Tuesday, February 06, 2007
The Atlanta Braves just closed a run of 13 consecutive National League East division flags (ignoring the partial seasons of 1994 & 1995), proving, without a doubt, their front office, scouting and field management are unarguably excellent. While this could be an opportunity for improvement (more on that counterintuitive idea in my next post), looming ownership issues may undermine the team's pursuit of excellence.
The team is in the process of being sold, in and of itself, not a fatal move. The seller is Time-Warner, Inc., a ~$20 Billion conglomerate, which inherited the team through its purchase of Ted Turner's broadcasting empire. Time-Warner is a real management mess in general (the litmus paper test I run, only a basic indicator, is the length of its 10-K, which is 259 pages long, and has 27 entire documents external to it required to explain its mere MoVaughnian girth; oh yeah, and it was subsequently amended 11 times because of things they missed in all that), a perfect poster child for The Diseconomies of Scale. Theyw ere, however, very clever with their ownership approach of the Atlanta Braves -- they appointed a smart guy to be the club president, and recognizing the excellence of the franchise's accomplishments, just gave them a budget with a hard but realistic line and let John Schuerholz and Co. do their thing. Incredibly smart, significantly not arrogant. That's not to say that Time-Warner doesn't have a half-dozen managers among its 88,000 employees who might be able to execute as well as the Braves' staff -- just that it made more sense to ride along with what was working, even through significant environmental changes that had to be adapted to. But that lack of ownership arrogance was one of the hallmarks of the run.
FINANCIERS GONE WILD
But if Time-Warner's sales of the Braves to Liberty Media finally closes, the excellence engine that is the last fifteen years of the Atlanta franchise will be tested against one of the most arrogant owners in North America: John Malone (background), the closest comparable I can come up with being Vladimir Putin. What is it about Malone that makes him so exceptionally destructive of excellence?
First, there's the personal. He's a squawky, demanding martinet...kind of Buck Showalter, but armed with a sense of his own perfection combined with access to enough money to buy Uzbekistan or Mississippi twice over. It's hard to pursue excellence when you have no/little functioning self-discernment or empathy.
Second, there's Malone's default business model, one I call Financiers Gone Wild.
Look, there are four basic alignments for corporate executive business management in their mission: Innovation, Marketing, The Customer, Maximizing Shareholder Value. Most organizations blend more than one, but all have a basic alignment, a primary motivator that makes their decisions somewhat predictable. Innovation companies include the old Hewlett-Packard, Joe Ely's company (or any company committed to lean techniques), Toyota. Marketing companies can market about anything; if you hear the word "brand" a lot, that's probably an indicator it's a marketing mission company. Companies that build their mission around pleasing customers exist in all areas, though in the corporate world, very few are in the retail space; many exist in the world of components or intermediate materials (Buckman Labs, Solectron, WL Gore, to name a few, though Buckman and Gore also have a strong innovation orientation).
Any of these missions allow the company to score at the other missions. Except Maximizing Shareholder Value -- which comes close to guaranteeing failure of adequacy at any of the other three. The act of managing an organization to move up stock price in the case of a publicly-held outfit or the apparent valuation in the case of the closely-held one generally pimps the customers and internal staff. And since it's almost always cheaper to slipstream the marketing and technical innovations of others than it is to experiment and carve out successful new methods, Maximizing Shareholder Value companies tend to pimp excellence in those missions, as well.
Malone normally acts with a Maximizing Shareholder Value mission. He knows how to play the stock price game; that's how he has succeeded. He only builds organizations insofar as they can deliver metrics valued by stock speculators and analysts. When he was with TCI, Malone mastered speculators' favored metric, cash-flow-per-subscriber, a sick metric in a business that operated as a monopoly. Like "batting average" pundits pounded on that point passionately, even though every involved interest group but one (shareholders) were guaranteed to get strip mined.
Malone-run endeavors play games, tend to muck with existing excellence and not generate much on their own, guaranteeing a vapid kind of enterprise sort of like the post-Soviet privatized monopolies owned and operated by Putin's buddies in Russia.
ATLANTA SINKING UNDER THE SEA?
This is all the opposite of baseball (with very few exceptions: M. Donald Grant's New York Mets regime ~1976-78, and the current Wal*Mart modeled Kansas City Royals, both of which, incidentally, made good money for spewing sub-mediocrity all over the scenery). The pursuit of money over excellence (as opposed to pursuing excellence that in turn generates profit) is a proven failure in baseball, the perfect crucible for competitive theory rendered flesh. The fact that Malone's higher-performance moments have come as the head man of a monopoly (that is, competition-free), it doesn't bode well if he chooses to shape baseball operations or marketing behaviors. Liberty may, like Time-Warner before it, leave the baseball people in charge and provide a hard line but realistic budget.
It would be more typical of a Malone-run organization, however, to try to squeeze a more immediately-beneficial ratio of income/quality. Since that means either boosting income, cutting costs or pimping quality, or some simultaneous combo of them.
I hope not. I very much respect the Braves' management, and it's really a delight to a management consultant who sees so much marginal and outright management spontaneous combustion to get to see year-after-year excellence in action.
YE OLDE AFTERWORD
I mentioned in the lead the counterintuitive idea about this being an opportunity as well as a risk. The risk is obvious for the reasons I stated -- and a Malone-headed organization is more crisis than opportunity, but some fine research by Vince Gennaro delivered at last July's SABR National Convention in Seattle cast some interesting light on the topic of the formula to calculate the extra value of an incremental win (contextualized by team), and the Braves' seeming anomolous results.
Gennaro has a new book I'm excited about reading. He shared a little piece of it about the Braves I'll pass on in my next entry.
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