Author Topic: Proper business management vs win at all costs.  (Read 7132 times)

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Proper business management vs win at all costs.
« on: July 12, 2008, 09:58:10 AM »

Offline nickagneta

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I had a brief conversation yesterday with winsomme that I think deserves so much more discussion here. I think it might help those of us that think we see things management's way to understand the dilemma's that mangement goes through.

First, I think knowledge of my background should be disclosed. I run my own business currently. It is a small, service based, redistribution business that I run from my home and at this point keeps my family in a middle class lifestyle. I don't want it to get that much bigger, I run it to maintain a certain profit margain and think it is perfect in size and scope for how I want to live my life.

I have run 3 other companies, owned by other people and those companies ranged in size from a company with 10 employees and $1 million in sales to 50+ employees and sales in excess of $35 million. I have run successful, profitable businesses 4 times now and moved from the different companies for my own personal reasons.

So where am I going with this?

I think what people have to consider is the way management might look at the whole thing of properly making decisions and how those decisions affect future decisions. Sometimes we get so locked up in the details of the present we lose sight of the big picture that affects the future.

I think the James Posey freeagency issue is a perfect example of this. The Celtics are not trying to sign James Posey. They are trying to build the overall best team while maintaining the ability to be able to continue to be able to attempt to build a team as good if not better than last year's team for the short term and long term future.

The entire situation is a perfect example of proper business management vs win at all costs attitudes that sometimes pervail in business today.

I have an example in my own personal business experience that, in my eyes, mirrors what is happening with Posey.

I was the GM of this company that manufactured items that were sold to a very niche marketplace. There were only maybe ten businesses worldwide that did the same type of manufacturing. So everyone in the industry knew who were the big fish clients and everyone tried to land one. We had one and for the longest time persued this other.

We finally caught a break and this company's supplier couldn't produce a piece of work with a specific deadline, we could and we were impressive. So they started having us quote some of their big business. Here was the catch. ALL of there business basically dealt with ridiculous deadline specifications because of that company's own horrible, internal management. This was not known at the time of the decision to go after this customer.

We did the work, increased sales by nearly 25%, hired 10 new workers and at the end of the year we lost money for the first time in a decade. Our CPA and I spent some time doing some analysis and cost accounting and determined it all came down to that one customer.

To get the customer we broke all of the rules that had gotten the company to be the healthy entity that it was. Overnight shipment of supplies, two week turnaround on new article manufacturing instead of 4 weeks, overtime work to meet unrealistic deadlines, slashing of standardized profit margains to assure the customer was receiving the same cost for the product, research and development to attempt to streamline manufacturing processes to increase profit, etc., and etc. All attributable to this one customer.

We eventually made the hard decision to stay with our original business model and business plan and communicated to the customer we could still service them but under our conditions not their's. They took a giant portion of the business elsewhere.

The next fiscal year came and the number's came out.

We had sales revenues that were 17% lower. We had let go of 9 of the 10 new employees we had hired. We were once again profitable, even more so because dealing with this customer we had streamlined some areas and renegotiated terms with suppliers that we were able to keep. There was a much larger employer contribution to the profit sharing account that year. The Christmas bonuses made employees happy instead of disappointed. And people were working less hours and the atmosphere was more of a place you would like to work in rather than dread waking up to go to work.

How does this correlate?

We broke our business model and long term planning looking for the big score. A mentor of mine called it Emergency Firehouse Management. You manage in the present so much to the point that you are focusing at putting out all the fires to succeed rather than planning on fire prevention.

Giving James Posey big money over big years because we have to succeed at winning the championship now because of our small window and because James Posey was a part of the winning formula once, so he obviously has to be part of the formula again or else it can't be done again, is firehouse management at it's finest.

It is breaking the model of success and sacrificing long term success for possible short term reward, but if the short term doesn't payoff, there can be disasterous long term consequences as well as short term side effects that management might not foresee ever occuring.

Of course specific examples of all the things that could result are too numerous to get into and if I attempted to use an example, most counter arguments would center on the breaking down of that specific example to the ridiculous simply to prove the entire concept wrong, so I am not going to delve into specific examples as to what could or will occur.

I refuse to get dragged into that minutea when it is the overall philosophy that is most important. It is how companies stay healthy and alive long term.

It is easy to say as fans, and for most of us who probably have never run an entire business, to do this or that at any cost because the goal is to win as many championships now and we'll gladly sacrifice tomorrow for the joy of today. I think the people who run the Celtics and make a living from the Celtics might see things extremely different.

Over the last 22 years this team as good enough to win consistently maybe in 6 years and to realistically contend for a title maybe in 3 years(87, 02, 08). That's a lot of years where expectations were not good and the effect on the business bottom line more than likely was not good.

This is just a guess but, ownership is more than likely not willing to have another 20 year period such as the last. We want to pay to win now, the hell with tomorrow. Ownership wants to contend and have a realistic chance to win every year. Why? Contending years are profitable and increase the value of the franchise if for any reason it needs to be sold. Consistent profitablity only further increases the value of the asset that is the team. It's business.

If the Celtics win now, while mortgaging the future for the present, another prolonged drought(see the Bulls and the Celtics) could seriously hurt the profitability and asset value of the team.

Which would you want if the team was yours? A possible(the key word here) championship once with a chunk of short term cash but an extended future of unprofitable years and the value of you team decling or the ability to contended for a long time, geting smaller chunks of money for a lot of years and having the chance to win a title during a whole bunch of years while the value of you franchise increases evey year?

Before deciding here's a clue. Millionaires don't become billionaires by chosing the first option.

Re: Proper business management vs win at all costs.
« Reply #1 on: July 12, 2008, 10:50:05 AM »

Offline Roy Hobbs

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Quote
If the Celtics win now, while mortgaging the future for the present, another prolonged drought(see the Bulls and the Celtics) could seriously hurt the profitability and asset value of the team.

Which would you want if the team was yours? A possible(the key word here) championship once with a chunk of short term cash but an extended future of unprofitable years and the value of you team decling or the ability to contended for a long time, geting smaller chunks of money for a lot of years and having the chance to win a title during a whole bunch of years while the value of you franchise increases evey year?

Therein lies the rub, nick.  Is the cost-benefit of going "all in" for a championship now worth it, from a business sense, as compared to breaking from fiscal responsibility?  That's the key question, and one I'm not sure I can answer.  I do know, however, that while fans on this blog say they'd be willing to accept ten seasons of losing for one championship, those fans aren't completely willing to put their money where their proverbial mouth is.  Losing seasons hit the team in the pocket book, whereas with sustained success over time, the team can expect greater returns, both in terms of profit and in franchise valuation.

I don't envy the Celtics, because they have to answer the question of "how much is an increased shot at a championship worth?".  For fans, it's "any price".  For business men, there's a finite answer to that question, and it's up to Danny and Wyc to figure it out.

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Re: Proper business management vs win at all costs.
« Reply #2 on: July 12, 2008, 11:37:43 AM »

Offline timepiece33

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I get where you are going with this point, but also being pretty successful in business ... I realize that you keep solid business fundamentals, but market conditions and volume considerations can vary the types of investments and risks you are willing to take.

You treat a product line with a 3 year window at the height of it's profitability differently  than you do one that is just starting and has 10 year life cycle.  Treating them the exact same is a mistake. Your channel needs will be different.  Your leverage will be different as will your cash flow.

In this case, you have a product line with a 3 year life cycle.

As I see this situation, we have a "volume step" in that 3 year life cycle where the profitability and success metrics go up significantly.  After three years, this product line is going to be not nearly as successful because the competition will surpass us.  You'd like the flexibility to invest funds at that point to another product that won't be as successful, but has some potential.  You target 3 year contracts with suppliers.

We are locked into a varying contracts with your top retail channels (2 yrs -Allen Industries,3 years-Pierce Enterprises, and 4 years-GarnettCo).  Your 4th through 6th distribution channels offer the same type of volume (Perkins Distribution, Rajon Inc, and Posey's Market). Your potential to replace one of them makes the capability to get to your "volume step" more questionable and your ability to secure channels is limited by legal considerations you agreed to in order to be in the business.

The only one with a contract variability (Posey's Market) is asking for 4 years.  You have a 3 year window, so you balk at first. The other options are less reliable (Ricky Davis's Bucket Shop), but are willing to take shorter term contracts.  The only other options are considered inferior and will put your step at severe risk.

Despite the fact that RD's Bucket Shop and Posey's Market have similar numbers, two of your channels have worked with RD's Bucket Shop in the past.  RD's has a history of overstepping their bounds and creating performance issues with the other channels.  It has not worked well with either GarnettCo or Pierce Enterprises in the past. RD's bucket shop looks good, but usually after a year ... suppliers leave him.

Most business will make a decision to look at the comparative NPV of options.  Some people are suggesting not to, because general business practices say you don't give 4 year contracts for that volume.   

Re: Proper business management vs win at all costs.
« Reply #3 on: July 12, 2008, 12:40:25 PM »

Offline nickagneta

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I get where you are going with this point, but also being pretty successful in business ... I realize that you keep solid business fundamentals, but market conditions and volume considerations can vary the types of investments and risks you are willing to take.

You treat a product line with a 3 year window at the height of it's profitability differently  than you do one that is just starting and has 10 year life cycle.  Treating them the exact same is a mistake. Your channel needs will be different.  Your leverage will be different as will your cash flow.

In this case, you have a product line with a 3 year life cycle.

As I see this situation, we have a "volume step" in that 3 year life cycle where the profitability and success metrics go up significantly.  After three years, this product line is going to be not nearly as successful because the competition will surpass us.  You'd like the flexibility to invest funds at that point to another product that won't be as successful, but has some potential.  You target 3 year contracts with suppliers.

We are locked into a varying contracts with your top retail channels (2 yrs -Allen Industries,3 years-Pierce Enterprises, and 4 years-GarnettCo).  Your 4th through 6th distribution channels offer the same type of volume (Perkins Distribution, Rajon Inc, and Posey's Market). Your potential to replace one of them makes the capability to get to your "volume step" more questionable and your ability to secure channels is limited by legal considerations you agreed to in order to be in the business.

The only one with a contract variability (Posey's Market) is asking for 4 years.  You have a 3 year window, so you balk at first. The other options are less reliable (Ricky Davis's Bucket Shop), but are willing to take shorter term contracts.  The only other options are considered inferior and will put your step at severe risk.

Despite the fact that RD's Bucket Shop and Posey's Market have similar numbers, two of your channels have worked with RD's Bucket Shop in the past.  RD's has a history of overstepping their bounds and creating performance issues with the other channels.  It has not worked well with either GarnettCo or Pierce Enterprises in the past. RD's bucket shop looks good, but usually after a year ... suppliers leave him.

Most business will make a decision to look at the comparative NPV of options.  Some people are suggesting not to, because general business practices say you don't give 4 year contracts for that volume.   
Not only am I impressed with your business savy but your imagination in the use of business monikas was brilliant.

Here's where I think we differ in our thinking. it is your statement that this  porduct has a 3 year life cycle. That is flawed thinking in my view because of the fluidity that proper fical management would allow and the fact that the three greatest assets that are in the celtics possession, 3 max contracts all expiring on consecutive years and all with players that could remain, while not at All-Star caliber, at least solid starter productively beyond the length of their current contracts.

Together, they are a three year window but looked upon as singular, tradeable and exchangeable assets that might return upgrades or side step quality individuals in deals with other franchises then the opportunity exists forn the expansion of that window and hence the advocacy of fiscal responsibility.

As Ray Allen's contract moves into 2010 it becomes a very valuable commodity to a team looking to break down from mediocrity to inferiority for the right to draft higher and get out from under a contract to a player they want to grow beyond.

Example what happens if come near the trading deadline of 2010 the Wizards or Hawks or Nuggets or someone like that decide they want to go in a different direction and take a shot at a big time free agent or just start over and wants to dump salary. If the Celtics can turn Ray Allen into Gilbert Arenas or Joe Johnson, or Carmelo Anthony does that that then extend their window by another year or two? Possibly? And would it then not be prudent to have financial flexibility available to the team to so that they may continue to add contributing assets rather than be locked into an asset that is expensive and not producing and difficult to move since that assest still has 2-3 years remaining on a full MLE contract?


Re: Proper business management vs win at all costs.
« Reply #4 on: July 12, 2008, 01:17:37 PM »

Offline cordobes

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The idea that paying $7 million to a player is going to make a franchise inviable, or will have a major impact in its value, profitability and future, is so nonsense and out-of-the-world that I don't even know what to say.

Nobody is talking about offering a big extension to Pierce or Ray Allen. Nobody is discussing Rondo's extension - and that will be a big decision, in terms of future and fiscal responsibility. Nobody is saying we must spend the MLE again next year (I don't think we should, precisely for fiscal reasons). Nobody is saying to re-sign Posey and House with the NBE and use the other exceptions to sign new players. I don't even care if the team decides to save the LLE this year for budgetary reasons. We're talking about 1 year, one freaking year, in a MidLevel contract.

I believe that making a discussion about if a Mid-Level player is worthy  a 3 years or a 4 years contract into a proper business management vs win at all costs attitudes discussion is a gigantic fallacy. Strictus sense, we broke from fiscal responsibility when Ainge offered that extension to Garnett, didn't we? The same mistake that cost your company serious money is the same mistake you're making in the present analysis: confusing strategy with logistics, the important with the irrelevant.

I'd ask you to show us a credible scenery where paying an additional $7M in salaries in 2011/2012 will curb the future of this franchise, if you please. What's exactly going to happen in 2012? The franchise will be sacrificing the future due to not be in position of landing a big FA in 2011 because they have that expiring in the books, is that it?

Otherwise, and until I read someone using the "win at any cost" approach as you describe it, I'll consider the use of this fallacy (as well as any use of argument from authority) extremely distasteful and fear-mongering. I would understand a fiscally responsible position like "don't spend the MLE at all this year, Posey is not worth of it". A "we should offer him 3 years, but that 4th year will jeopardize our entire future" fiscally responsible position is not respectable. It would be last Summer, centered in Garnett's extension. But not when the issues is a MLE contract.

The only reason for Ainge to offer a 3 year contract is being safe that Posey won't get a 4 year offer somewhere else. I'm pretty sure that Ainge will match any 4 year offer for Posey, if he's given the chance.

Re: Proper business management vs win at all costs.
« Reply #5 on: July 12, 2008, 01:25:48 PM »

Offline cordobes

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Example what happens if come near the trading deadline of 2010 the Wizards or Hawks or Nuggets or someone like that decide they want to go in a different direction and take a shot at a big time free agent or just start over and wants to dump salary. If the Celtics can turn Ray Allen into Gilbert Arenas or Joe Johnson, or Carmelo Anthony does that that then extend their window by another year or two? Possibly? And would it then not be prudent to have financial flexibility available to the team to so that they may continue to add contributing assets rather than be locked into an asset that is expensive and not producing and difficult to move since that assest still has 2-3 years remaining on a full MLE contract?

If teams want to start over and dump salary, they don't trade those big names for veterans like Ray. They prefer worse veterans and young players with upside. But okay, there's a more interesting thing:

If you believe that Posey will be not producing after the first year, why even care to give him a contract? If I had the same opinion, I'd be scared with a 2 year contract, let alone a 3 year one.

Re: Proper business management vs win at all costs.
« Reply #6 on: July 12, 2008, 02:08:19 PM »

Offline timepiece33

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Here's where I think we differ in our thinking. it is your statement that this  porduct has a 3 year life cycle. That is flawed thinking in my view because of the fluidity that proper fical management would allow and the fact that the three greatest assets that are in the celtics possession, 3 max contracts all expiring on consecutive years and all with players that could remain, while not at All-Star caliber, at least solid starter productively beyond the length of their current contracts.

The biggest variation in our thinking is I believe our contract structure limits our options over the next 3 years.

If we go the trade route with Allen in a year, Posey's presence is irrelevant to our flexibility.  In fact, he could be involved in the trade.  It will take additional moves to get us over the cap.

If we go the FA route during Pierce's contract year, Posey's presence is irrelevant to our flexibility because we will have the cap space to sign a FA EVEN if we sign him AND either an MLE to replace Ray Allen or Ray Allen at a discounted contract. 

The windows are what they are ... but our options with our current salary structure are unimpacted by this decision.

Re: Proper business management vs win at all costs.
« Reply #7 on: July 12, 2008, 02:16:06 PM »

Offline BballTim

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Here's where I think we differ in our thinking. it is your statement that this  porduct has a 3 year life cycle. That is flawed thinking in my view because of the fluidity that proper fical management would allow and the fact that the three greatest assets that are in the celtics possession, 3 max contracts all expiring on consecutive years and all with players that could remain, while not at All-Star caliber, at least solid starter productively beyond the length of their current contracts.

The biggest variation in our thinking is I believe our contract structure limits our options over the next 3 years.

If we go the trade route with Allen in a year, Posey's presence is irrelevant to our flexibility.  In fact, he could be involved in the trade.  It will take additional moves to get us over the cap.

If we go the FA route during Pierce's contract year, Posey's presence is irrelevant to our flexibility because we will have the cap space to sign a FA EVEN if we sign him AND either an MLE to replace Ray Allen or Ray Allen at a discounted contract. 

The windows are what they are ... but our options with our current salary structure are unimpacted by this decision.

  Posey's presence is irrelevant to our flexibility under the unlikely scenario that Ainge has no budget constraints.

Re: Proper business management vs win at all costs.
« Reply #8 on: July 12, 2008, 02:53:57 PM »

Offline CoachBo

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The idea that paying $7 million to a player is going to make a franchise inviable, or will have a major impact in its value, profitability and future, is so nonsense and out-of-the-world that I don't even know what to say.

Nobody is talking about offering a big extension to Pierce or Ray Allen. Nobody is discussing Rondo's extension - and that will be a big decision, in terms of future and fiscal responsibility. Nobody is saying we must spend the MLE again next year (I don't think we should, precisely for fiscal reasons). Nobody is saying to re-sign Posey and House with the NBE and use the other exceptions to sign new players. I don't even care if the team decides to save the LLE this year for budgetary reasons. We're talking about 1 year, one freaking year, in a MidLevel contract.

I believe that making a discussion about if a Mid-Level player is worthy  a 3 years or a 4 years contract into a proper business management vs win at all costs attitudes discussion is a gigantic fallacy. Strictus sense, we broke from fiscal responsibility when Ainge offered that extension to Garnett, didn't we? The same mistake that cost your company serious money is the same mistake you're making in the present analysis: confusing strategy with logistics, the important with the irrelevant.

I'd ask you to show us a credible scenery where paying an additional $7M in salaries in 2011/2012 will curb the future of this franchise, if you please. What's exactly going to happen in 2012? The franchise will be sacrificing the future due to not be in position of landing a big FA in 2011 because they have that expiring in the books, is that it?

Otherwise, and until I read someone using the "win at any cost" approach as you describe it, I'll consider the use of this fallacy (as well as any use of argument from authority) extremely distasteful and fear-mongering. I would understand a fiscally responsible position like "don't spend the MLE at all this year, Posey is not worth of it". A "we should offer him 3 years, but that 4th year will jeopardize our entire future" fiscally responsible position is not respectable. It would be last Summer, centered in Garnett's extension. But not when the issues is a MLE contract.

The only reason for Ainge to offer a 3 year contract is being safe that Posey won't get a 4 year offer somewhere else. I'm pretty sure that Ainge will match any 4 year offer for Posey, if he's given the chance.

TP. The idea that Posey will break the bank - along with the notion that we discard success with Pierce, Garnett and Allen for a hypothetical four or five years from now - is absolutely absurd. If you cling to 2012, then there's no logical way you could have supported last summer's deals, let alone the championship.

This is exactly the thought process that destroyed the franchise building up to last season - build, build, build, take fliers for the future, discard assets for nothing.
Coined the CelticsBlog term, "Euromistake."

Re: Proper business management vs win at all costs.
« Reply #9 on: July 12, 2008, 03:20:37 PM »

Offline nickagneta

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The idea that paying $7 million to a player is going to make a franchise inviable, or will have a major impact in its value, profitability and future, is so nonsense and out-of-the-world that I don't even know what to say.


I agree 100%. But please explain to me where that was discussed because it wasn't said or discussed here. You are taking stated overviews as a business system as a whole and now interjecting a particular circumstance and taking it to the extreme. Which is of course exactly what I said someone would do when I wrote this:

Quote
Of course specific examples of all the things that could result are too numerous to get into and if I attempted to use an example, most counter arguments would center on the breaking down of that specific example to the ridiculous simply to prove the entire concept wrong, so I am not going to delve into specific examples as to what could or will occur.


Which is again why I will agree with you said but not address the comment as a whole.

Nobody is talking about offering a big extension to Pierce or Ray Allen. Nobody is discussing Rondo's extension - and that will be a big decision, in terms of future and fiscal responsibility. Nobody is saying we must spend the MLE again next year (I don't think we should, precisely for fiscal reasons). Nobody is saying to re-sign Posey and House with the NBE and use the other exceptions to sign new players. I don't even care if the team decides to save the LLE this year for budgetary reasons. We're talking about 1 year, one freaking year, in a MidLevel contract.
Actually I am indirectly talking about all those things because when deciding as to the length of Posey's contract all those factors need to be considered and how a five year fiull MLE contract will affect all those other factors vs a contract of less money and/or less years.

Directly, you are the one talking about one freaking year.

I believe that making a discussion about if a Mid-Level player is worthy  a 3 years or a 4 years contract into a proper business management vs win at all costs attitudes discussion is a gigantic fallacy. Strictus sense, we broke from fiscal responsibility when Ainge offered that extension to Garnett, didn't we? The same mistake that cost your company serious money is the same mistake you're making in the present analysis: confusing strategy with logistics, the important with the irrelevant.
Couple of points. No we did not break from fiscal responsibility when we extended Garnett. We extended Garnett for less money every year than he is currently making. He has proven to still be a top 3-5 player in the league and has been extended at less than top 3-5 money. I find that fiscally prudent to be paying a player for less than market value.

Strategy and logistics run hand in hand and hence both are relevant. Good strategy with bad logitics or vice versa is a recipe for financial disaster. Breaking one up without compensating on the other is as wrong a business mistake as one can make.

And once again the discussion is not over the specifics of just a 3 to four year contract. It is how that contract can affect other contracts, other decisions and set bad precedent that can ruin the model as a whole.


I'd ask you to show us a credible scenery where paying an additional $7M in salaries in 2011/2012 will curb the future of this franchise, if you please. What's exactly going to happen in 2012? The franchise will be sacrificing the future due to not be in position of landing a big FA in 2011 because they have that expiring in the books, is that it?

Otherwise, and until I read someone using the "win at any cost" approach as you describe it, I'll consider the use of this fallacy (as well as any use of argument from authority) extremely distasteful and fear-mongering. I would understand a fiscally responsible position like "don't spend the MLE at all this year, Posey is not worth of it". A "we should offer him 3 years, but that 4th year will jeopardize our entire future" fiscally responsible position is not respectable. It would be last Summer, centered in Garnett's extension. But not when the issues is a MLE contract.

The only reason for Ainge to offer a 3 year contract is being safe that Posey won't get a 4 year offer somewhere else. I'm pretty sure that Ainge will match any 4 year offer for Posey, if he's given the chance.
I am sorry if my discussion of this subject has introduced fear into your life that you then feel the need to overreact to the point of calling the idea and entire discussion a fallacy.

The idea of win at all costs is that we pay whatever we need to pay to retain Posey and/or anyone because he is invaluable to the situation and we only have so much time to win, is I believe a much greater fallacy.

Our three year window is already one year over. It ends, in the opinion of many, with the end of Ray Allen's contract. So giving Posey a 5 year full MLE to ensure the continuation of a three year window two more years is fiscally irresponsible. Because it is feasible to replace Posey for those two years using proper business management techniques and options available, still win the championships and still not to be burdened with a contract that, if at the end of that 2nd year of the contract Posey has a sizable diminishing in his skill and output, might be and probably will be costing the team upwards of $42 million dollars between paying the player and pay the luxury tax on that contract.

Here's the Celtics salary situation:

http://hoopshype.com/salaries/boston.htm

The financial realities of that 2010-2011 year, the third of Posey's contract where he will be earning about $6.5 million is that between Posey, Pierce, Garnett, and Perkins the Celtics will be paying $47.5 million to 4 players(a 33 yo Posey, a 33 yo Garnett, a 32 yo Pierce and Perk in the last year of his contract. If the Celtics are smart they will have extended Rondo and a $55 Million 6 year extension would probably be pretty close to what he will be worth so in 2010-2011 that would be worth around $8 million that year. So we are at $55.5 million with 5 players. Add in a million and change for that years first rounder and the third year of Giddens contract and that's about another $3 million. $58.5 million for seven players.

Here's the kicker. What becomes of Ray's salary? If they let it expire, they are screwed because they have no cap space to replace him. That is pretty self evident. So, logic dictates they will trade him before the trading deadline that year if so expect at the very least $16.5 million being on the payrol at least through the 2011 season and probably longer.

That throws them over the luxury tax in 2010-2011 and maybe longer and that is with 8 maybe nine guys signed.

Who says if the Celtics haven't won it all that ownership will allow management to continue to spend to that level. If that decision is made then maybe Ray's contract does expire. We are left with a team of 2 aging max contracts, a full MLE on the books for 3 years for a bench player, 2 promising young starters and a whole lot of developing flotsam and jetsam and we are at the cap. That spells big trouble for the competitiveness of this team if management is now under orders to fill out the rest of the roster while not hitting the lottery number.

So instead of having $7 million a year to play around with in flexibilty for that and the next two years to help rebuild while not going over the luxury tax the Celtics are stuck with him, his decreasing skills and a lack of flexibility to help extend the window of opportunity or start over.

Do I really need to list the teams that have been building and rebuilding while staying under the luxruy tax waiting to get good enough and have enough chips to cash in and go over the luxury tax and finally make a run. Let's just say that the amount of teams that have been doing that for more than a decade are over 20.

Is that a viable enough scenario that states that maybe being prudent with the money being throw at a 31 year old bench player and the number of years involved because it could trickle down and effect long term and effectiness, viability and valuation of the franchise as a whole.

Wyc and his group paid $360 million for this team when they sucked back at the end of 2002 when the franchise was worth only $274. They were good but not champions.

http://www.forbes.com/lists/2007/32/biz_07nba_Boston-Celtics_326173.html

They are now valued at $381 million and are champions. What could they get for the franchise on the open market right now as currently constructed?

Now imagine what happens to the value of the franchise and what it could be sold for if after 2009-2010 things change and the team takes a turn for the worst, and maybe for a while.

Look at the charts on that Forbes page and look at the value, operating expenses and revenue back in the years where they had been exceptionally bad for a long time(98, 99, 00, 01). Do you think that ownership would ever want to return to those types of numbers?

Would Posey's contract be the determining reason for something like that to happen, no.

Could it be a contributing factor that compounds when looking at the entire picture and state of the Celtics as a whole and how the are contructed? [dang] straight it is.

Re: Proper business management vs win at all costs.
« Reply #10 on: July 12, 2008, 03:26:17 PM »

Offline BballTim

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This is exactly the thought process that destroyed the franchise building up to last season - build, build, build, take fliers for the future, discard assets for nothing.

  build, build, build, take fliers for the future is the thought process that brought us the championship. Overpaying your 6th best player over an extended period of time is nothing more than a panic move.

  And it's looking more and more like such a panic move is unnecessary. People (and writers) were claiming that the only way to keep Posey was to offer him the full MLE at 5 years. That's unlikely to be the case. I haven't heard any rumors of offers, just his agent going from city to city telling everyone who will listen that half the contenders in the league are trying to get Posey. Clearly none of them have offered what he'll accept.

Re: Proper business management vs win at all costs.
« Reply #11 on: July 12, 2008, 03:49:29 PM »

Offline Who

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Wyc and his group paid $360 million for this team when they sucked back at the end of 2002 when the franchise was worth only $274. They were good but not champions.

http://www.forbes.com/lists/2007/32/biz_07nba_Boston-Celtics_326173.html

They are now valued at $381 million and are champions. What could they get for the franchise on the open market right now as currently constructed?

Now imagine what happens to the value of the franchise and what it could be sold for if after 2009-2010 things change and the team takes a turn for the worst, and maybe for a while.

Look at the charts on that Forbes page and look at the value, operating expenses and revenue back in the years where they had been exceptionally bad for a long time(98, 99, 00, 01). Do you think that ownership would ever want to return to those types of numbers?
That Forbes page is pretty cool. It's fun cycling through all the teams. I'm going to have to add that to my bookmarks.

Bulls in 1998 won a title. Their last and the end of a dynasty. Next four seasons they were atrocious winning about 20-25% of their games. That's pretty much the worst case scenario for when our best players leave right? Okay. Chicago's value goes up slightly and contiues to increase, their income stays steady then increases, their operating profit increase and continues to increase.

The value and all that won't suffer any catastrophes if the Celtics are bad for awhile. Click through a bunch of the other teams and most have had the same jumps in revenue and value as the C's did.

Re: Proper business management vs win at all costs.
« Reply #12 on: July 12, 2008, 04:05:46 PM »

Offline cordobes

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People (and writers) were claiming that the only way to keep Posey was to offer him the full MLE at 5 years

Can you provide any evidence to sustain that assertion? IMO it's quite clear that what's in play is a 3year vs. a 4year deal.

Nick,
Quote
But please explain to me where that was discussed because it wasn't said or discussed here. You are taking stated overviews as a business system as a whole and now interjecting a particular circumstance and taking it to the extreme.

Look, I fully understand the concept of fiscal responsibility. If your aim is just making a theoretical reasoning about the importance of it, I fully agree.

The problem is that I don't equate giving Posey a 4 year contract to fiscal irresponsibility, while you seem to think that way (though I can't be sure). I wouldn't give Posey a 5 year contract for fiscal reasons (basically because it would hurt a safety valve in 2012).

Quote
The idea of win at all costs is that we pay whatever we need to pay to retain Posey and/or anyone because he is invaluable to the situation and we only have so much time to win, is I believe a much greater fallacy.

The fallacy is saying that offering Posey a 4 year contract (if needed to retain him, of course) means "pay whatever we need to pay to retain Posey and/or anyone because he is invaluable to the situation and we only have so much time to win". Things are not black and white. You surely understand that if someone says, using your logic, that offering Posey (or any other player) a cent of the MLE (or a minimum salary) is fiscally irresponsible and equates to "win at all costs", you'd have to agree or else you can accurately being accused of lack of coherence.

Let me put it this way: how does your reasoning helps and informs your decision when facing this problem - offer Posey a 4th year to keep him or don't go further than a 3 year deal?

Quote
Here's the kicker. What becomes of Ray's salary? If they let it expire, they are screwed because they have no cap space to replace him. That is pretty self evident. So, logic dictates they will trade him before the trading deadline that year if so expect at the very least $16.5 million being on the payrol at least through the 2011 season and probably longer.

That throws them over the luxury tax in 2010-2011 and maybe longer and that is with 8 maybe nine guys signed.

Who says if the Celtics haven't won it all that ownership will allow management to continue to spend to that level. If that decision is made then maybe Ray's contract does expire. We are left with a team of 2 aging max contracts, a full MLE on the books for 3 years for a bench player, 2 promising young starters and a whole lot of developing flotsam and jetsam and we are at the cap. That spells big trouble for the competitiveness of this team if management is now under orders to fill out the rest of the roster while not hitting the lottery number.

With a 4 year contract, that would mean:
- having an expiring contract that would be easily traded at the end of the season to a franchise looking for cap space. And you're assuming a worst case scenario: that Posey will be grossly overpaid if he's making a MLE salary in 3 from now. I disagree and it's bad management to make decisions strictly based in pessimistic scenarios.

Also, you contradict yourself: if the team just let Ray walk, to dump salary, then it's pretty clear that the goal is not being competitive for the next seasons. In that case, the "big trouble for the competitiveness of this team" is only virtual. In that case, we'll probably try to trade KG for a smaller contract and youngsters/picks/cash, as well as Pierce. What's the problem with that? It's not having a MLE in the books for 2 years that will hurt your ability to do these deals. You are valuing too much the importance of a MLE contract when analyzing its impact on the all picture.

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No we did not break from fiscal responsibility when we extended Garnett. We extended Garnett for less money every year than he is currently making. He has proven to still be a top 3-5 player in the league and has been extended at less than top 3-5 money. I find that fiscally prudent to be paying a player for less than market value.

You are using a double-standard here, unless you believe that Posey's market value is not the MLE this season (and, in that case, the market seriously disagrees with you). What you have to answer is this: will a 36 years old KG be worth of a $21 million salary?

Re: Proper business management vs win at all costs.
« Reply #13 on: July 12, 2008, 04:22:41 PM »

Offline BballTim

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People (and writers) were claiming that the only way to keep Posey was to offer him the full MLE at 5 years

Can you provide any evidence to sustain that assertion? IMO it's quite clear that what's in play is a 3year vs. a 4year deal.

  There were IMO a fair amount of articles about how Posey could get the full mid-level for 5 years, as well as a lot of posts on this blog. Are you saying that you never heard anything like that? And where's your proof that what's in play for Posey is a 3 year vs 4 year full MLE deal?

Re: Proper business management vs win at all costs.
« Reply #14 on: July 12, 2008, 04:26:21 PM »

Offline nickagneta

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Wyc and his group paid $360 million for this team when they sucked back at the end of 2002 when the franchise was worth only $274. They were good but not champions.

http://www.forbes.com/lists/2007/32/biz_07nba_Boston-Celtics_326173.html

They are now valued at $381 million and are champions. What could they get for the franchise on the open market right now as currently constructed?

Now imagine what happens to the value of the franchise and what it could be sold for if after 2009-2010 things change and the team takes a turn for the worst, and maybe for a while.

Look at the charts on that Forbes page and look at the value, operating expenses and revenue back in the years where they had been exceptionally bad for a long time(98, 99, 00, 01). Do you think that ownership would ever want to return to those types of numbers?
That Forbes page is pretty cool. It's fun cycling through all the teams. I'm going to have to add that to my bookmarks.

Bulls in 1998 won a title. Their last and the end of a dynasty. Next four seasons they were atrocious winning about 20-25% of their games. That's pretty much the worst case scenario for when our best players leave right? Okay. Chicago's value goes up slightly and contiues to increase, their income stays steady then increases, their operating profit increase and continues to increase.

The value and all that won't suffer any catastrophes if the Celtics are bad for awhile. Click through a bunch of the other teams and most have had the same jumps in revenue and value as the C's did.
That Chicago example is perfect for what I am saying. The Bulls retained franchise value because they switched everything they were doing. After the great exodus their player payrolls plummeted, they sucked for a long time, and didn't reinvest in players They relied on gate to stay profitable while deleivering a horrible product. Let's face it without some lottery luck, the fact they still have one of the hottest selling gear in the league due to the Jordan legacy and the fortune of trading with a complete and utter imbecile in New York, Chicago may very well have had a very large backlash at the box office and maybe not be as close as they are or as profitable as they are.

cordobes, where we are off a bit is that you are discussing the 3rd vs 4th year whereas what I have been discussing is this:

Quote
The idea of win at all costs is that we pay whatever we need to pay to retain Posey and/or anyone because he is invaluable to the situation and we only have so much time to win.............So giving Posey a 5 year full MLE to ensure the continuation of a three year window two more years is fiscally irresponsible.


I would say that my idea would be a 2 year deal for Posey, player option third. That's not going to cut it. I know that. But in other threads there have been, for days, a group of people saying to just give the guy the full 5 year MLE because we have a window that is only so big and they don't care about the consequences down the road.

You are definitely more conservative than those. This thread isn't really directed at your one year argument and hence it is why I didn't want to delve into the specifics which ultimately everyone does. Because then people want to discuss just the Posey contract and won't discuss how such a contract will affect:

The decision as to whether to trade Ray, Paul, and KG, who to trade them for, extend them, or allow them to expire when their contracts end.
The decision as to if, when, and how much to to extend Rondo and P{erk for(my guess is both will have new contracts nearing $10 million a year for the length of each contract).
How the team will use future MLE's.
Whether ownership will continue to allow over luxury tax salary levels.
The playing time of developing players.
Future trades.

But you very vocally dismissed my notions because you were applying it to a one year difference in Posey's salary and not as to the whole picture or the extreme I was addressing it to.