Sheldon H. Jacobson: Stanley Cups must be won in the front office before they are won on the ice

The 2024-25 National Hockey League season is well underway. All 32 teams began with a fresh start in the standings, and for some, a fresh roster on the ice. Though every team hopes to raise Lord Stanley’s cup in June, there are only a handful of teams that have a realistic chance of doing so.

Filling a roster that can win the Stanley Cup is not just about the talent of individual players. It is about creating a winning team and culture. The salary cap places a hard constraint on how much teams can spend.

In contrast, Major League Baseball does not place a limit on team roster salaries, though big spenders must pay a competitive balance tax (aka luxury tax) if they are deemed to spend too much. That is how the 1990s New York Yankees won four World Series over five seasons, paying exorbitant salaries to field teams that dominated baseball.

This baseball “money game” has continued, with the top six total payroll teams in 2024 all making post-season play, and the fifth highest, the Dodgers, winning the World Series. The Pirates had the second lowest total payroll in 2024, with post-season hopes dashed back in July.

The NHL salary cap means that money alone cannot buy championships, forcing NHL general managers to be more creative in how they fill team rosters.

One option is acquiring players through the entry draft, a methodical process requiring scouts who can evaluate talent and spot hidden gems that other teams may miss. It also requires patience and a quality development system to support such efforts.

Another option is via trades. Exchanging players between teams suggests that each believes they are getting the better of the trade, either by improved talent on the ice or by shedding salary to gain salary cap flexibility. Trades provide a more rapid acquisition of talent, particularly when one team acquires seasoned players while the other acquires future assets in the form of young prospects or draft picks.

Yet another option is via free agency. However, when free agents are acquired, they must be signed at market rates, often based on past performance. Top-tier free agents typically demand long-term contracts that invariably take them beyond their peak performance period, as age and injury wear away skills.

This creates the risk of teams carrying bad contracts on their books, which occur when a player is being paid at a level that is not commensurate with his production on the ice. Their salary absorbs a disproportionate amount of team salary cap, forcing GMs to compromise other aspects of their roster. Indeed, the kryptonite for success on the ice are such bad contracts, which can only be avoided by how GMs offer or acquire contracts.

Numerous teams carry such bad contracts. Examples include Jonathan Huberdeau of the Calgary Falmes, Seth Jones of the Chicago Blackhawks and Erik Karlsson of the Pittsburgh Penguins. The first two players were high first round draft picks who never quite reached their anticipated potential but were given lucrative mid-career long-term contracts that are not in-line with their production on the ice today. The third is a superstar defenseman who was also given a long-term contract that will invariably take him past his prime.

The pressure to keep talent often forces GMs to offer contracts that are too long and too lucrative, or risk losing players to other teams that are willing to overpay to gain a short-term advantage and keep fans happy.

Is there a solution?

One is for the NHL to limit contracts to a designated upper bound in length based on the age of the player. For example, players under 24 years of age could be offered contracts for up to six years, hence set to expire when the players are 30 years of age or less. For older players up to 29, the sum of their age and the contract length would be no more than 32. For players 32 and older, two-year contracts would be the limit.

The NHL Players Association would not welcome such restrictions, since long-term contracts based on past performance is desirable for them, even if they have the potential to lead to bad contracts for their team, hurting their chances to win a Stanley Cup.

Temptations by GMs to pay market rates for talent based on past performance is a formula for disaster. It may give a team a short-term boost in the standings but will invariably mortgage the team’s future success when it gets saddled with bad contracts.

Sometimes, the best decision a GM can make is to pass on offering a long-term contract that will not make the team better in the long run. Indeed, avoiding bad contracts may be the recipe for success in a salary-cap constrained NHL. GMs who can resist such temptations position their team for success on the ice, giving them a real chance at raising Lord Stanley’s Cup in the future.