Monday, October 04, 2004

MBxpO: Montreal's Existential Management
Lessons In Which Drucker Rassles Veeck
& the Curse of Pepe Mangual  

I do not think that winning is the most important thing.
  I think winning is the only thing. -- attributed to Bill Veeck

I loved Bill Veeck's creativity and intensity, but his epigram above is not right in all cases. Baseball itself provides a lot of examples where winning games isn't the only thing, and these examples are enlightening about organizations outside baseball, too.

I was drawn to writing about this topic by reader David Lippman when he asked:

What is your take on the Expos fiasco? It seems like that team was designed to fail, given their lack of talent, "home" games in Puerto Rico, and the continued uncertainty regarding their future. How good has Frank Robinson been in trying to lead his team through all of that?

Thank you D. Lippman...the Expos of recent vintage are a tragically wonderful management lesson for a bunch of reasons.


In general, it's safe to say that most baseball organizations in most seasons manage along the Veeck model: winning a World Series or at least a pennant is the primary goal. But in baseball, there are other primary goals.

For a team like the 2003-4 Pittsburgh Pirates, or the 2004 Cleveland Indians, it's a positive trend against the previous year with experience building for promising young talent and a chance for management to battle-test that talent and provide hope for the fans.

For a team like the Tampa Bay Devil Rays, it's finishing above last place.

For the New York Mets, it's competing with a cross-town rival for the hearts and minds of fans...regional popularity. The objectives to support that goal could be to win a lot of games, and certainly that'd be their Plan A to start the season, but there are many ways to compete, and the Mets have found alternate paths in the past.

For the Seattle Mariners, it's operating at at least break-even on the P & L and minimizing perceived risk.

For all of these, a trip to the playoffs is icing, not cake.

In the recent past, for several teams, it was to position themselves to get a subsidized stadium built, though that era seems over, between the glut of new stadia and the now-apparent evidence that if you build it they might, or might not, come.

Beyond Baseball, there are many parallels. Some public companies exist to make their executives a healthy income, while some are obsessed with shareholder value. Some firms exist for the egos of their owners (in this model, the firm is most frequently named after the egotist). Some measure their success in working on or delivering the coolest products or even just getting the recognition for making the coolest products. For some, it's just competing against a particular metric or rival or even themselves. For some, it's just surviving without rocking the boat.

Most organizations set out objectives and manage to them, but in a diverse, competitive endeavor, each will have its own currency. When you work for an organization, especially when you're just starting, it's important to absorb and act recognizing its own currency (and not just your own, or some "standard" model).

Individual employees have their own currencies, too. Some work for money, some for glory, some for recognition, some to please themselves by meeting a standard they set for themselves. As a manager, it's vital to come to understand each associate's currency (or currencies).


For the Expos, as Lippman noted, they were designed to fail. The team is owned by the other Major League team owners as a consortium, bought to enable one of their internally-beloved peers, Jeffrey Loria, to have the assets to buy another team, last year's champion Florida Marlins. So the team is owned, literally, by the men who own the Expos' daily enemies. Game theory quickly describes why the consortium owners would resource-starve the franchise intentionally so it can be a human punching-bag for those rivals -- so it's no surprise the team has the lowest payroll in its division...its closest peer has a payroll 51% higher than the Expos').

If you own 1/29th of a team and all of another team, where do your loyalties lie. And you you do have some portion of decision-making power in the way your minority interest is invested. Ideally, you'd get all the other 28 owners to invest more than you did and do it in a way that was quite bad, so they'd be out their money and yet your own team could beat the victim-franchise senseless at will. The ideal is just about unattainable -- so you have to settle for a game-theory silver medal, which is a low-investment approach that guarantees a losing record (baseball being a zero sum game, for every loss there has to be a win, so a losing team puts more wins on the table for all others to share in), and yet puts some entertainment on the field.

Baseball has not so distant examples of owning part interest in a team designed to fail. In the 1950s, the Yankees' main owner apprently bankrolled in part the man who bought the Philadelphia Athletics and moved them to Kansas City. This wasn't out in the open (the other franchisees would have objected), but the Yankees and Athletics proceeded to become each other's most frequent trading partners, with an extraordinary number of deals that seemed to benefit the Yankees more than the Atheltics (though not always in that one direction). Roger Maris was one of the players the Yanks obtained in a trade with the As.

You see Expo-style objectives in some companies, though ownership isn't usually held by rivals. Companies packaging themselves to be bought or liquidated or where the executives have designs on buying the business for themselves will frequently make moves designed to draw down the orgnaization's apparent (or actual) assets and actual (or apparent) liabilities to dress up its desirability (or lack of it) as an acquisition target. For external buyers, it's usually for simplifying the buyer's analysis, and for internal executives, it's to make the property look like it's worth less (so they can make a lower offer when they try to buy).


That designed to lose plan is quite obvious, almost overt.

But there was another currency that was under the surface, and not made explicit -- teasing more money out of metropolitan Washington D.C., the Expos long-determined next stop.

MLB ownership flogged chunks of the Expos season off to San Juan, Puerto Rico for a couple of reasons. One minor one being to spif the Puertorriquenos for all the wonderful players the continent has received from P.R. over the years. Another minor one is to possibly get some additional attendance from fans in that country for whom even a last place ML team would be a tasty novelty. I know at least a few people thought the weather would be better there than in Quebec.

But the real reason, the coup de main here was to make it appear that MLB had potential suitors that could compete with metro DC, putting MLB in a better negotiating environment. San Juan didn't exactly flood the stands at Hi Bithorn Stadium for the games, but it gave some illusion that it might be a possibility. Canada was out of the question, even if the Majors could find a town with more anglophones, something less Youppified, because Canada's regulations hinder the application of public funds for private gain, making many of the ways teams optimize their take untenable. Cuidad Mexico certainly had the middle-class population to support a major league team, but the political situation there is feared. For all the apparent uncertainty of the Expos situation, and given that MLB had intentionally destroyed what was left of the Montreal market for the product since it allowed a major interest in the team to be sold to Loria in 1999, there was really no high-dollar choice for a metro area that could sustain a team for at least a decade except for DC.

Essentially, to anyone looking at the factors that MLB bases franchise city decisions on, metro DC was by far the most obvious. But that main suitor was so nostalgic, it had been so long since they had had even a tragically-flawed team, they were determined to close the deal, no matter how little room their MLB counterparts had to maneuver.

Call it the Curse of Pepe Mangual -- a major city taken in by the Puerto Rico Gambit that to any outside evaluator, would have been as transparent as the contents of a cup of Wall Drug "coffee".

A quick side note on the Washington deal I haven't seen mentioned much online. As you may know, DC has RFK Stadium, a multi-purpose facility that's over 30 years old, where the Senators had played before they left town. DC agreed to build a new park for the team, but MLB agreed that,m to get the team out of Montreal, they would have them live at RFK for up to three season. Late last week, a movement on the DC city council was pushing to get the team, but once it had moved to DC, to can the new ballpark and have them play in RFK for a while. As the mastermind of this bit of aikido, Council member Adrian Fenty, said "Where else are they going to go? They've already left Montreal. And no one else has a stadium ready."

This Fenty Gambit is a dangerous one, but not a bad one to keep in your tool kit. Negotiating backwards once a deal is made is something you can only do once to someone sitting across the table, and, if it's in the public eye, the way this or the way most public company negotiations are held, you can only do once ever, because everyone is going to know you will let a deal close or get close to it and then shift the terms. In this case, it might work, especially if the MLB owners are tired of their co-ownership of the Expos (a potential distraction that may be tying up capital for some teams' owners). The DC council will probably never have to negotiate a sports franchise import again, so poisoning the well might be worth it to them. Fenty seems to think the $500 million is a loser because it comes from a regressive tax of businesses' gross receipts as aprt of the package. And he thinks big money would go farther on rec centers and libraries. If you're going to poison a well, do it for something you believe in, as it appears Fenty does, rather than just doing it because you can get away with it.


The lessons for organizations outside of baseball are clear.

  • Never fall in love with a deal so much you can't negotiate reasonably over it.
  • Keep in mind that every organization has its own currencies, what it defines as success and how it measures that.
  • Always try to discern the bits of glitter on a deal meant to distract you -- the no-payments-until-St. Francis of Assisi Day package or the free 2-liter bottle of Jolt -- especially if the party across the table has a history of mendacity during negotiations.
  • Don't ever risk the Curse of Pepe Mangual

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