Royals sign Francisco Pena; Added to 40-man Roster

It was announced today that the Royals had signed free agent catcher Francisco Pena to a Major League contract.  He will be added to the 40-man roster.  Pena has some family ties with the Royals, as his father, Tony Pena was a former manager of the Royals and is now currently serving as the New York Yankees bench coach.  His brother, Tony Pena, Jr., also a former Royal, played shortstop..and we all know how well that panned out for us!

Since 2007, as a 17 year old, he has spent his professional career in the Minor Leagues for the New York Mets.  With nearly 2,300 plate appearances, he has a career line of .236/.286/.348, 40 HR, 286 RBI, 103 2B, 6 3B, 415 SO, and just 136 BB.  Last season he played 89 games, 68 for Triple-A Las Vegas and 21 for Double-A Binghamton of the Eastern League, hitting a career high .254 at both levels with 9 HR and 39 RBI.  Behind the plate, he managed to throw out just 15 runners, allowing 35 for steals.

With the addition of Pena, the competition for the backup role of Salvador Perez shouldn't change.  Veterans George Kottaras and Brett Hayes are considered the front-runners for the position, which means Francisco will have to work extremely hard to be even considered a legitimate backup.  Basically, this signing doesn't make any sense and was not necessary.

This signing also adds another dilemma: who to protect for the 40-man.  The roster now has 39 players on it, including Francisco Pena.  As Kansas City Star reporter Bob Dutton mentioned in a recent article, the Royals have until Wednesday November 20th to finalize their 40-man roster, otherwise eligible prospects will be made available to other teams in the upcoming Rule-5 Draft.  Instead of choosing 2 players to fill the void, now we're down to just 1 player allowed to be added.  Some of the more notable names to protect are Michael Mariot, Christian Colon, Cheslor Cuthbert, Lane Adams, Brett Eibner, and Brian Fletcher.  We will find out who the lucky 40th member to the roster will be soon enough.

In the Cross Hairs: Josh Johnson

#Welp...he gone. With Ervin "Magic" Santana rejecting the Royals qualifying contract offer of 1 year, $14.1 million, he will test the waters of free agency in search of his 5 year, $112 million deal he so wishes for.  Is he worth 112 million dollars? Nah.  Will he get it? I mean... Vernon Wells once received $126 million so..who the hell knows what 'Magic' will get.  What is he worth? Perhaps a 5 year deal worth around 75 million wouldn't be too absurd.  If you want to hear a compelling argument from Santana's trio of agents, comparing their client to another former Royal..Zack Grienke, check out Jon Heyman's article from this morning, talking about some interesting points that make Santana and $112 million a plausible outcome.  As Jeffrey Flanagan reported on Tuesday, GMDM will continue to pursue a deal for Santana. On the plus side, we do get a compensatory pick in the upcoming draft if he signs elsewhere, so there's that, but hey...I've moved on. It was great having you in Royal Blue, Erv.

Let's get to the task at hand: replacing Ervin Santana. While other clubs are moving in on the services of Ervin, Bronson Arroyo, Matt Garza, Phil Hughes, and Tim Hudson, to name a few, I'd like to discuss the reports of the Royals interest in Blue Jays starter Josh Johnson.  Buster Olney of ESPN tweeted earlier this evening a potential signing for Kansas City would be the 29 year old righty, stating it would be a "possible high reward" and that he's a "good team guy." This is definitely intriguing.

Photo courtesy of torontosun.com

In his 8 year tenure as a Florida AND Miami Marlin, Johnson posted a 56-37 record with a beastly 3.15 ERA, along with being named a 2 time All-Star and finishing 5th in Cy Young Award voting in his 2010 campaign. The right hander logged 916.2 innings on the mound, racking up 832 strikeouts and 308 walks, a WHIP of 1.23 and giving up just 0.6 HR/9.  Prior to the 2013 season, Miami owner Jeffrey Loria decided to unload some payroll by creating a mega package including Johnson, pitcher Mark Buerhle, and SS Jose Reyes and sending them up north across the border to the Toronto Blue Jays.  Things got a little sour for Josh as a Blue Jay.  He hit the DL early in the year, came back for a dozen more starts before being shut down to a forearm injury. Coming off minor elbow surgery, Johnson is expected to be healthy and ready for Spring Training.

In his glory days with the Marlins, Josh had a lightning fastball that averaged 95 mph in 2009 and 2010, but since then, his velocity has dipped slightly each of the next years, to 92.8 mph. Along with the heater, Johnson has a slider with good movement, a curve that sits around 79 mph, and a decent changeup.  If somehow the Royals would be able to snag him off the market, his 45% ground ball rate and 31% fly ball rate would make a nice fit at Kauffman Stadium. Turning 30 in January, Johnson is well known for visiting the disabled list and if he can stay away from that list and pitch like he did in '09 and '10, he can easily be one of the top right handed arms in the game. That's the risk that comes with signing the once former ace.

Let's just say for kicks and giggles, Josh wants to come to KC.  Here's what the rotation looks like (in my world):

                                        1.) James Shields                         

                                        2.) Josh Johnson                        

                                        3.) Danny Duffy                          

                                        4.) Jeremy Guthrie                    

                                        5.) Yordano Ventura    

Moore has already gone on the record to say the 1-2 spots are already locked up.  Shields will lead it off, of course, and then Guthrie to follow.  The next 3 spots are up for grabs.  If we were to miss out on Johnson, you can already assume that Duffy will be a full-time member of the rotation, barring any setbacks and if "Ace" Ventura can figure things out, he should be a regular, as well.  Zimmer is close to ready, so in the mean time, someone will have to step up, whether it be Wade Davis or Will Smith.  There's also the risk of letting Luke Hochevar earn his way back as a starter, he was straight up filthy last year in the 'pen.  I say leave him there, but that's not up to me. 

To fill Santana's spot, we need an outside source, and I believe the ex-Marlin/Blue Jay should be the source.  A long-term offer would be way too much of a gamble for any organization to make on Johnson.  This is a bounce back season for Josh, in trying to regain his old form as a top 1-2 starter.  Reports have shown that Johnson could very well get a 'qualifying offer' type of deal, such as 1 year, $8-12 million range. I have no problem with this kind of deal.  The Royals should at least go after Johnson, before bidding on Phil Hughes.

Royals Flashing Leather

As I'm sure you have heard by now, five Royals have been named finalists for 2013 American League Gold Gloves. Salvador Perez, Eric Hosmer, Alcides Escobar, Alex Gordon, and Lorenzo Cain will learn if they are taking home the hardware during tonight's award show at 7 pm on ESPN 2.

The Gold Glove is a nice little honor for the player, but ultimately it might be the most worthless out of any of the nationally acclaimed awards. Nonetheless, I'll be rooting for each of the nominated Royals to take home the hardware tonight.

An award more reflective of results would be that of the Fielding Bible Award winners. This year, Alex Gordon took home the trophy for top left fielder. (I'm not sure if there is an actual trophy.) The panel for this award includes: Bill James, BIS Video Scouts, Dave Cameron, Doug Glanville, Hal Richman, Joe Posnanski, Mark Simon, Peter Gammons, and Tom Tango's fan poll among others. It is an interesting hodgepodge of people associated with baseball. With that being said, I give the Fielding Bible Award more credence than the Gold Glove.

Here's a look at how each of the Royals finalist ranked in terms of UZR/150 among their qualifying Major League positional peers:

• Salvador Perez: 3rd out of 16 in defensive value according to Fangraphs. (Top in the AL)
• Eric Hosmer: 11th out of 19 (8th out of 11 in AL)
• Alcides Escobar: 3rd out of 21 (2nd out of 11 in AL)
• Lorenzo Cain: 4th out of 22 (1st out of 13 in AL) *Had to lower minimum innings to 750.
• Alex Gordon: 7th out of 18 (4th out of 9 in AL)

My guess is that Salvador Perez and Alex Gordon take home the hardware. I do not think that Eric Hosmer is deserving and I don't think that Alcides Escobar hit enough to win a Gold Glove. Lorenzo Cain is on the short list of best fielders in baseball, but the fact that he only played in 115 games hurts his case.

We'll see how it goes. Go Royals!

Looking Ahead 2014 MLB Draft

With the season in the books, Kansas City is slated to select 19th in Major League Baseball's 2014 First Year Player Draft. This is much lower than the Royals are accustomed to making their first selection. It is important to note, that the Royals first round selection will not be protected this season. This means that if the team signs a Free Agent who received a qualifying offer from his former club, the Royals will forfeit their first round pick to that former club.

In addition to the 19th overall selection, the Major League Baseball Welfare committee has also awarded Kansas City with the 37th overall selection. This selection will likely slide several spots after compensation picks are awarded.

Speaking of compensation, the Royals may be receiving one of these picks. If Ervin Santana declines the Royals qualifying offer and signs with another organization, Kansas City will likely find themselves with three picks in the top 45 selections of the 2014 MLB Draft.

Given the current nature of the MLB draft it is important to consider how bonus pools affect a team's draft approach. Last season Kansas City had roughly $8,290,700 million to play with, but this year that number figures to be much lower. Let's try to figure out what it might be, assuming slot values stay the same. (This estimates for 6 compensation picks, just like in 2013.)

• 19th overall selection (1st round) - $2,055,800
• 37th overall selection (compensatory round) - $1,508,600
• 43rd overall selection (competitive balance round) - $1,229,600
• 62nd overall selection (2nd round) - $899,400
• 98th overall selection (3rd round) - $525,500
• 128th overall selection (4th round) - $393,500
• 158th overall selection (5th round) -$294,600
• 188th overall selection (6th round) - $220,600
• 218th overall selection (7th round) - $165,400
• 248th overall selection (8th round) - $152,200
• 278th overall selection (9th round) - $142,200
• 308th overall selection (10th round) - $135,300
• Total Bonus Pool - $7,722,700

Basically, the Royals figure to have roughly $500,000 less to play with in 2014 than they did in 2013. Also, a team can spend up to 5% over that allotted amount without surrendering a future draft pick. Just last season the Royals exceeding their pool by roughly $80,000. Based off of these estimates the Royals would have approximately $8,108,835 to spend on the 2014 draft. Last season a bonus pool of this size would have ranked 9th in baseball.

As we are beginning to see with the new Collective Bargaining Agreement, it is far more important to look at a draft class in its entirety than it is to compare individual selections. The Royals may be picking 19th overall in 2014, but if the team receives compensation for Ervin Santana and doesn't sign a qualifying free agent, the Royals will once again be in excellent position to add to the farm system. 

If you are interested in viewing an incredibly early report on the 2014 draft's top 50 prospects, you can click on this link here. 

Using a Bunch of Business Terms to Judge Dayton Moore

The Royals have saved Dayton Moore’s job this year. Or maybe it’s Dayton Moore that saved the Royals this year? Depending on whom you ask, Dayton Moore should or shouldn’t be fired. And while the thought process is a difficult one, there is probably no one clear answer at this time. And while I would love for you to make up your own mind with your own opinions on the future of Dayton Moore, let me put some thoughts out there from a managerial standpoint.

When managing a company, there are many things that managers have to consider: operating leverage, return on investment, net operating income, sunk costs, etc. And while I’m not nearly educated enough to write a book about it, I am just educated enough to put some bullet points up here on the similarities between managing a company and being general manager of a baseball team. Intertwined in my descriptions will be my thoughts on Dayton Moore.

·         

•       Let’s start with a growth-share matrix. A growth-share matrix is a portfolio-planning method that evaluates a company’s strategic business units (SBU’s) in terms of market growth rate and relative market share. This definition is usually followed with a chart you might have seen in a high school or college business class.

• While any analogy will have holes in it, stick with me on this one while I switch some terminology around to compare it to baseball. Using this matrix, I think it’s fair to say that Dayton Moore traded a star for a cash cow – that, of course, meaning Wil Myers for James Shields.
• Cash cows are log-growth, high-share businesses or products, and thus they produce a lot of the cash that the company uses to pay its bills and support other SBU’s that need investment. This is what James Shields has brought to the Royals. He stabilized the rotation, eats innings, and helped make the pitching staff as good as it is. He made the whole team better.
• Unfortunately, cash cows don’t stay cash cows forever, and as good as James Shields has been this year, he only has one more year of team control left following this season. It’s examples like this that make finding stars which can eventually turn into cash cows so important for businesses and baseball teams alike. The Royals had that star, and his name was Wil.
•  To play devil’s advocate, however, what if we shouldn’t consider Myers a star at the time he was traded? After all, he had yet to take a swing at the major league level. That would make him a question mark, according to the matrix. Question marks require a lot of cash to hold their share, but can turn into stars if the right course of actions are taken. Well, Myers had been and dominated the minor league levels for some time, and was about as close to a star before entering the Majors as one could be, but let’s forget that right now. A critical part of a manager’s job is to correctly identify stars from the question marks. If Dayton Moore didn’t think of Myers as a potential star, and that’s why he felt good about the Shields trade, then he made a critical error in his judgment. If Moore thought Myers would be a potential star, but still thought a cash cow in the present was the best course of action, then I believe he still made a critical error in judgment.
• Enough with the weird names and references to matrices, let’s go to operating leverage! This is a measure of how sensitive net operating income (NOI) is to a given percentage change in dollar sales. This is going to be a big stretch, but just go with me on this one.
• Increased variable or fixed expenses affect the amount of operating leverage that a company has. Higher variable costs with lower fixed costs make for a lower operating leverage. Lower variable costs with higher fixed costs make for higher operating leverage. To summarize, companies with higher operating leverage have a higher ceiling but a lower floor than companies with low operating leverage.
• When it comes to baseball, a young player with many years of inexpensive baseball ahead of him is about as close to a fixed expense as you can get. A guy with only a couple of years of team control, at a high variance position such as pitcher, would be what I consider a variable expense. Teams like the Royals can’t afford to trade fixed expenses for variable expenses. They need a high operating leverage, because in such an unfair game as baseball is on the salary cap side, the higher the leverage, the better the chance that when the Royals are ready, they are REALLY good.
• While James Shields made the team better this season, the ceiling is no longer as high as it would have been with Wil Myers.

I hope what I stated above makes sense. There are some flaws to using the above to judge Dayton Moore; first off, I’m really only looking at the decision to trade Myers. I don’t talk about other moves he’s made, such as Guthrie for Sanchez or Santana for someone I’m not even taking the time to look up, but these are important to the evaluation process. The Myers trade, however, sticks out more than anything else, and is what I would consider almost unforgivable. But going forward, as any good manager would tell you, the Myers trade is a sunk cost, and should be considered irrelevant when deciding on Moore’s future. And when looking at it this way, and hoping the Royals are now ready to really go for it next year, I think Moore has earned another year in Kansas City.

But this year will be remembered for one of two reasons for Royals fans going forward: 2013 was either the year the Royals turned the corner or the year the Royals traded a cornerstone. 

All definitions I used are credited to:

Garrison, Ray H; Noreen, Eric W; Brewer, Peter C. Managerial Accounting. McGraw-Hill Irwin. New             York. 2012.

Kotler, Philip; Armstrong, Gary. Principles of Marketing. Pearson. New York. 2013. 

Bateman, Thomas S; Snell, Scott A. Management: Leading & Collaborating in a Competitive World.              McGraw-Hill Irwin. New York. 2013.