NBA's Guaranteed Salaries with No Incentives - More Money, More Problems?

5 min read

Here in the Bay Area, it’s been a little over a week since Kevin Durant joined the Golden State Warriors and we have to admit we are still on a bit of a high. If you’re a basketball fan, you’re looking forward to seeing how “KD” will blend with a team that was already in championship-caliber form going into next season.“KD” is just one of many high profile NBA players switching teams this summer. While a number of these moves were expected…what was not were the astronomical contracts and salaries that came with them. Durant’s deal – for two years at $54 million – was largely considered a bargain for what he provides the Warriors. Compared to other free agent contracts, however, we can’t help but question, “where’s the remaining incentive?” now that these players have received such a large influx with no performance levers baked in.

A few examples of Salaries from this year’s NBA free agency frenzy:

  • Matthew Dellavedova: In his first three years in the NBA (all with the Cleveland Cavaliers), Dellavedova averaged 5.7 points and 3.5 assists per game. He is now with the Millwaukee Bucks, who signed him to a four-year contract worth $34.4 million.
  • Marvin Williams: In 11 seasons, Williams averages 10.5 points and 5.2 rebounds per game. But the Charlotte Hornets rewarded him with a four-year contract worth $54.5 million.
  • Bismack Biyombo: A five-year veteran with career averages of 5.5 points and eight rebounds per game, Biyombo was impressive for one first-round playoff series with the Toronto Raptors. The Orlando Magic “rewarded” Biyombo with a four-year contract worth $70 million.

While we’re happy for these players, we can’t help but question why these teams would invest a substantial amount on players with “moderate” stats, without any performance accelerators as a safety net. Of course there is the chance that these players may live up to these contracts. But we’ve seen, time and time again, teams giving large amounts of cash to players up front, and not seeing a strong ROI. These player contracts would be better justified if there were personalized incentives tied to them. Typically, players will receive bonuses for making the All-Star Game, going to the playoffs, etc. But better incentives would be if the player averages ‘X’ amount of points, rebounds or assists, he would receive a bonus. Instead, these salaries are guaranteed, without giving that extra monetary motivation to perform better. Let’s bring this back to the business world. Would you guarantee an employee a high salary and guaranteed bonus without the need to meet certain objectives and goals? Probably not. At the end of the day, incentives are a proven mechanism for any employee – whether on the court or behind a desk – to strive to reach a higher goal. Without incentives to continually earn your compensation package, statistics show that production will likely decrease in the workplace… much like what happens to these players once they’re given these large, guaranteed contracts. Only time will tell if these moves were a slam dunk … or an airball. But in our opinion, a little incentive structure could have gone a long way in trying to reach the long-term success these teams are seeking.