Friday, July 08, 2011

It's Claire as Day:
Why in a "Free Market", Corporate Initiatives Tend to Degrade Quality  

In many posts including the previous entry, I touched on the set of issues in Baseball that gets exacerbated when there's an imbalance between the Baseball bottom line (game wins) and the Business bottom line (dollars won). And while it's true that a great, winning team on the field can have persistent business issues, the imbalance is generally in the other direction: the team's ownership or front office values some business consideration more than wins to a degree that the product itself becomes degraded and then the business side tries to figure out a way to diminish the baseball part of the product (in favor of mallpark or other distractions) to cover that up.

I'm about to tell you about an example that beautifully illustrates an almost universal feature of what passes outside of Baseball as management in this "Free Market" era. It is a beautiful illustration because it simultaneously:

  • Exposes the intrinsic inability of conglomerated corporations to deliver quality,
  • Illustrates the contemporary hubris of corporate management in believing decision-makers don't need domain knowledge, because "we're management, we can do anything we want", and
  • Provides an additional nail in the coffin of the idea that a publicly-owned corporation can act as a vessel for real capitalism.

I recently lucked into a bit of dialog with Fred Claire, one of the longest-tenured general managers of contemporary times, and one of the more successful ones. He was kind enough to send me his book, My 30 Years in Dodger Blue (Sports Publishing, 2004), and it was a great read that covered some only-in-this-book MBB  topics (proper book review in a later post). But the insider commentary most striking to me is what I'll cover in this post: the breaking of a multi-decade covenant between the Dodgers and their fans and staff that just about inevitably followed the team's ownership transfer from family ownership (the O'Malleys) to a contemporary conglomerate (a set of entities ultimately owned by News Corp.)

To reiterate what I've discussed previously, Baseball differs from Beyond Baseball business in that Baseball is almost perfectly accountable. The wins and losses (individual, team, league) are fully measurable, visible to any who take an interest. And competitive capitalism is at its finest when the accountability is most knitted into the institution. There's no Enron in Baseball, no ability to cook the books and fool the observers into thinking a 37-51 team is a great team, or that a batter putting up 180/250/205 should be batting as DH in the heart of the order of a team that intends to win games. Pretty much no-one will accept that in an accountable system like baseball.

And true Baseball ownership learns that over time, and the relentless nature of Baseball sharpens that awareness, so (as stated by Angus' First Law of Organizational Dynamics: All human institutions tend to be self-amplifying) over time, owners that hate accountability flee to other, less accountable organizations, like Business or Non-Profits, and owners who either actively like or can live with high-accountability environments stay or recruit others like them.

Family or single-endeavor owners like the O'Malleys' can be ruthless and make sub-optimal or even dumb decisions, but the accountability they choose to operate within guarantees some balance, some respect for the covenant between the team as business-entity and the fans, players, community. The owners that rely on the team itself for their livelihood and self-image can't escape accountability for all their decisions. And they have many tough ones (Fred's book is a gem of a tour through a single team's everyday challenges).

Balancing the Baseball factors with the Business ones is extremely hard. But when the O'Malleys sold the Dodgers to Fox Entertainment Corp., a conglomerate owned by the conglomerate of conglomerates, News Corp., that balance was ignored. 

Actually that's not exactly correct; in reality, the Baseball disappeared into a set of News Corp.'s existing balancing schemes that were designed to maximize the returns on various forms of assets through "synergy", the wild, more-often failing idea that if you sell both cotton candy and nuclear reactors you can cross-market to your customers, sell you cotton candy to your power plant as insulation material and ship your nuclear waste to your cotton candy manufacturing plant as an additive that makes the confection glow in the dark.

So in 1998, the Fox executives who took authority for the Dodgers' corporate decisions immediately evaluated the team and its individual "properties" (in Hollywood, a performer under contract, a script, a set, a sound studio, an owned film, et.al.), and realized they could strive to increase the value of another piece of the conglomerate, a regional sports-broadcasting network in Florida, if they sent Mike Piazza, already then the most prolific slugging Catcher in the game's entire history, and a very popular fan symbol for the team, to the Florida Marlins, where he would presumably increase the lustre of Marlins broadcasts, ergo the value of this other piece of Fox Entertainment Group. "Property" then, becomes commodity, and commodities are not given deep consideration (any more than one ton of Powder River Basin 8,800 Btu, 0.8 SO2 Coal is treated differently from any other particular ton of it, or one vanilla teen sitcom is treated differently from another).

BTW: They didn't consult Fred Claire or any of the Dodger baseball or Dodger business people about the trade. With zero knowledge and experience of Baseball or baseball business, they executed a restructuring, just like they would if they had taken over a small chain of radio stations or cotton-candy plants. With the kind of grandiose domain-ignorance corporate heroes almost invariably have, they act out deus-ex-machina movements of people, craft, buildings, debt, credit, customer service and product quality without little to no consideration of employees or customers in the name of shareholder. And the irony of it is, this usually bits the shareholders in the pocket, though with the sub-Baseball accountability enforced in the corporate world, this usually doesn't have consequences for the Barons of Botch.

Not amazingly, given their total lack of domain knowledge -- combined with a religious faith that domain knowledge is not a necessity -- Fox's executive, Chase Carey, arranged for the Marlins to send a player in the trade who had a no trade clause in his contract. The Marlins' front office, of course, had reason to know that the Dodger "negotiator" knew this public bit of information, so presumed that this was something for the Dodgers to negotiate with the player. Well, Hollywood properties don't have no-trade clauses in their contracts, so Carey didn't realize the implication, and then, when it blew up, shifted the responsibility to the Dodgers' real front office. 

The trade served the Dodgers neither from a Baseball perspective, nor further, given the importance of Piazza to the franchise's image, the business side of the Dodgers. And ironically, it did not pan out in service of  the conglomerate's interests either, because the Marlins knew they couldn't force Piazza to sign a contract with them they could afford, so they very quickly flipped him to the New York Mets for the kind of acquisitions they like better, promising young (cheap) players whose asset value might go up. So it was a total lose-lose-lose from every angle, even some aspects we haven't discussed. Not a shred of the plan worked for Fox or the Dodgers in any way whatsoever....a total write-down-to-zero.

The bigger and more diverse the conglomerate, the less true to any piece of it tends to drift, the less likely any piece of it can achieve quality (because quality becomes ever-more-tenuously understood and control of quality ever more removed from people who value it and because the equation of what "works for" the amalgamated behemoth becomes ever more disconnected from the core of the quality of any one operation inside it.

In Baseball, someone who behaved like such an outrageous chump like Carey and his cadre did, would be purged like so many aging back-up catchers or relievers who can no longer get anyone out. Beyond Baseball, for example the world of publicly-owned companies  where accountability is something to be sluffed, hidden from or even ridiculed, people like Carey and his cadre can escape. Carey, for example, is now President at News Corp. and has a C-level title to go along with it.

Fred Claire's Dodger career was inevitably affected...the trade was not good on the baseball side, perhaps worse on the business side. So he took some of the blame for the trade he opposed but (accountability) worked hard at to make functional. More painfully for the book's reader, it's clear that not only is he accountable, but he's a person who makes a thoughtful and serious effort to be ethical. Because Claire  was not a jolly cheerleader for their buffoonery, it made it more likely he would be sacrificed for show, and so that came to pass -- Claire was let go along with manager Bill Russell in an effort to fool the rubes that management was going to make changes to the team for the better.

The Dodgers' lustre eroded, the asset became less strategically valuable, so Fox dumped "the property" (the Dodgers). This eventually resulted in the team passing into the feeble hands of the McCourts, unleashing another wave of eccentric and un-accountable non-Baseball foolishness.

There are good lessons here, even if your own endeavor is not about to be taken over by a conglomerate. 

If you are, I think you already know that you are about to be a commodity and that, far more often than not, the people taking over strategic (and even tactical) decisions will more often than not be unaware of the fine points of your line of work, and unconcerned about making critical decisions about it even from ignorance.

But the lack of accountability and the willingness to make decisions without regard to social contracts or, for that matter, regard for a foundation of domain knowledge, is an affliction that transcends the conglomerate. 

There two viable paths, and the most commonly-taken one, which isn't viable...that is, being a jolly co-conspirator, generally hiding and hoping the madness doesn't touch down in your own little world. It doesn't work because that lack of accountability is self-amplifying, so you either stoke the anti-accountability decay, or get devoured by it regardless of your apparent fellow-traveling. Remember that within the organization run by people who got to be decisionmakers by shifting blame away from themselves, your own blamelessness will become ever-more irrelevant.

The two viable paths are to work, conspire, collaborate with those who find this model unappealing or realize how ineffective it makes the organization or start working on your exit strategy. The latter is easier, though the present Permafrost economy makes that a less clear choice. The first viable path, conspiring to glue accountability by being responsible oneself while also making sure people who try to weasel out of their own responsibility are always called on it, every time, is a long, challenging path to follow.

If you're taking a middle-class or better paycheck from an organization, you owe it to them to try the challenging path. The alternative is a world dominated by Fox Entertainment Group-type buffoons.

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