salary Structure Model for the Cavaliers

When  you get to the end of a season it’s never bad to look at the teams who made it all the way to the end and see how they accomplished such a great season. How good was their defense? How did they operate their offense? What key additions did they make? What adjustments did the coaches make? How is their salary structured?

That final question probably didn’t jump into your mind as you were pondering how Chris Grant and Mike Brown can get the Cleveland Cavaliers to the level of the Spurs and Heat. But it did for me. The way that the NBA operates on their business end with the salary cap and the collective bargaining agreement has a profound impact on what teams do with their personnel. When the Memphis Grizzlies traded Marreese Speights, Wayne Ellington, Josh Selby, and a future first round pick to the Cavs for the towel boy, that wasn’t a move to make them better on the court. It was a salary dump, pure and simple. Memphis cannot afford to operate their team above the salary cap for fear of paying punitive luxury tax penalties. The subsequent trade of their leading scorer Rudy Gay furthered their quest to stay under the luxury tax threshold. But despite depleting their bench and trading their leading scorer, the Grizzlies were still able to reach the Western Conference Finals. This happened in large because Russell Westbrook got injured their front office has a keen understanding of how to structure a winning team.

NBA teams are run by smart people. The days of nonsensical transactions like the ones done by Isiah Thomas and David Kahn are mostly over. There will still be some real head-scratchers from time to time, but for the most part teams are smarter now and aren’t quite as willing to throw $50 M contracts at guys just because they’re tall.

For the purpose of this discussion we’ll look at the top two teams from both the Eastern Conference (Heat and Pacers) and Western Conference (Spurs and Grizzlies) this season as well as an additional team from each conference whose squad was adversely affected by an injury to one of their star players (Thunder and Bulls). Over the past several weeks we’ve looked at the current assets possessed by the Cavs as well as broke down their salary cap situation for the next couple years. Today’s column is a continuation of those pieces as we try and get an idea of how the Cavs can be formed into a playoff contender and eventually a champion.[1]

Now, the biggest key to success in the NBA is that you have to have star players, preferably two or three of them. Earth-shattering revelation, I know. But, what so often goes unnoticed is how teams organize the rest of their team around those star players. Lots of people made jokes when LeBron, Wade, and Bosh all announced they were going to Miami that it didn’t matter who the other two guys on the court were, they would still win. The media in Miami joked about holding contests that would have a different fan play alongside the Big Three each game. Because as long as you have the stars, it doesn’t matter who else you have around them. That’s just not true. Even with great role players this year it took everything they had, plus a little luck, to repeat as champions. And as great as Jordan and Pippen were they still needed very good complimentary pieces around them to win those titles.

The addition of role players to teams with multiple stars can be tricky. Most star players want to be paid like star players and if you have more than one of them that can eat up a lot of your cap space. There are some teams over the years who have tried to build around just one star player and then pretty good role players around him. That’s what the Cavs did when LeBron was in Cleveland. Danny Ferry tried to find another star but in the end just ended up paying too much for role players like Larry Hughes. After their only trip to the Finals in 2007 the Cavs came into the next season with the following players as their top paid players:

1. Ben Wallace $15.5M
2. LeBron James $13M
3. Wally Szczerbiak $12.775M
4. Zydrunas Ilgauskas $10.1M
5. Eric Snow $6.7M
6. Anderson Varejao $5.4M
7. Joe Smith $4.2M
8. Sasha Pavlovic $4.25M
9. Damon Jones $4.2M

That’s nine players with contracts over $4M a year. Additionally it’s really hard to make the case that four of the top five players were really even worth anything close to what they were being paid. In LeBron’s final season in Cleveland (2009-10) that number was down a little to just seven players with annual earnings over $4M.[2]

We are all well aware that approach to team building didn’t work. As great as LeBron was at the time, he wasn’t good enough to carry a team with Shaq eating up $20M in cap space. So let’s compare how those past Cavs teams were structured with how teams from this season organized their team salaries.

Miami Heat

1. LeBron James $17.5M
2. Chris Bosh $17.5M
3. Dwyane Wade $17.2M
4. Mike Miller $5.8M
5. Udonis Haslam $4M
6. Mario Chalmers $4M

The Heat had only six players making over $4M a year. The salaries of their star players made up 62.65% of their total payroll. Now it should be noted that this team is a bit of an anomaly. LeBron, Wade, and Bosh could all be making more than $17M a year for any other team. They chose to take less money so the team could afford better role players. And then some of their role players like Ray Allen, Shane Battier, and Chris Anderson are playing at prices below their market value. It’s a tough team to judge because of their unselfishness regarding money.

San Antonio Spurs

1. Manu Ginobili $14.1M
2. Tony Parker $12.5M
3. Stephen Jackson $10M (cut)
4. Tim Duncan $9.64M
5. Boris Diaw $4.5M

The Spurs are great. They have only five guys over $4M and their top four earners take up 66% of their payroll. But they’re so good that they were able to cut a guy making $10M without it hurting their team on the court. If you take Jackson out of the picture then the Spurs stars take up 60% of the remaining payroll. Much like the Heat, the Spurs star players are not making what they can possibly make on other teams. Manu, Parker, and Duncan are all taking less money to keep their team in competition. But beyond those star players the Spurs are comprised of mostly bit pieces that you’d find on any team. The only difference is that they’re playing under a great head coach who gets his guys to buy into their role. And if they don’t he just gets rid of them…just ask Stephen Jackson.

Indiana Pacers

1. Roy Hibbert $16.7M
2. Danny Granger $13M
3. David West $10M
4. George Hill $8
5. Ian Mahinmi $4M

The interesting thing with the Pacers is that their best player is Paul George who only made $2.6M this season and will make $3.3M next season. It worked out this season pretty well for them considering that Granger didn’t play this year. The Pacers’ top three salaries take up 59% of their payroll.

Memphis Grizzlies

Grizzlies 001

1. Zach Randolph $16.5M
2. Marc Gasol $13.9M
3. Mike Conley $7.5M
4. Tayshaun Prince $6.76M

The Grizzlies are a fascinating team. As I mentioned earlier they dumped their leading scorer for Prince who’s older and is overpaid and still has two more years left on his deal. They also just gave away Speights and Ellington, guys who were getting rotation minutes for them. They did these things because they needed to cut salary. By flipping Rudy Gay for Prince the Grizzlies saved about $10M this season followed by $10.5M and $11.5M the next two. With Gay off the books they only have four guys over $4M and their top three salaries make up 60% of their payroll.

Chicago Bulls

1. Derrick Rose $16.4M
2. Carlos Boozer $15M
3. Luol Deng $13.3M
4. Joakim Noah $11.3M
5. Rip Hamilton $5M

The Bulls are heavily invested in their top players. Their top four salaries, all over $10M, make up a jaw-dropping 75% of their payroll. This fact has caused them to let some key role players like Omer Asik, CJ Watson, and Kyle Korver walk in free agency. They can, and probably will, amnesty Boozer this offseason. He still has two more years of an escalating salary left on his current deal. That will save Chicago some money but Taj Gibson’s salary jumps from $1.155M this year to $7.55M next year. Rose, Deng, and Noah also have escalating salaries. But the point remains, their payroll is loaded at the top and the role guys make close to nothing. And even without their highest-paid player this year they still made the playoffs.

Oklahoma City Thunder

1. Kevin Durant $16.7M
2. Russell Westbrook $13.7M
3. Kevin Martin $12.4M
4. Kendrick Perkins $8.3M

For a team as good as the Thunder, those top four salaries look pretty funny. Now, they of course traded away Harden because they didn’t want to pay the luxury tax going forward and decided to keep Serge Ibaka instead. Martin is a free agent this summer and there’s no way in heck OKC is paying him anything close to $12M. They will also probably amnesty Perkins, freeing up more space. This is what their salaries look like next year if they cut Perkins:

1. Durant $17.8M
2. Westbrook $14.7M
3. Ibaka $12.35M

That’s it. That’s the list. For the 2012-13 season their top three salaries made up 63% of their payroll. If we assume that for 2013-14 they’ll be at about the same payroll number of $68M then their new top three would make up 66% of their payroll. However, if they get their payroll down to the salary cap number of $58.5M then those top three salaries would make up 77% of their payroll.

Earlier while discussing the Grizzlies I mentioned that they offloaded Gay to the Raptors. Just for kicks, let’s take a look at their top earners.

Toronto Raptors

Gay 001

1. Rudy Gay $16.46M
2. Andrea Bargnani $10M
3. Landry Fields $6.25M
4. Amir Johnson $6M
5. Kyle Lowry $5.75M
6. Linas Kleiza $4.6M

That, my friends, is the recipe for a terrible basketball team. When your top two earners are Gay and Bargs, you’re probably not going to be good.

So what have we learned today?

In building a great basketball team you first need to have star players. Despite what Tony Rizzo may think, the Cavs do have a certifiable star in Kyrie Irving. He’s only been in the league for two years and has already displayed that he possesses that other-level ability to be the best player on the court in any given game. If the Cavs want to be a championship team, though, they’ll need more than just Kyrie.

While I love Tristan Thompson and I think he’s made really impressive strides so far in his career, I don’t know that he has much “star” potential. Can he play the role of Serge Ibaka? Sure. He might make some All-Star teams but I don’t know that he’ll be a transcendent player. Dion Waiters, on the other hand, I am very high on. He has the physical ability, mentality, and temperament to be a star in the NBA. You might have an issue with his shot selection or defense but the tools are all there. With time, Waiters will be a great player. I truly believe that. But that’s an argument for another day. Finally, there’s whoever the Cavs choose with the no. 1 pick this year. Whether it’s Nerlens Noel, Alex Len, Ben McLemore, Otto Porter, whoever, that player could represent a potential star. I don’t think the chances are great, but all of these guys have potential.

In structuring player salaries for the Cavaliers going forward I believe the evidence shows that you really want only about four or five players who are paid over $4M dollars, unless of course you’re willing to pay into the luxury tax. What you don’t want is to have a whole bunch of guys making $4M+ like the Cavs did back in 2008-09. You would prefer that the team load up about 60-65% on probably three guys and fill in the rest with low-level role players on rookie deals or veterans who are willing to take less to be on a winning team.

But probably more than anything teams cannot afford to pay players more than they’re worth. Basketball is a funny sport. More often than not the great players are getting paid far less than they’re worth and the mediocre players are making way more than they’re worth. We can all agree that LeBron is worth way more than $17.5M. In fact, he’s probably worth way more than the $21M that he’ll make next summer after he opts out of his deal with Miami. In the same light, was Daniel Gibson worth $4.8M this year? Or Luke Walton worth $6.1M? I know no one thinks that Gay is worth $16+M.

Because you can only play five guys at a time and typically the starters play such a high percentage of the minutes, bench players should almost never make $4M a year. There are 240 available minutes per game for each team. You want your starters to play about 30-35/40 minutes a game. If on average they play 35 a game that’s a total of 175 minutes, 73% of the total available. It’s not inconceivable then that they should command 73% of the available dollars.

Let’s throw out a hypothetical example: Kyrie is the Cavs starting point guard and will play about 35-40 minutes a game. Shaun Livingston was Kyrie’s backup last season and is a free agent this summer. No doubt we’d all like to keep him. But how much is he worth? There’s probably about 10 minutes available as the backup PG. He also played in some situations where he was backing up Waiters as well, basically playing a third guard role getting about 20 minutes total a game and that’s about where you’d like him. So how much is that worth? Well with the cap at $58.5M this year and Livingston playing about 8% of the minutes, he’s essentially worth 8% of the cap: $4.68M. The Cavs can easily afford to pay a backup guard that much at this point given that they have so many players on rookie deals. Down the line, however, as Kyrie and Dion get into their second contracts and start making more money they’ll need to carry more of the minutes load because they’ll be taking up more of the cap money. So for 2013-14 the Cavs can handle a backup guard making more than $4M, I mentioned before that contending teams who have multiple star players cannot afford to pay backups that much. So typically you pay, and subsequently play, them less money.

It’s simple economics. If you’re going to pay $6.25M to Landry Fields then you’d better be getting 25 quality, productive minutes out of him. And if you’re paying Rudy Gay $17.9M next year he’d better be playing like he’s worth 30.6% of your cap, which means that he’s worth 73.44 minutes a game. Obviously he’s can’t play that many minutes unless the game goes into like five overtimes. So he needs to make up for it by playing 40+ minutes and providing a ton of offense. Last year in 33 games with Toronto Gay’s averages were 35.8 minutes, 19.5 points on .425 shooting, with 6.4 rebounds and 2.8 assists. His PER was 15.66…decidedly not worth $17M. So, if a mediocre player like Gay is taking up 30% of your cap while only playing 15% of the minutes and scoring 19% of the points, then most likely you’re not going to be a good team.

The task at hand for Chris Grant is to follow these guidelines in putting this team together. A couple weeks ago we determined that the Cavs can spend about $8M this summer on one-year deals and $16.5 on multi-year deals while maintaining $21M of available cap dollars for a hypothetical LeBron return.[3] All of this spending has to be done while keeping in mind that you’ll have to pay Kyrie and Tristan in 2015, Waiters in 2016, and then the 2013 no. 1 pick in 2017. Those are going to be tough decisions that Grant will have to make going forward. But how they affect this summer is that while you’d like to get some established players in Cleveland, you don’t want to do so at the expense of having to let the young guys that you’ve invested in walk in a couple years because you’ve maxed out your cap space on role players.

Iguodala 001

Take Andre Iguodala for instance. If the Cavs take Noel or Len no. 1 then you’d love to have Iggy staring at small forward in that lineup. He’s a great defensive player and has a very capable offensive game to supplement it. He’s basically Alonzo Gee, only if Gee was a fringe All-Star player. But how much should you pay Iggy? He made $15M this past season. He’s never been worth that and he certainly isn’t anymore. He’s a 40 minutes a game guy who’s going to give you 18-20 points with 8 rebounds and 5 assists, all while playing great defense. He’s probably a 15-17 PER guy. If he was willing to come on for a one-year deal I’d be more than willing to give him $10-12M for next year because the rest of your core players are still on rookie deals so you have a ton of flexibility that way and it doesn’t tie up your cap going forward. If he’s demanding a multi-year deal (which he likely is) then you have to decide what his numbers are worth. I feel like as a starting SF you’d like him to play about 17% of your available minutes (40). Therefore, given his skill and production you’d be willing to pay him right about 17% of your cap which would be about $9.945M. However, given his age and assumed diminishing skills you wouldn’t want the contract to be more than three or four years and definitely with decreasing money every year to make up for the drop in production that will occur over the course of the contract. For a young guy like Kyrie you’re likely signing him to an escalating contract because you’d assume that his production will escalate over the course of the deal. However, with a guy that is 30 years old like Iguodala who’s going into his third deal you want that contract to decrease in dollars every year as his abilities begin to decline. The reduction in pay will also help as the young guys come up for new contracts. You could sign Iggy to a three-year deal with a team option for a fourth where the wages each year go down from $9M, $8.5M, $8M, and $7.5M. That also keeps that contract very tradable. You should never sign a guy to a contract that you’ll never be able to trade. So that’s just an example of what they could do with the contracts.

I hope that all made sense.

We’ve blown by the 3,000 word mark and this has been pretty heavy stuff so we’ll wrap it up. Media pundits like to scream and yell about how the team didn’t add enough players at the start of last season and how they weren’t trying to win. However, what’s important to understand is that GM’s like Chris Grant have to always be thinking and making moves with the future in mind. Grant knows that just a few years down the line he’s going to have to pay Kyrie, Dion, and Tristan. The Cavs can’t afford to sign a bunch of bench players to $6M and $7M contracts for multiple years. What they can afford is players like CJ Miles who made $2.225M this year and has a team option for the same amount next season. That’s about right for a guy playing Miles’ minutes at his production level.

What people also don’t often understand is that by Grant keeping the Cavs cap situation flexible and open it allows the teams to make moves like the one they did with Memphis. There have also been rumors this offseason about them taking on either Paul Pierce or Shawn Marion. You can’t make those moves if you’ve already tied up all your cap space in multi-year contracts for over-paid role players.

Chris Grant has demonstrated that he’s probably one of the smartest GM’s in the league. He’s made the right moves to this point to put the Cavs in a position to make the turn to becoming a contender. It’s going to be a lot of fun to watch it all unfold over the next couple years.

[1] And no, it’s not as easy as just saying “sign LeBron in 2014.”

[2] I should note that it was only seven at one time. The Cavs flipped Z’s bloated salary for Antawn Jaminson’s $11.6 M, then brought Z back after he was bought out by Washington.

[3] Again, I would never count on him returning. But if you don’t leave the option open then you should be fired on the spot.


One thought on “NBA Free Agency: Following the Heat and Spurs Team Salary Structure Model for the Cavaliers

  1. Pingback: NBA Free Agency: Andrew Bynum and the Cavaliers position to add Stars | Cleveland the GOAT

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