Matt Swartz has an interesting article up on Baseball Prospectus (subscription probably required).

Each year, about 25 players receive two-year contracts. The inevitable question that analysts ask is whether it was smart to commit to the player for a second year, or whether the team should have stuck with one year. But did you know that most players receiving two-year deals in recent years actually do better in the second year of their contract?

I wouldn't have guessed that.  Free Agents are usually at the age where performance is declining so it's pretty interesting to learn that.  Matt provides some numbers later on.

among players who re-signed to two-year deals with their old teams, they produced 39 percent of their WARP in the first year of their deal, and 61 percent in the second year of their deal. Players who signed two-year deals to new teams produced 63 percent of their WARP in their first year, and only 37 percent in their second year deal. It certainly seems that teams who re-signed their players had better information on their players. Looking at players who signed three-year deals produced 36 percent, 34 percent, and 30 percent of their WARP in each of their three years, respectively—maintaining constant value for sure—but players who signed three-year deals with new teams declined from 45 to 39 to 16 percent of their WARP in each of their three years, respectively.

As soon as I read this I knew I was going to apply this to the Cubs and Jim Hendry.  I'm going to use WAR rather than WARP, but the difference should be very small.  In fact, Matt points out he tested this using Fangraphs WAR and it still proved to be correct.  I'm going to use Rally's WAR database.

I took all of the multi-year contracts that Jim Hendry has signed since becoming GM.  You can see a list here.  I failed to include Derrek Lee's first 3-year contract with the Cubs in that list and it is included in what I will post below.

Jim Hendry has signed 29 players to 2 or more years.  The samples here are going to be much smaller than the ones Matt used of course.  You have to keep that in mind when you check out the results.

I initially split the contracts up into two groups like Matt did: those re-signed and those signed coming from another team.  There were 19 players who were signed coming from another team and 10 who were re-signed.  I should point out that Aaron Miles and Milton Bradley were not included, because they played only 1 year of their deals so far.  I also included Carlos Zambrano and Kosuke Fukudome in the 2-year deal group because they've played only 2 years of their current contracts.  It worked out kind of nicely in that Derrek Lee's current 5-year contract is the only player who has played more than 3 years of their contract.  I did not include Lee's most recent contract in the list.  Soriano has played only 3 years so he's in the 3 year list.  Same with Lilly.

I then split those 2 groups up into 2 more groups: 2-year contracts and 3 year contracts.  We have the following groups: Other (signed after playing for another team) 2-year contracts, Other 3-year contracts, Cubs (re-signed players) 2-year contracts and Cubs 3-year contracts.

On a different team previous season (2-year contracts)

That's almost the exact opposite of the league average (63% 1st year and 37% 2nd year).  It's not just one or two players.  Every single player coming from another team played better the 2nd year of the 2-year deal with the exception of Antonio Alfonseca.

Re-signed players (2-year contracts)

Henry Blanco was worth -.5 WAR his first year and .5 WAR his 2nd year.  Until you figure out how to divide by zero, there's nothing I can do about that.  His value is added into the total value though.  Glendon Rusch is the only player who played better the 2nd year of the deal and that's just because there was almost no way he could play worse.  Once again, this is the exact opposite.  On average, re-signed players were worth 39% of their total 2-year value in year 1 and 61% in year 2.

In this list, I also included Ramirez's first multi-year contract with the Cubs which he voided after 2 years and Carlos Zambrano's current contract.

On a different team previous season (3-year contracts)

The average was 45 to 39 to 16%.  The Cubs new players are performing better in their 3rd year than the average player, but not quite as good in the 1st year.  These are very similar numbers to the average unlike the 2-year contracts.

Re-signed players (3-year contracts)

Only 3 players, but both Dempster and Lee performed quite a bit better in Year 3 than they did in the other years.  Ramirez's Year 3 in this list is 2009 when he was injured much of the season.  Dempster's first 2 years were as a reliever and then Year 3 was his outstanding 2008 season.

I don't think we can really draw any conclusions here.  Certainly not from the re-signed players to 3-year contracts list.  The largest sample of any of these groups matches very closely to what Matt found.  I'd guess if the samples were larger we'd find that all of these groups would be similar to what he found.  Anyway, I just thought that was an interesting article and knew I could easily apply this to Jim Hendry and the Cubs.