Phoenix Suns: Agency risk explains Trevor Ariza signing

The Phoenix Suns signed Trevor Ariza in the offseason to a deal that might not make sense to outsiders, but makes perfect sense in light of agency risk.

Like any good graduation speech, this article starts with a definition. Thefreedictionary.com defines agency risk as “the risk that the management of a company will use its authority to benefit itself rather than shareholder[s].”

More broadly, agency risk is a risk where not everyone’s goals within an organization may not be aligned. In the NBA, that’s a common theme. Agency risk is one reason why coach-general managers rarely work, along with bias.

Take Tom Thibodeau of the Minnesota Timberwolves. He regularly goes after former Chicago Bulls players that he’s coached, which is partly because he’s seen them a lot and assumes they’ll be better within his scheme. Partly, it’s because his incentive is not the same as the rest of the organization.

For most of the Timberwolves franchise, the goal is (hopefully) to create a sustainable and winning team. You could also argue that the goal for the shareholders and owners is to increase profit revenue, but there’s certainly overlap there (winning teams tend to make more money), so to simplify, assume the goals are synonymous.

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However, a coach’s goal is almost always to win as many games as possible, as soon as possible. No matter how bad a team’s roster may be, it is always expected that a coach should at least be trying to win, and if he can win more games with an inferior roster than the next guy, then he’s doing his job as a coach.

Players have nearly the same incentive. Their goals tend to be winning games and making money, and performing well on the court accomplishes both. Again, there are some slight differences, but for the sake of argument, it can be assumed that their goal is winning, just like the coach.

However, the GM is in a weird spot, caught between long-term and short-term goals. It’s his job to gather the best players possible in the moment, but also generally to not mortgage the future to do so (look how trying to go all-in worked out for the Brooklyn Nets).

Having a GM who’s also the coach leads to a lot of shortsighted moves. Doc Rivers of the Los Angeles Clippers and Tom Thibodeau have both regularly signed aging veterans in an effort to compete immediately, instead of investing in and developing young players. Only now that Rivers has been supplanted as the decision-maker in L.A. has that changed for the Clippers.

How it affects the Phoenix Suns

Luckily for the Phoenix Suns, they’re free of that type of conflict of interest. However, they still have a good amount of agency risk that needs to be dealt with.

In the NBA, the coach is almost always the first scapegoat; when things aren’t going well, he’s the first to be fired. Phoenix is no exception, as it has a brand new coach heading into this season in Igor Kokoskov.

A lot of times, it’s more of a PR move than anything, especially during a rebuild. Mike Budenholzer and Steve Clifford were let go by the Atlanta Hawks and Charlotte Hornets, respectively, despite both being well-respected coaches who quickly found new jobs. Getting a new head coach is one of the easiest ways to sell change to a fanbase.

Kokoskov will probably have a shorter leash than most, simply because he’s an international coach with less standing around the league. David Blatt was fired halfway through his second year with the Cleveland Cavaliers, despite making the Eastern Conference Finals the year before and having a 30-11 record at the time of his firing. Kokoskov’s seat will be somewhat warm the moment he takes it, just by nature of being the new head coach of a rebuilding team.

However, when a rebuild becomes as long as that of the Phoenix Suns’ and the coach has already been changed, it is the GM who often finds himself under the microscope. The Suns have finished three straight seasons winning fewer than 30 percent of their games, and last season was the worst of the three.

It’s also been eight years since the Phoenix Suns made the playoffs. They have a bona fide star in Devin Booker, and the fans would like to see some wins, preferably sooner than later.

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Suns owner Robert Sarver probably wants to see the same, which means GM Ryan McDonough has to be feeling the pressure. He even claimed last year that the Suns weren’t tanking. He probably also feels pressure to win in the form of Devin Booker. Booker signed a five-year extension this summer, so he’s not going anywhere, but if he got fed up with the losing and demanded a trade, that would be disastrous.

Some might suggest that McDonough’s job is secure, but that’s far from the case. Sam Hinkie got his owners to agree to a long-term rebuild, and they effectively pulled the plug after less than two years. To the public’s knowledge, Sarver has certainly never green-lit anything as drastic as the Process, so expecting him to be more patient than the Philadelphia 76ers ownership group is unwise.

This is agency risk. Coach Kokoskov and GM McDonough both are incentivized to win now, which may not be in the best interest of the franchise. That’s why Trevor Ariza received a one-year, $15 million deal, and it’s also why he’ll likely play a lot.

What would’ve been the smartest long-term ploy for the Suns would be to use that extra cap space on a young player or to absorb bad contracts for draft picks — something similar to the Nets taking on Kenneth Faried and Darrell Arthur for two draft picks would’ve been a wise move for a franchise that just gave up an extra pick to acquire Mikal Bridges.

The Phoenix Suns are not going to be great next year, especially in the stacked West. Bleacher Report claims that the Suns have a zero percent chance of making the playoffs, and only ranks them ahead of the Sacramento Kings in the West standings.

Their highest-potential players are 21, 20 and 21 years old. If you’re a big T.J. Warren or Brandon Knight fan, they’re still only 24 and 26, respectively. The addition of Ariza will not magically make the Suns a title contender over night.

To be fair, there’s an argument to be made that consistent relevance can be a more important goal than just a championship. The Process was founded on a “championship or bust” mentality, but there’s something to be said for the middle ground.

The Memphis Grizzlies have an aging, injury-prone core, yet they’ve still been resistant to blow it up. Last season aside, they have a consistent plan of action: play hard defense, win 50-ish games and make the playoffs, lose before making the Finals, retool around the stars, repeat. Grit-N-Grind, baby.

The Process would say, “Tank another year. You won’t be good yet, so give Deandre Ayton time to develop, and stockpile assets.” Grit-N-Grind would say “No team becomes a winner overnight. Start the slow climb as soon as possible, so that by the time your stars are in their prime, you’re already a perennial playoff team.”

It’s not up to this author to declare definitively which of the paths are better. It really depends on what your personal preference is, although the assumption in team sports is generally that winning a championship is the most ideal situation. Signing Ariza to a one-year deal doesn’t seem to nudge the Suns in that direction.

Ariza will definitely help the team this year though, and he could help the development of the Suns’ main stars anyway. Acquiring him could be one of those “six in one, half-dozen in the other” situations where it just doesn’t matter much.

At the end of the day, the Trevor Ariza signing just isn’t a huge deal. It’s a one-year contract, and he’s just a stopgap starter. It’s unlikely to affect the long-term outlook of the franchise.

However, it is still illustrative of the agency risk inherent in the structure of the NBA. Let’s hope McDonough is looking out for what’s best for the Phoenix Suns, and not just what might help him keep his job.