June 9, 2013

Dissecting the Draft

Draft Wrap

by Nick J. Faleris

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The MLB First-Year Player Draft concluded on Saturday afternoon, and with it concluded the sixth installment of the “shadow draft/shadow system” project I have been running dating back to 2008. This Dissecting the Draft series has explored the process of formulating a strategy for draft day, from exploring candidates for first-round selection to examining the strengths and weaknesses of the draft class and the effects thereof on our establishment of loose goals, or “wants,” within our overarching strategy.

The below table constitutes my “work sheet” for the three days of the draft. It contains each of the slots where a pick was to be made, the amount allocated to each slot by Major League Baseball, an estimate as to what bonus a particular selection would command, and a running tally as to how much of my total pool allotment I expect to have available after each signing (assuming signings in each of the first 10 rounds—remember, these are the rounds that comprise the total pool allotment, and you only have access to the money if you sign the player you draft in that slot).

For this “shadow draft” we stepped foot inside the Red Sox’ war room and picked at each of their slots for the first 20 rounds. Total pool allotment for Boston was $6,830,200. You are permitted to spend up to 5 percent over your total allotment without incurring any loss of picks in future drafts (though you are taxed for the overage). Including that additional 5 percent, our total allotment for the 2013 draft came out to $7,171,710.

One last note on reading the table: In order to calculate how the total budget would be affected by a non-signing in the first 10 rounds, take the total available amount, subtract the amount in the “slot” column (which is the money MLB awards for use on that signing), then add back the amount in the “Estimate” column (which is the amount we estimate spending).

*Note: Eighth-round pick Garver signed for $40,000 while this piece was being written, so the estimated amounts for picks eight, nine, and 10 were slightly (but not significantly) adjusted to keep consistent the overarching strategy.

Finally, as a reminder, based on the strengths of the draft class, the placement of our picks, and with an eye toward the current state of our “Shadow Farm System,” we identified five “wants,” which represent loose and realistic guidelines for an ideal draft (outside of simply taking players we consider to be draft-worthy):

1. Two middle-infielders;
2. One corner infielder;
3. One college pitcher;
4. One catcher; and
5. One “best available” with at least two potential future plus tools (this can be satisfied by one of the four above selections, as well)

As we step through each of our picks, the primary consideration is drafting a high talent for the slot, and the secondary consideration is our “wants.” Each decision must be made with our budget in mind. That’s the roadmap; here is how the journey actually shook out.

Day 1: First- and Second-Round Picks
We discussed the reasoning behind our first- and second-round picks the morning after day one in the previous entry to this series. As a quick summary, the first-round decision came down to Dom Smith, Trey Ball (LHP, New Castle HS (IN)), and Braden Shipley (RHP, Nevada). Ultimately, Smith was settled upon due to the fact that (1) all three graded out comparably, (2) there were greater opportunities to find high-ceiling high school and college arms later in the draft, (3) Smith fit a need in our system as a potential high-level bat that will start in the low minors, and (4) Smith could potentially be had at a slight discount for the seventh overall pick.

After the first selection was made, our attention turned to the board and what we expected it to offer over the next few rounds (which is where much of the potential impact talent was likely to be popped). Jon Denney was tempting, as he was rated as a first-round talent and was, throughout this series, in consideration for selection with the seventh overall pick. Ultimately, we settled on Riley Unroe due to the fact that (1) there were greater opportunities to find a high-ceiling catcher later in the draft, (2) Unroe fit a need in our system and allowed us to check off another of our “wants”—one that would be more difficult to check off as the draft proceeded, (3) because Denney had dropped out of the first round, but still likely carried a first-round price tag, it could be that he would be a difficult sign (and drafting him would put us in danger of losing the pick and the $1.2 million and change that comes along with it), and (4) other teams were likely to have the same concerns about popping Denney in the second round, so there was a good chance we would have a third shot at him at the beginning of Day 2.

Exiting Day 1, we had just three of our wants remaining: (1) one more middle infielder, (2) one college pitcher, and (3) one catcher. This put us in an excellent position to get creative as needed on the second and third day of the draft, as the board looked strong as far as offering us an opportunity to tick off the remaining wants within the first three or four rounds on Day 2.

Day 2: The Decision on Denney
The word surrounding Denney entering Day 2 was simply that he had a first-round price tag and teams had shied away from him on Day 1 due to concerns as to his future behind the plate after an inconsistent spring. Looking at our budget, estimating around a $300,000 savings on Smith and a slot signing for Unroe, we were staring at approximately $3,042,110 left to spend on our draft class in the first 10 rounds (and including any amounts of $100,000 per pick after the 10^th round).

Denney would almost certainly require at least $1.3 million to sign, and his demands could drive upward of $2 million. His decision to attend the draft in person (along with several other candidates for first-round selection) was a pretty good indicator that he wanted to be selected, he wants to sign, and he wants to get started with his pro career. I set an estimated signing amount at $1.5 million, which would eat through about half of my remaining budget.

In order for this pick to play—there isn’t much, if any, extra in the way of bonus pool allotment when you draft seventh overall—we would need to save money in the second half of the top 10 picks, drafting cheap signs and banking the excess allotments in order to add to the $671,000 and change we were already allocated for our third pick. That’s about $830,000 we had to account for. As noted above, I was reasonably confident Smith would come at a slight discount, so that estimated $300,000 in savings could be applied to Denney. However, we would still need $530,000 more. Estimating between $25,000 and $50,000 per “cheap senior signs” in the later rounds on Day 2, we could scrape together around $550,000. That would cut things awfully close.

If we were to make an aggressive play on Denney, we would have to suck it up and spend our fourth-round pick on him, too, in order to get what we need to sign Denney to $1.5 million (which remember, is still just an estimate—we need some cushion, too). By “using our fourth pick” I mean utilizing a “cheap senior sign” in the fourth round. This would free up a little over $400,000 in extra funds, but the opportunity cost would be inability to make a high-caliber selection, comparatively, at 113 overall.

Looking at our round-by-round opportunity table (which gave us a breakdown of our desired targets in each round across different positions/draft profiles), it looked like we could make a fifth-round selection of a college arm or a middle-infielder that would be comparable to a college arm or middle-infielder we would expect to be available to us in the fourth round.

Taking all of the above into account, Denney was too good an opportunity to pass up. He would give us a third player arguably ranking as a first-round talent, and with a little creativity, we would be able to make it work with our budget. Denney was popped with our third pick.

Rounds 4 and 5: Paying for Denney Without Punting Upside; Getting Our College Arm
As noted, our fourth-round pick would be a senior sign to free up money to funnel to Denney. After Denney, our remaining budget was cut nearly in half, leaving approximately $1,542,110 with which to work. The senior sign I tabbed for selection was Luke Farrell, a right-handed pitcher for Northwestern not believed to have a high bonus demand, believed to be eager to start his pro career, and as a bonus a player with ties to the Red Sox (his father, John Farrell, is the manager of the big-league club). We estimated Luke’s bonus at $42,000 and change to round off our budget at a clean $1,500,000.

That single move freed up almost enough money on its own to make us comfortable we could sign Denney (when added to the expected $300,000 or so in savings on Smith). That meant we could potentially get a little aggressive with one or two more picks (mid-six-figure guys) should the opportunity arise. First, however, I wanted the college arm we had tabbed for the fifth round. Dan Slania, a right-handed closer for Notre Dame, had an impressive summer on the Cape, a solid spring, and carries the arsenal and body to be run out as a starter to begin his pro career. He was also considered to be eager to start his pro career, and expected to be a fourth- to sixth-round talent (which I viewed slightly higher than that). He was the pick in the fifth round, with a slight discount bonus marked in pencil, though a slot signing would be easy enough to work around.

Rounds 6 and 7: Middle Infield Opportunities
The player I was most excited for, as far as players I expected might be available in this portion of the draft, was Malik Collymore—a middle-infielder from Ontario, Canada that showed very well for me in-game and in the showcase setting. However, I was surprised to see El Dorado High School middle-infielder Chris Rivera still on the board as we approached the sixth round. (I had him marked as a fourth- or fifth-round guy.)

Rivera has a solid offensive profile in spite of an inconsistent spring, but most intriguing is the potential for versatility in his defensive profile. A shortstop by trade, he could be a well above-average defender at the keystone, and he even has backers for a shift behind the plate, where he has worked out in the past. I decided Rivera was the more interesting option in round six, giving the organization the opportunity to develop him at multiple positions up the middle.

I expected Collymore could drop to the seventh, and he did (he actually dropped to the 10^th), making him an easy selection for the round. I estimated it would take fourth- or fifth-round money to sign Rivera and fifth- or sixth-round money to sign Collymore, marking a $400,000 and $300,000 estimate, respectively, for purposes of our draft budget. After adding Slania’s estimated $300,000, that left us with approximately $500,000 for the remainder of the top 10 rounds (plus anything we would like to spend over $100,000 per pick after round 10).

Rounds 8 through 10: Providing a Cushion, Understanding Money, and Creating Negotiating Leverage
Looking at our first seven picks, I was not confident enough in the estimates to go aggressive with any other selections in the top 10 rounds. Instead, I wanted to lock in a solid cushion that could cover any of the following: (1) Smith requiring full slot to sign (which would eat an additional $300,000 out of the budget), (2) Denney requiring more than $1.5 million to sign (I was confident I was close with $1.5 million but wanted additional flexibility to make sure the deal gets done), and (3) Rivera and/or Collymore requiring more than anticipated. The selections in rounds eight through 10 were senior selections that satisfied needs in the organization and allowed us to create the cushion.

Before moving on to rounds 11 through 20, item 3 in the proceeding paragraph is worth a little extra discussion. My preference would obviously be to sign the player we draft so that we add that talent to the system. I want that cushion in place so that the organization is in the best position possible to add the talent we have selected. However, with regards to Rivera and Collymore, we are in an interesting position where, should their demands exceed our expectations by too much, electing not to sign them might prove to be the most prudent option.

You might quickly question that statement, noting that under the draft rules under the new CBA, if you do not sign a particular pick in the top 10 rounds, you lose the ability to allocate the funds assigned to the slot elsewhere. This highlights the utility of approaching the draft, and potential signings, from the perspective of a broader draft budget, rather than looking at specific over-allotment/under-allotment signings. Looking at our worksheet/table above, it turns out we’d actually have more money to give to Denney if we forfeited those two picks.

Our budget has already built in over-allotment signings for each of Rivera and Collymore. Keeping that in mind, let’s look at what happens if Rivera were to refuse to sign. We would lose the $254,900 provided for his sixth-round draft slot, however, we would add back to our budget the $400,000 we had allocated for purposes of an estimated signing bonus. That means the net effect on our budget is an increase of $145,100. The same holds true for Collymore, who would add $108,900 to the budget were we to walk away from the table.

As you can see, by locking in our savings in the fourth round (with Farrell as a senior sign), we have given ourselves a great deal of financial flexibility without sacrificing our opportunities to leverage our selections—Slania, Rivera, and Collymore all fitting in as fourth- to sixth-round talents on my board. While the preference is not to be in this particular position, we can also use this as leverage should negotiations turn cold. The organization is incentivized not to sign the players if we are looking to free up money, and the players can be made aware of this. In order to put teeth into that particular negotiating weapon, however, we will need to tab some “backup selections” after round 10, so we have some place to spread any money that might remain should Denney sign for slot, Smith sign for under slot, and the cushion cash remain unallocated.

Rounds 11 through 20: The Back-up Plans
There are two collections of players that required “back-up plans” in the later rounds: (1) Jon Denney, and (2) the tandem of Chris Rivera and Malik Collymore. In each case, should these players choose not to sign, we will be left with excess cash. In Denney’s case, we get almost $900,000, which is the difference between what we’ve allocated in the budget and his $671,200 slot allotment as the 81^st overall pick. Rivera and Collymore, as discussed above, would free up around $145,000 and $109,000, respectively.

My first choice for Denney’s backup was Jake Brentz, a prep lefty power arm from Missouri with an estimated seven-figure signing bonus demand, but more of a third-round profile. Unfortunately, Brentz was nabbed by the Jays at the end of Round 11—I wanted one more prep infielder before switching to my back-up plans, and nabbed Edwin Diaz with my 11^th-round pick.

There was little else on the board that I considered a suitable back-up for Denney, taking into account likelihood to sign, so I put his back-up on the back burner until the 19^th round when I grabbed Ryan Boldt—a prep outfielder from Minnesota with a significant seven-figure bonus demand. While Boldt would be an incredibly difficult get, I figure failing to sign Denney would give me just under $900,000 to add to the $100,000 MLB allocated to the slot where Boldt was selected. There was $400,000 remaining in the budget after Round 10, so some or all of that could potentially be thrown at Boldt as well. I think Brentz would have been the better backup as a more likely signable option, but I should at least be able to make a run at Boldt if Denney falls through. Ultimately, for reasons noted above, I think Denney will sign.

The back-up options for Rivera and Collymore are Zach Alvord—and infielder from D-II Tampa that had early-round grades coming out of high school but inconsistent showings through his collegiate career—and Christian Jones—a lefty from the University of Oregon who threw exclusively in relief this year as part of his recovery from Tommy John surgery, but with top-three-round upside. Both are tough signs, but would be respectable gets with leftover money should they be willing. Additionally, these two options could still be on the board even if Rivera and Collymore sign, as we have that $400,000 cushion that could afford us enough flexibility to navigate negotiations with one or both of Alvord and Jones if the rest of our top-10-round estimates are on target

Rounds 11 through 20: The Remaining Picks
The remainder of my selections were slot or near-slot selections, focusing on up-the-middle college talent and arms. The one exception is Mark Payton, who is an undersized outfielder from the University of Texas who might be a left fielder in pro ball. Payton has no usable power, but he does display an incredible knack for squaring up balls and making loud contact in addition to a high baseball IQ and work ethic. He’s probably an org guy and will probably opt to go back to Texas for his senior year, but I love the makeup and have been a big fan of his dating back to his junior year of high school.

A number of the remaining picks may also opt to return to school. Oregon State has held on to rising seniors in recent years, making Dan Child a potential senior sign next year. Likewise, Ty Ross and Tyler Kuresa could return to LSU and UC Santa Barbara, respectively, to try and raise their draft stock in 2014. My hope is that enough of our $400,000 cushion saved in the first 10 rounds will remain to give these players, along with Edwin Diaz, what is needed to convince them to start pro ball. I wouldn’t consider any of them to have significant bonus demands, but the $100,000 assigned to their respective slots isn’t life-changing money, and ultimately the decision will come down to whether these men want to start their pro careers.

Summary
There you have it—the formulation and execution of a draft strategy. I may update this series a couple times in the coming weeks as signings begin to roll in, and we’ll have one more “shadow draft” piece post-signing day (or once everyone has signed), assessing our strategy and how it played out.

For now, a few days removed from the draft, I have to say I am thrilled with the ultimate result. I believe we identified the strengths of the class and played to them without sacrificing quality picks and targeting specific needs in our “Shadow Farm System.” The system under the new CBA requires an organization to consider a multitude of factors when making selections, and hopefully this series has touched on at least a few of those considerations, though undoubtedly the professionals are dealing with more nuance, and of course with a wider set of resources at their disposal.

Thanks for coming along for the ride. If there is interest, we will do this again for the 2014 draft—perhaps starting a bit earlier in the draft cycle and stepping into the shoes of an organization picking in the second half of the first round, in order to explore a different set of considerations. We’ll close the loop after signing day; hopefully, our executed plan holds up.

Nick J. Faleris is an author of Baseball Prospectus. Follow @NickJFaleris
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