Management by Baseball

What makes you or breaks you is
the ability to choose from among the in-betweens
those (players) who will go on to make good.-- Branch Rickey

In contemporary organizations that will survive the coming economic shocks, there's a single common thread: they know and act on the idea that the talent is the product. No line of endeavor makes that clearer and holds more lessons for managers looking for an edge in this area than baseball does. Baseball is way ahead of other kinds of organizations, with its decades of post-reserve clause competition to acquire talent.

WHEN THE TALENT IS THE PRODUCT

I've elaborated on that point before, most recently here, so I'm not going to do any more explicatin' on that topic in this entry.

But this idea is catching on and one of the most innovative management consultants, Tom Peters, recently brought to my attention a slide deck he presented to a conference of H.R. people. As all of his output does, this deck is choc-a-bloc with new ideas and enthusiasm. My favorite new idea was "Best Sourcing", which is exactly the model baseball front offices understand and that most pursue because history has lead them to it. Baseball teams have to scout hundreds of potential prospects to find a handful of individuals in whom to invest resources. And a small percentage of those will actually contribute in the major leagues.

In such a challenging, winnowing model, small errors in judgement have devastating effects. For example, the Brooklyn Dodgers gave up on Roberto Clemente, one of the 100 best outfielders of all time, by not protecting the 19-year old in the Rule V draft (that allows other teams to pick up unprotected players for a tiny token dollar sum) in favor of protecting around a dozen players who never were able to contribute to the major league team. A more recent example (there are hundreds) is the champion Boston Red Sox' David Ortiz, left-handed slugger extraordinare and probably the Bosox' most valuable player in October. The desperate for left-handed power Seattle Mariners coughed up Ortiz for 28 games of Dave Hollins, a Minnesota Twins third-baseman who did give the Ms a wonderful contribution in a stretch drive (in which the team failed to grab a playoff spot).

In any competitive endeavor, talent acquisition is the single most important area that will determine success or failure. Before free agency forced teams to become hyper-competitive, teams tended to do have their talent acquisition ruts. They looked for players everywhere in the U.S., sure, but they had one or two leading techniques on which they relied, so talent tended to be clustered, usually based on the efforts of a small handful of their regional scouts.

Joe Cambria, for example, acquired a lot of the second line talent for the old Washington Senators. Being relatively impoverished, the team found Cambria to scour then Third World Cuba for their second-line talent. Cambria had little competition, and he was good, so fishing in that secret (for a while) pond made him effective.

Teams later focused on Puerto Rico or the Dominican Republic. Some teams, like the Dodgers, were more aggressive in combing Japan and Korea.

There was a rage a couple of years back -- Taking a Rule V player. Many more teams than usual were selecting a minimum-wage, usually low-minor league player of promise and then were forced to make him plaque on the major league roster. Teams' management have argued/tried-to-negotiate for years to cut the 25-player major league roster to 24. In the absence of that, putting a Rule V guy on the roster is the cheapest way to fill a 25th slot for a year. Then you send the player down to the minors, a year of development lost, to try to continue developing. This Rule V fad was designed to save money, but so are a lot of H.R. decisions.

And when the reserve clause met its sudden death and that escalated competition, baseball got serious about the Major League Scouting Bureau, a co-operative venture that put a pool of common scouts at the disposal of all member teams. It was a clever money-saving device, but it was, in a major way, the anti-Moneyball approach. Co-op models are the basis of many a successful industry (Ocean Spray, Minute Maid, Farmland are all superb examples), but in all the exemplars, I cannot think of one where the co-op's members are hyper-competitors. If you can think of one, send me e-mail; I'm looking right now for a counter-example for a discussion with a client. In baseball, the co-op scouting model guarantees uniformity of thinking, at least as a foundation. Teams will send their own scouts to cross-check the Bureau's reports, but if the player is a diamond, that potential contributor won't be a diamond in the rough, undiscovered by competitors. The only way a team could gain a competitive edge would be to examine the players the Bureau's scouts weren't recommending -- hardly a high-yield strategy.

There was a rage a couple of years back -- Taking a Rule V player. Many more teams than usual were selecting a minimum-wage, usually low-minor league player of promise and then were forced to make him plaque on the major league roster. Teams' management have argued/tried-to-negotiate for years to cut the 25-player major league roster to 24. In the absence of that, putting a Rule V guy on the roster is the cheapest way to fill a 25th slot for a year. Then you send the player down to the minors, a year of development lost, to try to continue developing. This Rule V fad was designed to save money, but so are a lot of H.R. decisions. Like most fads, a few teams that mastered the context benefited. But some teams lost their chance to be in the playoffs in trying to save 1% on their labor costs with a Rule V-er.

H.R. departments' uniformity of thinking imitates the functions of the Major League Scouting Bureau. While too many H.R. departments are totally incompetent (evolutionary tendency operates here; H.R. is such a complex endeavor with such a history of non-success that many sensate executives have come to believe it can't be better, while others just do end-arounds to do their own hiring but not confronting the entrenched, failed model), most are quite "good". What they are "quite good" at is acting like the standard, vanilla, H.R. Department, making standardized, mostly-uniform decisions, just as the Major League Scouting Bureau, a standards-driven evaluator, does.

The trend in baseball is to put more resources into in-house, proprietary scouting analysis. The Boston Red Sox' sabermetric consultant Bill James has proposed tinkering with the paradigm for scouting, proposing vastly-more in-depth scouting of significantly fewer potential players. The Sox haven't, apparently, implemented the James model, perhaps they never will, but they are open to thinking about it.

But no team can afford, in the hyper-competitive environment, to just scout Cuba or just scout college players in the Pac Ten or just scout high schoolers in Florida. Rigidity, autonomic simplicity, increases the chances for failure, something no team can afford to risk.

The challenge for non-baseball organizations with a standards-based, conformity-driven H.R. department is they will all pursue the same profiles, missing out on the Roberto Clementes and David Ortiz-es. As a result, those failures have created a gravitational attraction for letting others (most frequently no better, by the way) do the recruiting and carry the burden of failed hires. That movement has lead to many kinds of "sourcing", mostly "out-sourcing". Any orghanization that would outsource either its most important fucntion (talent acquisition) or its second-most important function (strategic planning) is playing Russian Roulette with four bullets. And playing two rounds.

The approaching economic shock forces all organizations to rapidly internalize the baseball model if they want to survive. How best to do it becomes the key question.

Personally, Peters' "Best Sourcing" idea is one of the most worthwhile to internalize, I think.

His slide read as follows:

Not "out sourcing"

Not "off shoring"

Not "near shoring"

Not "in sourcing"

but...

"Best Sourcing"

Peters' argument is (oversimplified) use the talent that's most appropriate for the upcoming tasks. Don't automatically assume a specific source is the best for everything or that a standard approach will be best for any specific effort. Diversify your talent search to acquire the best available anywhere, because if you don't, a competitor will.

If your H.R. group is not open to breaking its mold, you're going down the path of a team that only uses the Major League Scouting Bureau. In a non-competitive environment, that wouldn't be fatal, merely generic. In a competitive environment, it guarantees high salaries/wages and average performance, a turnpike to performance hell.