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Depends how "out of it"
What I mean by smarter is this. Owners will have to be smarter when dealing veterans for picks and or rookies if they are "out of it" because they will have to be carefull not to gut the team so dramatically that they fall into the basement of the league. To keep a team they will have to stay competitive while re-building. If a manager is already in last place.. maybe it's not so bad that they keep those veterans around. The current rules will ensure that the TEAM will get a shot at some good rookies the following season. In the meanwhile, the current manager should be busting his butt to make sure he gets as many wins as possible. Even if he's still going to loose the team he currently runs.. more wins means first (or higher) pick at the teams available next season.
The truth is I don't know if this would work or not. I do know that I'd like to test it. From some of the other posts about champions and challenger leagues it seems that maybe something similiar has been tried already and (judging by the state of those leagues) failed. If that is the case, then I can accept that and move on.