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The Case Against Jim Hendry: Exhibit A – Backloaded Contracts

Written by , Posted in General

Most Cub fans are well-aware of the heavy burden some of Jim Hendry’s larger, longer contracts present to the team.  In simple terms, the highest-paid Cubs (Soriano and Zambrano) are the ones most fans would like to see traded away.  But their contracts are essentially untradeable, because they’re so heavily back-loaded, paying the highest salaries at the end of the deals.  In Soriano’s case in particular, his salary has continued to climb while his production withers, progressing from a minor annoyance to a massive laughingstock across the league.  Some writers list it as the worst-ever for the Cubs—others say it’s the worst in league history.

So let’s face it, Cub fans—short of some clever dealing*, both those guys are staying in Chicago for the foreseeable future.  What’s less apparent—and potentially more damaging for the Cubs long-term—is the next tier of back-loaded contracts Hendry has given out, and what they mean to the team’s ability to retain their veteran players.

*Don’t hold your breath—Hendry’s still our GM for the time being.  His cleverness is limited to turning batting practice hugs into national headlines and using spare buttons to pay for snacks from the office vending machines.

Carlos Pena is one example.  He signed with the Cubs this past offseason for a staggering $10 million—staggering because he’s a ten-year veteran with a career batting average of .239, coming off a contract season where he managed to hit only .196.  Across the league, it was considered a bizarre amount to pay, even if half of it is deferred until 2012.

Fast forward to this week, and it looks like Pena might be starting to live up to his offensive potential.  His long fly balls are making it into the stands, and his glove is covering up for inexperience elsewhere in the infield.  Add in his growing reputation as a quality teammate and clubhouse leader, and he has many Cubs fans wondering if he can stick around beyond this one season.

Ah, but there’s the problem.  Any extension talks with Pena start at that $10 million price tag.  By the numbers, Pena is probably a good value somewhere between $6-7 million.  If he really does like Chicago and day baseball as much as reported, he might be willing to give the Cubs a discount in return for more years, but it’s doubtful it will bring the overall price to within a reasonable range**.  What’s more, how many years can you safely commit to a thirty-three-year-old veteran before the discount you get isn’t worth the money you’re saving?  Ideally, you’d want to sign him for one or two more years, but at the price you’d likely have to pay—plus the $5 million you already owe him for this year—it’s not worth the production he’d bring to the lineup.

**That doesn’t mean I think Pena is the villain here—far from it.  Just look at it from his perspective: if the Cubs are happy enough with his performance this season to want to resign him, why would he come back for substantially less than what they’re already paying him?  The same is true for you—you wouldn’t take significantly less money next year to do the same job you’re doing now, no matter how many years you were promised.  Would you?  Nope.  I wouldn’t either.

Carlos Marmol’s three-year, $20 million contract presents an even stickier situation for the Cubs down the road.  This season he’s making just over $3 million—a bargain price for one of the best closers in the game.  But next year his salary jumps to $7 million, and the year after that the Cubs will pay him just under $10 million.  That means when it comes time to negotiate his next contract or any extension, the base salary you’re working from is that $10 million price tag.  By then, Marmol will be over thirty, and the combination of age and cost might force the Cubs to trade him away or let him wade into free agency, still well in the midst of his prime.

The same question of resign-ability is looming over Ryan Dempster and Aramis Ramirez this season.  Both have options for next year—Dempster has a player option***, while the club has the option in Ramirez’s contract.  Both are fairly beloved, long-term Cubs who have professed a desire to stay with the team to the end of their careers.  But in both cases, their back-loaded contracts put the starting price for negotiations at an unreasonably high level—Dempster is making $13.5 million this year, while Ramirez makes $16 million.  By maxing out the tail end of their deals, Hendry has inadvertently**** guaranteed that one or the other—and possibly both—will be playing in different uniforms next season.

***I can’t speak for Dempster, but I think he would waive his $14 million option for next year to extend his deal with the Cubs.  And it wouldn’t be the first time he financially sacrificed for the sake of the team—he deferred $3 million of his contract back in 2010.  Much like Kerry Wood, I get the sense that Dempster is the rare veteran who would make a large financial sacrifice to keep playing where he wants to play.  I just don’t think the Cubs can afford to bank on that kind of benevolence, and with Hendry in charge, they are.

****Not sure why I’m giving Hendry the benefit of the doubt there.  The truth is that his pattern as a GM has been pretty focused on the supposed needs of the moment, with little regard for the future.  His track record is full of half-measures, band-aid signings, and short-term self-preservation—the Soriano signing is just one example.  He’s not what I would call a “planner.”  If I had to guess, I’d say he probably buys a whole lot of stuff from the Home Shopping Network.

Bottom line, the Cubs have roughly $50 million coming off the books at the end of the season.  Most of that money will go to resign current Cubs***** and reel in key free agents******.  Can the Cubs trust Jim Hendry to use that money wisely to piece together a roster and rebuild a winner?  His track record says no.

*****Possibly a combination of Garza, Wood, Pena, or Dempster, and raises for the handful of arbitration-eligible players we have.

******Please, please… not Pujols or Fielder.  Neither of them solves any of the Cubs’ primary problems.  And if the worst should happen and Hendry keeps his job through the offseason, both of them are prime targets for one of his patented, massively back-loaded deals.

  • chris in Illinois

    A few things:

    * A player’s contract the previous year isn’t always the ‘jump-off’ point for his next, especially for an older player…see Wood, Kerry 2011.

    * Why point out Pena’s weak spot without mentioning his strengths?? He wasn’t signed for his batting average (which is WAY over-rated anyway) he was signed to get on base and swat homers—-sadly he’s the best left-handed power bat the Cubs have had since Leon Durham…props to Hendry for recognizing a gaping 25-year old hole.

    * If the rotation had held up, we’d probably be around .500 and be within 5 games of the division lead and we’d be talking about how do we get some offense out of centerfield, second base, third base and catcher. We’d be looking to upgrade those spots and wondering why Baker doesn’t play first against lefties (by OPS, Pena is the 14th best hitter in the league among players with 150 PAs vs. RHP)…

    * Hendry is far from perfect—I blame him completely for our lack of rotation depth (how much better would Gorzy have looked than Jimmy Russell??)—but I give him enormous credit for overseeing a farm system that actually has produced actual MLB players. Some of you guys born after 1980 my not remember, but the Cubs had probably the worst minor league system for the better part of 25 years and the fact that it has produced several actual MLB players is a new and novel development in Cubbieland.

  • PackerCubBull

    Exhibit B – The Milton Bradley ordeal
    Exhibit C – The Rich Harden ordeal. Harden was claimed on waivers, Hendry decided not to take the trade because he felt he could get better with the draft picks, then decided not to offer arbitration because he felt Harden would accept it. If you feel he’ll except it, then why don’t you take the trade?

  • dennis

    Good logic!
    Ramirez looks old. Dempster maybe. Soriano must go. He is in the way. Maybe we can package him with a good player or two. I don’t think we can fix it until he is not part of the problem.

  • chet

    Dennis,

    Who would we package Soriano with? Not so sure I want to rid myself of good young players in order to get rid of one older, expensive, mediocre player.

    That being said, put yourself in the other teams shoes, what would it take for you to take on Soriano?

  • I think you hit the nail on the head about Hendry not being a planner and working to fix the moment with no regard to the future. As a Packers fan, I have been able to enjoy the exact opposite in Ted Thompson (who, if memory serves, does NOT backload contracts). Initially, he was not well liked and lots of fans questioned his moves. But as a few years go by and the long term outcomes become apparent, he is much more popular. Seeing what Thompson does makes watching Hendry even more painful.
    .
    Chris in Illinois: “…props to Hendry for recognizing a gaping 25-year old hole.” Didn’t the entire organization and fan base spend all the Pinella years yearning for a left handed power bat? I’m not sure props are appropriate in this case.

  • Eric

    Breaking news: Jim Hendry turns hug at a Smorgasbord with Prince Fielder into 30 year $1.2 billion contract.

    Jim Hendry said of the signing “…as we left the restaurant and stood on the curb waiting for the driver, Milton…err Prince sorry…said, ‘I know it’s going to take some time, but I want to tell you I want to be a Chicago Cub if you want me.”

  • chris in Illinois

    I’m not the first to realize the need for a lefty power bat, nor was Hendry…he just was the first to address the issue. I suppose my main defense of Hendry is three straight seasons above .500 including one where we had the best record in the league…as a fan for over 30 years that seems nothing less than miraculous and I’ll always give him credit for that.

    I’m guessing that if you told Cubs fans in the winter of 2006 coming off a 66-96 season where the club finished behind the Pirates that we can rip off three straight seasons of + .500 ball including a 97-64 season in 2008 and all it would take from each of you is $100 and a pint of blood, the only question most fans would have had was, “Does it have to be my blood?”.

  • Doc Raker

    I completely agree that JIm Hendry has to go for all the reasons you listed. I do agree about the most recent salary being a starting point in most negotiations, players really need to have down years before anyone talks about a pay decrease. The ‘staggering $10M’ to Pena was so out of line at a time when the folly of the Soriano contract was so apparent it boggles my mind how Hendry negotiates these contracts and how Ricketts can allow him to continue. It is like he is getting kick backs from the MLBPA, Hendry, “Hey Carlos we would like you to be a Cub for 2011, what salary would you like?” Carlos replies what he thinks is a high starting point for negotiations, “How about $5M?” Hendry, “I will give you $10M if you kick me back $2M.” Carlos, “Done”.

  • Doc Raker

    Neither Aram or Demp deserve anything close to the money they are currently earning. Neither should be a Cub in 2012 if the Cubs have to pay them anything close to their current deal. Aram’s club option should not be picked up and Demp’s player option should be left alone if our only option is to extend. If Demp didn’t have a contract he would of been sent down to AAA already.

  • chris in Illinois

    I’m not saying that Dempster has pitched well, but even if you could send him down to Iowa, who would you bring up?? Don’t know if you realize it, but starting pitching depth hasn’t been a real strength on this year’s squad.

  • Jedi

    @chris – two massive problems. Kerry Wood very publicly gave the Cubs a hometown discount. He could’ve gotten at least $6 million/year based on his performance, and perhaps more if he found a team that wanted a closer.

    Second, “the best left-handed power bat since Leon Durham”…you must’ve missed Henry Rodriguez’s career as a Cub? And even if you’d like to claim that by saying “power bat” you have immediately excluded Mark Grace, that’s rather unfair. Where is it written that you need to have a lefty power bat? We didn’t have a lefty “power bat” for at least 13 years, because we had a lefty hitting 3rd and racking up the most hits of ANYONE during the 1990s. If, during the career of Mark Grace, the Cubs had gone and added a “lefty power bat” you and your ilk would’ve been decrying the absence of enough righty power bats (see current Philly fans – you know, that team with the best record and not a single righty with any significant power).

    Lefty/Righty, who cares, the Cubs need players that can hit (especially in the clutch), and at .220 Pena isn’t worth $10 million/year – even if he hit a solo home run in every game! He’s got six solo HRs and only 2 of his HRs have come with more than a single runner on base. His 38 RBIs aren’t exactly tearing up the league either (Castro has 36!!!). No one is saying they hate Pena – just that he’s not worth the money based on his numbers.

  • PackerCubBull

    @Chet – If I was another team, taking on Soriano would mean the Cubs have to take on one of my albatross’s of a contract

  • D2JayDub

    @Chris in Illinoise – 2007-2009 seasons were TWO years ago! The last two campaigns (this one included) have proven Hendry’s inability to see beyond the present. And what, tell me, did those three glorious years above .500 gain us? Old players, no trophies, more misery and a GM who’s clever enough to hire Elmer Fudd to manage the squad so he’s not on the hotseat when the team tanks it.

    And the credit for the development of those excellent minor leaguers you speak of was run off to coach for the AAA Philadelphia organization. I’m not saying Ryno would have fixed it all, but he sure would have known how to handle the younger talent on the club better. Hendry and Elmer can go.

  • Mark in Toronto

    I agree with chris in Illinois regarding our lack of starting pitching depth. For that reason alone, I would hold on to Dempster, short of the Cubs being able to pick up some young but ready for the big leagues starting pitcher via a trade or free agent signing.

  • Norm

    Tribune owned the Cubs when Hendry gave out the back loaded contracts to Fukudome and Soriano. Do you think that maybe the order came FROM the Tribune to do that since they weren’t going to own the team when the big dollars started to be paid?

    Everyone blames Hendry, and that’s fine, he’ll be the fall guy, but everyone also seems to ignore the role the Tribune played in those contracts when they owned the team in their final years.

  • Jedi

    Norm – that’s all possible, but the Tribune Co. wasn’t forcing Hendry to sign 4 starting outfielders in 4 years (Soriano, Fukudome, Bradley, Byrd). That kind of stupidity in and of itself should be enough to get him canned.

  • Scott

    You know, you don’t “have” to re-sign those guys. If they start at the value of their last contract, and you want to get them for less $$ and another year, then that is the offer. If they don’t want it, chase the money after someone else…I like Pena too, but he looks better when he has help. -Guess we could have had Dunn on the team…

  • PackerCubBull

    Tribune Co. went drunk on that half billion spending spree because they knew damn well they wouldn’t be paying those contracts. And all of us were lauding Hendry for signing Soriano and Fukudome in 2007 and 2008. I agree Hendry needs to be fired, but not just for these awful contracts. It’s his stupid spending moreso than his reckless spending. And a failure to develop useful players down on the farm, sans Choi and Hill who got us Lee and Ramirez. And Castro. Also, Hendry’s refusal to intervene when managers continually play unproductive veterans over developing kids in lost seasons should also get him fired.

  • mrbaseball2usa

    I know we’re sellers at this point, so I’d love to get some room in the OF and let Brett Jackson prove his worth with a late-season callup. REALLY hoping this guy can cut it in the bigs, and give us a decent, cheap OF to build around.

  • Norm

    Jedi – I don’t disagree that Hendry should be fired. I just think the backloaded contracts have more to the story than just saying they’re Hendry’s fault.

  • Dusty Baylor

    Given Pena had a rotten April, his has hit 14 Hr’s since…putting up .245/.373/.548 in May/June combined. He’s been the least of the Cub concerns this season, IMO. I’d be more worried about the back of the rotation, Soto’s lack of hitting, Soriano’s contract, and whether Barney can be a starting 2B…..among other things.

    also….hooray for Fukudome, but he’s a player who shouldn’t be here next season. the Cubs need to evaluate guys who can help them for the future…..which never seems to happen.

  • dennis

    i’m thinking, that if a contender wants Marmol or Soto, Soriano comes with. We get a prospect. The Cubs lose a nice cog, but can we move forward with a left fielder that does not fit? Sori would have value to some teams.

  • Jeremiah Johnson

    Maybe I should have included this in the original post, but I’m SURE the Tribune Co. had a hand giving out many of these back-loaded contracts. It makes a lot of sense for them, since they wouldn’t have to pay out the largest sums in the latest years.

    But the fact that Hendry was simply the bag man for the Tribune doesn’t make him any less culpable. It’s OK for him to be a bad GM because that’s what the previous owners wanted him to do? Please.

    And frankly, the reason I highlighted Marmol’s contract is to show that his back-loading ways did not end with the sale of the team to the Ricketts family. (Marlon Byrd’s contract is also back-loaded, although it’s not as imbalanced as Marmol’s.) So even if you hold the Tribune Co. primarily responsible, you have to also acknowledge Hendry’s hand in what they did, and the fact that it’s still his pattern today.

    Chris in Illinois–The Kerry Wood signing is perhaps the worst example you could possibly give. The offer he made to Hendry to come back to the Cubs was nothing short of the blank check Andre Dawson presented the team in the spring of ’87. You can’t credit Hendry with that deal. In fact, go back and read the articles regarding that signing–Wood and Hendry both admitted that Hendry tried to talk Wood out of taking so much less $ to come back to Chicago. Wood had to push him into taking the discount!

    Thanks for all the good comments guys. This was just the first in a series of posts about Hendry’s abject failure on a number of key levels. Jedi already hinted at the next one–terrible free agent signings.

  • PackerCubBull

    @Jeremiah – I’m not sure I would consider Marmol’s deal a back-loaded contract, since it was buying out his arbitration years

  • PackerCubBull

    What about decisions like the Harden one? Anything on those kinds of moves?

  • PackerCubBull

    @Dennis – I like the idea of making it a condition for a trade for Soto, not sure if I would trade Marmol away though.

  • Larry Sproul

    If Ricketts keeps Hendry into 2012 he gets what he deserves .What he will get is a ball park with alot of vacant seats . Lets see how many season ticket holders sign up for 2012 !
    This August and September should have Ricketts wondering . Lets see how many fans show up at the Cubs Convention .WGN is already started to remind us to book the over priced room at the Hilton .

  • chris in Illinois

    No one has come forth with the obvious, so here goes: It’s not like Hendry invented the ‘back-loaded’ contract, it’s kind of the industry standard. Jayson Werth makes 10 mil this year and 21 the last year of his deal…Carl Crawford has a similar deal. Jay Bruce makes 2.5 million in 2011 and 13 million in 2016…the Soriano contract isn’t unusual, the Dan Uggla contract this year is the outlier.

  • PackerCubBull

    Yeah, I’m not too keen on holding that against Hendry. But I’m more against his reckless spending and handing out NTCs like they were candy (even if they are a moot point at this time because those players have the 10-5 veto anyways, or are close to getting it.)

  • Doc Raker

    Chris makes a good point, if the backloaded contract is the industry norm then if you want to sign someone you have to offer it, otherwise you might not land the player. This is just another reason the players union needs to be broken.

  • chris in Illinois

    The only way I’d like to see a weaker player’s union is if it meant a return to $15 field level seats and $2.75 beers. I don’t see either happening. I couldn’t care less what these guys make, I’m only concerned with how much it costs me to consume baseball on a daily basis. This cost is solely a matter of supply and demand. Player salaries don’t really impact ticket prices demand for tickets does. If the Cubs started to draw 1.6 million instead of over 3 million a year, ticket prices would drop. Don’t believe me? Check out Stubhub starting in August for teams that had been contenders (or pretenders) and are now out of it and you’ll see some incredible bargains for great seats…

  • Doc Raker

    “Player salaries don’t really impact ticket prices”- Sorry Chris they really do. Of course supply and demand is part of the cost structure but demand goes up with a good team and good teams can be expensive. Players salaries impact the fans costs, no way around it. You might want to consider dropping out of the Obama school of economics and enrolling in the economic school of reality. Ever been to a minor league game? Minor league tickets are inexpensive, minor league salaries are small, there is a correlation.

  • Doc Raker

    PS Chris- The stub hub scenario you mention is that of the SECONDARY MARKET which is completely driven by supply and demand. The original ticket price set by the club is directly impacted by players salary, don’t confuse the two markets.

  • chris in Illinois

    Wrong Doc. Minor league tickets are inexpensive because there is relatively little demand for them. My local squad gives them away hooping to recoup their $$$ in beer, soda and hot dogs. Any MLB team can ask whatever they want for their tickets and certainly they factor in their payroll costs into that projected ticket cost. Of course if the fans do not buy the tickets, they will reconsider their price decision to sell the amount of tickets that they want to. A market driven fella like yourself should applaud the Cubs’ choice to seek maximum $$$ for their product. The fact remains that if the average ticket price is $40 or $80 supply on most days is eclipsed by demand….this has been true when the Cubs payroll was 40 million as well as $140 million. Ergo, salaries are irrelevant in the matter.

    *Clearly I’m of the GOP school of economics anyway, reduce revenue, Increase spending and pray like hell that a Democrat inherits the mess.

  • PackerCubBull

    Are we all forgetting economics 101? Salaries are a fixed cost, they don’t change with the number of asses in the seats. Most costs for sports teams are fixed. It is all supply and demand that sets prices. When teams sign new players, they increase ticket prices because they can, because there is more demand to see this new player.

  • Jedi

    @Chris – now you’re just making stuff up. When was the last time any MLB team cut significantly the regular prices of tickets or concessions? It just doesn’t happen. When people stop coming to the park they make a big free agent splash or have more promotions, tickets aren’t cut. The don’t kill their revenue stream, they drive up interest through marketing or changes in personnel.

    No one is saying that player salaries are the only determining factor in price points for the fan – but they do have some bearing, and to suggest that they are irrelevant is just naive.

  • chris in Illinois

    Jedi….Ummmmmmmm, don’t think I said that teams reduce ticket prices or concessions across the board in response to attendance. Of course, if you listen to MLB on XM with any frequency, you’ll hear lots of ads for 10 game packages for $125 for teams like the Rays, Royals, Astros Etc….of course it’s just a coincidence that these great deals are available mid-season for teams with attendance problems.

  • Jedi

    “If the Cubs started to draw 1.6 million instead of over 3 million a year, ticket prices would drop. Don’t believe me?”

    Your words. My point still stands, it is beyond rare for an MLB team to lower ticket prices, for any reason. Promotional multiple-game packages weren’t part of the original point were attempting to make; let’s not move those goalposts.

    So no, I don’t believe you, but only mostly because it doesn’t happen.

  • chris in Illinois

    Fair enough, I guess that I wasn’t clear that I was talking in terms of tickets prices from year to year…I don’t know every team’s average tix price for every season forever, but just one quick example from the team listed first alphabetically (AZ) shows that their average ticket price in 2008 was 15.96 and it dropped to 14.21 in 2009…I’m guessing that if you adjust for inflation you’d see lots of team ticket prices holding steady over the last decade or even decreasing since so many teams get so much more of their revenue from outside sources (TV, MLBAM, etc)…

  • Doc Raker

    Thanks Jedi- you make sense. Salaries are part of the clubs fixed costs which certainly are part of the formula in determining ticket prices. Supply and demand is always part of any free market system and includes many factors but to ignore a business’s fixed costs in determining price is very marxist in ideology.
    * I would bet season seat ticket prices have risen along with a teams payroll. Securing players and payroll is part of creating demand.
    *Chris- you are right I do believe in the free market system. Keynsian economics is a bad deal.

  • flyslinger2

    I bought $40 seats (4) for $10 each to see the Cubs in DC the week of the 4TH. Just about halfway through the Season and already you can get bargain prices on good seats. It improved my beer budget greatly. How can backend contracts be supported financially when ticket prices plummet? We have the Dodgers filing for bankruptcy protection. I bet if you evaluated their income to debt ratio you would find the same type of contract terms with it’s players also. It’s not a game. It is a business. It is a business that is being run by people whose original intentions were to play a game. I’m an IT guru. I hire people to run the business aspect of my company with clear direction from me on how the business model should perform. This leaves me to do what I do best-fix Billware all the time. If MLB truly cares about their fan base they would revamp the union negotiating process, if not entirely scrap it, and get realistic with the money that is truly in the fan bases disposable income budget. You cannot spend more then you make and right now the fans don’t have a lot of disposable income to throw around. I am seeing one ga em this year only because I have family from the Chicago area in town and they love the Cubs. I saw zero games last year and it is not looking good for seeing any games again next year already.