Disparity in NBA Player Salary Often Leads to Winning, Says Case Study


With the National Basketball Association (NBA) group of owners locking out their players this basketball season more sports fans are taking interest in terms like “revenue share,” and “luxury tax.” Terminology and topics usually reserved for the business section is now making its way to the front page of the sports section. In the wake of yesterday’s epic fail of player-owner labor negotiations, a new study examines how the pay hierarchy on an NBA team can actually lead to victory on the court.

Unlike Major League Baseball, salary disparity in the NBA can make a positive difference on the court, according to new research from the Kellogg School of Management at Northwestern and the Stanford Graduate School of Business.

The study, by professors at both schools, examines the connection between salary dispersion, starting lineups and playing time and team record.

The disparity between the highest-paid basketball players and their lower-paid teammates on teams often lead to negative headlines about large NBA salaries. This has been played up in the media to the point that it has generated some public sympathy for the owners in this labor dispute. (I mean who on Earth believes Joe Johnson ever deserved a max contract?) But, in fact, these pay hierarchies often lead to wins.

Hierarchy can promote coordination and enhance cooperation on teams, the authors of the study claim.

“We view procedural interdependence as a critical factor that creates a need for hierarchy. Thus, we predicted that hierarchy in the NBA would relate positively to team performance,” said Adam Galinsky, the Morris and Alice Kaplan Professor of Ethics and Decision in Management at Kellogg.

“This is in stark contrast to professional baseball, which is much more of an individual game requiring minimal team interdependence. Indeed, prior research on major league baseball found that pay disparities had a negative effect on on-field performance and revenues.”

Kind of verifies what I’ve been saying for years, that basketball is a team sport, and baseball is an individual sport masquerading as a team activity.

The research examined the NBA from 1997-2007, looking at pay dispersion, starting lineup dispersion and playing time dispersion to measure hierarchy. They studied team performance as measured by the team’s winning percentage. The authors also tested intra-group coordination and cooperation by looking at assists, turnovers, defensive rebounds and field-goal percentage.

“Pay dispersion and starting lineup dispersion were significant predictors of increased intra-group coordination and cooperation, and enhanced the performance of professional basketball teams,” said lead author Nir Halevy, acting assistant professor of Organizational Behavior at the Stanford Graduate School of Business.

Interestingly, although differentiating among a team’s players in terms of playing time also contributed to team success, it was not associated with cooperation and coordination within teams.

“People who get paid more may demand the status of starting and the prestige that results – starters receive elaborate introductions set to blaring music while getting high fives and chest bumps from teammates,” said Galinsky. “Playing time is more tactical, depending on which players are contributing the most during a given game.”

So for those sports fans who don’t enjoy the NBA due to their belief that “players are too selfish and place individual gain over team achievement,” their case loses some credibility with this study. There appears t be more validity to the idea that it’s a star driven league, and the higher paid individual stars earn their pay with wins.

Paul M. Banks is CEO of The Sports Bank.net, an official Google News site that generates millions of unique visitors. He’s also a regular contributor to Chicago Now, Walter Football.com, Yardbarker, and Fox Sports

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