Saturday, February 25, 2006

Change Insight 4 of 3: 2007 Dodgers --
Long-term Planning Meets a Diseconomy of Scale  

Whatever Kills You Is What Made You Stronger --
Angus's Fourth Guideline of Change

The rate of change strongly correlates with the kinds of adaptations you come with to cope with them. That's just an essential truth. Soviet Five Year Plans usually failed because the systems they were setting targets for were evolving rapidly (in areas with slow rate of change, they acutally were able to hit their targets as often as anyone, but these are exceptions to the essence of the kind of Soviet Planning that big U.S. organizations do).

One of the many reasons smaller organizations kick serious axe of their bigger competitors is that it's cheaper for them to discard their adaptations/changes and replace them with others because the bigger the organization, the more intertwined complexity it takes. Baseball has a great example this week that illustrates this like a JumboTronic-rendered image.

The Los Angeles Dodgers's ownership/management decided earlier this year they wanted to make a trivial customer service upgrade. They decided to put players' names on their uniforms. This is an essential part of their re-positioning strategy I've discussed before: Whatever We Were in 2004-2005, We're Not That Now. As I mentioned before, this goes back to the real estate development cognate of the Dodger owners.

Well, they decided it. But they can't. Yet. Not until next year. Because when it comes to Change, what kills you is what made you stronger.

The Dodgers don't own the decision of when to change their uniforms' configuration. For the Bums, it isn't as easy as it was in the pre-1907 off season when they suddenly had a brain fark & decided to implement gingham road unis. The decision-owner is MLB, which has done a great job of figuring out how to make serious money out of logo-wear. They license the rights to use teams' logos and eye-dressing, and concentrate the necessary effort to protect license manufacturers' relative exclusivity by doing the legal scutwork required to protect their licensees' investments by challenging Red Chinese sweatshop-produced and other counterfeit habiliment. 

The very strength of the licensing program for MLB and high-margins paid by the licensees makes a gold goose no-one wants to cook.

The high price tag charged means only fairly big manufacturers can afford to play. And they, like most big organizations can't just re-tool their supply chain, from design to marketing collateral to inventory management, to whip out updated logowear on a dime. They need advance notice. So MLB regulates how teams change symbols and logos and uniform configurations. This is a pretty good thing. It protects fans from buying what's current in April and having it be passe composé by the All-Star Break. And that protects the big companies that are licensees. 

If baseball didn't have this licensing, if they yielded on the income, teams could be a lot more maneuverable. They could go gingham in April, 1970s Astro in June and Richard Gere Collection for the playoffs. As it is though, the teams need this complex structure to stabilize the market that feeds them.

Crude oil prices have been very stable for a long time. Gasoline prices are somewhat correlated to crude oil prices, but not anchored. In a smoothed way, they look like this. There's a lot of equilibrium in the model and every once a while it gets punctuated by a quick updraft with a new plateau that tend to stick for a while. So when automakers and their three+ year planning cycles they need to commit way in advance to features that affect mileage one way or the other. In 2003, most people who know about oil pricing knew the Second War on the Iraqis would raise the price of crude oil significantly, although I suspect most thought it would be transitory because they thought the occupying coalition would replay the successful end-game of the First War on the Iraqis.

So automakers had an opportunity in December of  2002 to tweak a little their manufacturing mix for the 2006 model year.

What they didn't do nor would they ever was plan for highly fluctuating gasoline prices. If they were convinced an  unprecedented flux in prices were to become a norm, they'd have designed cars that give the drive an ability to trade efficiency for power in a more mechanically-driven way. Drivers, of course, make this trade-off all the time, by accelerating gently or quickly or choosing a speed or (if they still use a real transmission) choosing a gear to be in. But it would be fairly routine to engineer this ability into a line of engines and put a control on the dashboard to control it.

When the Rate of Change is high, the need to build a flexible response is higher. Replacing a flawed Soviet Five Year Plan in the middle of its second year by replacing it with a "new improved" Soviet Five Year Plan guarantees movement towards moribund destinations. But the larger the organization, the less likely it can choose to re-tool quickly.

The 1907 Dodgers, as an indie, had the flex to foist gingham unis on the baseball fans of America, bless 'em. But as a part of a corporate combine, they yield that ability to adapt quickly to their organizational needs. NOTE: The solution, by the way, is not to kill long-term planning, which seems to be the natural response of most American organizations. The simple duality Soviet Five-Year Plan <---> Plan-Free Meandering is a artifact of inexperienced managers who fear one of the poles and institutionalize the other in the hopes of banishing their fear. I, for example, as a sole practicioner, the least afflicted model for Diseconomy of Scale, orignally planned three entries on this change riff, but this new Dodger story came on the heels of a Dodger entry, so rather than run it 4th, I just moved it up one slot. It's not Milspec, but it's highly functional.

Where is your organization on the size scale? And where is it on the ability-to-adapt in real-time scale? 

Exactly. Whatever kills you is what made you stronger.

Wednesday, February 22, 2006

Change Insights 2 of 3: 2006 Dodgers --
MBWT Hard to Overcome  

Luck comes to those who stockpile the most fairy dust -- J.M. Barrie

In the previous entry, I discussed an element of change that seems to evade most managers: The fact that sometimes the nexus/place the change is happening is more important than the amount. This next Change comment addresses a flaw that's actually more prevalent, almost universal.

We all have, to some degree, Management By Wishful Thinking tendencies, believing that something will happen because it can, or believing that something will happen because it should. Having MBWT impulses is not in itself a problem, but acting on them is, especially when you're getting paid to manage. The moments that are the most infused with MBWT impulses are moments of obvious change...like baseball off-seasons or any new initiative beyond baseball. Let me touch on a baseball example first.

In the same Bill Madden New York Post spring training camp wrap I pointed to in the previous essay, he transceives Dodger management's view of their 2006 season prospects for us thusly:

VERO BEACH, FLA : After taking over as Dodgers GM on Nov. 26, Ned Colletti embarked on a whirlwind of signings and deals, enlisting Grady Little as his manager and bringing in fellow ex-Red Sox, Bill Mueller and Nomar Garciaparra as corner infielders, ex-Braves stalwart Rafael Furcal at short and troubled vagabond Milton Bradley to take over in center field. For the pitching, Colletti added much-traveled workhorse Brett Tomko and potential bloomer Jae Seo to fill out the rotation, and Danys Baez from Tampa to provide closer insurance if Eric Gagne isn't fully recovered from major elbow surgery. It's a drastic makeover of a team his predecessor, Paul DePodesta, had made a mess of, but given the weak NL West, if Little can make this all jell, the Dodgers could be legitimate contenders.

Ignore the Milton Bradley comment...we all get brain cramps occasionally, and Madden is an East Coast writer here scribing about West Coast teams.

I'm going to translate this briefly, swapping names for attributes that affect the conclusion:

VERO BEACH, FLA : After taking over as Dodgers GM on Nov. 26, Smart Guy In His 1st GM gig embarked on a whirlwind of signings and deals, enlisting Jury is out on Guy as his manager and bringing in fellow ex-Red Sox, Swell but not all-star caliber infielder and High upside, injury-prone, attitude-questioned aging infielder who will be playing out of position as corner infielders, ex-Braves stalwart borderline all-star and reckless driver sparkplug at short and troubled vagabond Milton Bradley to take over in center field. For the pitching, Colletti added much-traveled workhorse unquestioned smart guy & consistent mediocrity starter and potential bloomer potential bloomer but could go either way to fill out the rotation, and as solid as closers get guy from Tampa to provide closer insurance if superstar closer isn't fully recovered from major elbow surgery. It's a drastic makeover of a team his predecessor, demonized ousted, had made a mess of, but given the weak NL West, if Jury is out on manager guy can make this all jell, the Dodgers could be legitimate contenders.

That's some hefty MBWT. Yes, Furcal and Mueller are clear positives in the mix, but by this narrative, to succeed a div flag is going to be contingent on proven mediocrity overperforming, people with health issues performing above their health norms, and potential bloomers blooming. HEFTY MBWT. Talibaptists giving up jihads once they've tasted Classic Coke & had an opportunity to buy Levis 524s for their virgin fiancees-caliber MBWT. The Little Deuce Côup de grace in this cognitive surfin' safari is "but given the weak NL West".

The justification for hope is not contingent on the Dodgers' strength but the uniform weakness of every other contender. This is much like Bucky Jacobsen imagining he can win the Boston marathon because the other 16,782 entrants will get shin splints while Bucky bounces perkily to a personal best. And while every other NL West contenders has question marks in their futures -- any one of them could get the alignment of the planets the McCourts' court astrologer is trying to work out for the Bums.

Change-related MBWT erupts all over the place. One of the most pervasive points is on hiring someone new. When I ran marketing operations for a mid-size company we had a structural problem in a basically adequate Sales group -- a Director who didn't know her craft well and who was more concerned with politicking than doing what it took to fix the weaknesses. Her approach was to serially hire good-looking (on their resume) males sales guys and hope they would magically sell so much that no one would have to address the real limitations her ignorance and sub-adequate judgment imposed on the company's success.

A local USPS branch office is run in a breathtakingly incompetent way. The Postmaster is functionally retarded on operational management (First Base in the MBB Model). They were not authorized to put up the signs that informed customers that rates were going up until six days after the rate change had gone into effect, and their price lists reflected old rates (not the new) until four days after that. They almost always have long lines that snake out the door, and when I was granted an audience to speak with the Postmaster's rep about it, I was told that there was a plan under discussion to install a machine that might replace the work of the equivalent of 1/2 a clerk, and until that plan was settled, they would make no changes. Over a year later, they did install the machine. As you might guess, they had put all their MBWT faith in the machine which acted almost as well as advertised, yielding no advantage. Like the MBWT of Dodger fans that allows them to think the deployment of the reliably-medium Brett Tomko will make the season a success, the USPS jokers use change as an excuse to deploy their MBWT on situations that need addressing.

The Dodgers might win the NL West, but it's lazy to believe it'll all work out because that would be nice, or because they've stockpiled the most fairy dust. The father of four decades of Dodger competitiveness, Branch Rickey, said "Luck is the residue of design," an argument that while luck is a factor, it's management' job to design plans for the best opportunity of neutralizing luck. That is, to rage against the MBWT impulses almost everyone has.

Friday, February 17, 2006

Three Insights into Change: 1 of 3 --
"Where" Is as Important as "How Much"  

When organizations facing changes try to analyze what to expect and design tactics for coping with it, they usually focus on "how much" change. How big is the budget cut or hike? How unlike the current protocol will the new one be? How different is staffing?

Baseball has some good examples of this logic. You almost always see a late March Sunday sports section with a baseball preview like this 2005 one, where the foundation of the analysis is built on which contributors have been added, which are gone. In and of itself, it's a decent start. But where the changes occur in an organization can be a lot more important than just the gross count or even scope of them.

As Bill Madden's recent Sunday wrap from Spring Training explicated:

FORT MYERS, FL : Until Manny Ramirez arrives, the Red Sox brass must cross its fingers that he and the missus have reconciled their alleged domestic issues about Boston and rescinded their trade demands. Assuming Manny doesn't make any waves and David Wells is finally traded to San Diego without further incident in March, manager Terry Francona can concentrate on working in his new infield - Mike Lowell at third, Alex Gonzalez at short, Mark Loretta at second and Kevin Youkilis/J.T. Snow at first - as well as resolving his closer situation from among rehabbing Keith Foulke, hotshot rookie Craig Hansen and Mike Timlin.

Presuming the right-handed hitting Youkilis and the switch-hitting Snow are platooning at first, one of two situations are going to be in effect. When Snow is on the field, all four of the Sox infielders will be new to the team since 2005. And when 2005 alum Youkilis is playing first, it'll be three new contributors and a first-baseman who started the season with a grand total of 47 innings of major league experience at the position. Not a shred of continuity.

It's not fatal for the Bostons, but it's a challenge that is more challenging than the raw number of changes might make it look. It's the "where", the infield, that makes this change so disruptive. Neither first baseman has been taking throws from any of these infielders in games, and the keystone combo of Loretta and González haven't played together before. That's a ton of learning to do. The one relationship that comes pre-built is the occasional communication required between shortstop González and third-sacker Lowell, who have played together as Florida Marlins for eight years in those jobs.

It's four changes (the Sox have some others, too), but the interplay of these four positions is critical. On the 2005 Red Sox, for example, there were 1375 assists between these positions, roughly 8-1/2 times per game that infielders had to coordinate with each other defensively. It's not as though an infield captain can integrate everyone into a working whole. There's no continuity anchor who can fluidly provide leadership on who does what. It's all going to be picked up along the way by trial and error. Four player changes elsewhere (outfield, starting pitching) could give you as many new faces, but not in such a sensitive (and now uniformly re-made) area.

I hand-checked the last fifteen years of teams, and I couldn't find very many that had four new most-frequent starters at all four infield positions. I couldn't find a single one that had a winning record. Is that the effect with the cause being the all-new infield? I don't think so. It's not an experiment many teams are willing to try except under duress, and most teams can't be simultaneously under duress and loaded up with enough talent to play winning ball.

NOTE: Let me make this clear. In baseball and beyond, this level of change can be a cause of challenge, it can be the result of challenges (think of teams in the offseason between 1913, when there were two leagues that colluded effectively, and 1914, where the addition of a third league that was aggressively competing with the other two made for chaotic and competitive labor and vendor and sponsor markets). It can also be both result and cause. The Bostons may be able to work through this handicap gracefully because of other strengths -- but it'll be truly noteworthy if they do.

A former co-worker of mine worked at a big Rust Bowl company that around 2001 started to implement a big ERP program that forced changes to every single department. As anyone whose ever lived through a serious ERP project knows, the user-company either has to change all its own processes to match the software vendor's view of how things should be done, or pay a Draconian price in time and effort (and aftershocks) in trying to transform the ERP software tot he buying organization's model.

They did a pretty good job...much better than average. Most ERP implementations are bloodbaths, but this one, while tough, was deftlexecuteded. By itself, that was a massive change, but not one with ugly implications.

Right after that was digested executive management decided to outsource the company's assembly and customer service, two functions that had low perceived value, low average wages. What they missed was that both were strong components of product quality. Both required handling of external relationships as deft as the more-massive ERP implementation. Neither was vigilantly managed, since they were both viewed as commodity. Both failed. By early 2004, their marketing department found customers' perceptions of the company's offerings had turned negative.

It wasn't the amount of change that (as they say in Boston) scrod; it was ugly because while fairly small in the scheme of things, the changes were in critical areas and both pumped up the same potential flaw.

A manager can affect good changes with small, strategically placed changes, too. For example, the New York Mets have retained the services of Paul LoDuca at catcher. He's not an offensive force (though he has been adequate), but he will affect (and should affect for the better) every pitcher who has been throwing to his predecessor, Mike Piazza. While Piazza is generally regarded as having had the greatest hitting career of any catcher who has ever played in the majors, his pitchers haven't gotten much help from his game-calling, while LoDuca is considered by soem experts to be one of the best game-callers in the sport. If they are right, every starter stands to gain incremental effectiveness from LoDuca's work. It's only one change, but it ripples throughout the organization. In the same way, a client I've been working for just replaced a struggling production manager with a new, ultra-competent one. Because he's much more effective than his predecessor was, logistically-adjacent departments have made a greater effort to deliver to schedule. There's more time to catch errors. Customers are going to get product earlier and, I suspect, with higher quality.

The whole organization is getting tuned because of this one small but vital change.

THE KEY QUESTION IS ¿Will the 2006 Red Sox be the first team in fifteen years to rack up a winning record with an entirely replaced infield cohort? It's quite possible, although it's equally possible that injuries could put Youkilis back to 3rd base, breaking up this perfect storm of change.

Either way, with change, you need to examine the "where" as closely as the "how much".

Sunday, February 12, 2006

Tampa Bay Devil Rays:
Writing Chapter 1 of the Turnaround Manual  

If you want to observe lessons in how to turnaround a failed or failing organization, you can't do better than to start with a few baseball lessons.

One of the most consistent failures in baseball is the Tampa Bay Devil Rays organization. Courtesy of Retrosheet.Org, the Ray's finishes since their inception:

Year Team     G    W    L   RS   RA  PL 
1998 TB     162   63   99  620  751  5E
1999 TB     162   69   93  772  913  5E
2000 TB     161   69   92  733  842  5E     
2001 TB     162   62  100  672  887  5E     
2002 TB     161   55  106  673  918  5E     
2003 TB     162   63   99  715  852  5E    
2004 TB     161   70   91  714  842  4E 

They've failed in a number of ways. As an expansion team, they had only a so-so draft. Then they tried to blast their way into contention with a monocultural slow slugging offense that didn't work. Then they drafted very well, acting as though they were willing to lose in the near term to give young players filed time to sharpen their chops, and this enabled them to set aside money for a run if they ever got decent. Then they got decent, good enough to be a .500 team, but didn't invest the money they'd allocated that might have kept them competitive. That cost them the services of their beloved manager who'd been lied to about the owners' interest in winning. Then they added inanity to impotence with the most incompetent marketing tricks since the 1988 Pittsburgh Pirates' Felix Fermin game-worn sweatsock giveaway.

But new ownership has taken the helm this year and wanted to get off to a quick start in the makeover department. Most organizations will change some of the more obvious faces in front of the public, and Tampa Bay did this with a smart and judicious trio of decisions.

They hired Andrew Friedman, to be a young GM with a very different background who could bring in tested ideas that weren't widely-used inside baseball. They brought in an experienced and successful executive to complement him, Gerry Hunsicker, who'd helped build the Houston Astro team that has had such a successful run in the last few years. Then they hired a new manager, Joe Maddon, and while he isn't as well-known as his predecessor Lou Piniella, like Hunsicker, he's got experience with winning teams.

Most turnaround efforts might have gotten that right. But it's the universally powerful and rarely-used supercharge technique, one of my own favorites, that I suspect will make the most difference in their effort to gain respectability.

According to a story by Alexis Muellner in the Tampa Bay Business Journal, executive management are finding out all the turnaround knowledge stored in the heads of the Devil Ray line staff.

Until then (the new ownership group took charge), the culture within the organization was oppressive, stifling and negative, Silverman told a crowd of more than 150 at the Tampa Bay Business Journal's Power Breakfast series Tuesday.

"Fear governed the entire workplace," he said. "I knew it because I lived it for two years."

The problem wasn't the employees, he said, nor the market. {SNIP}

Before announcing the ownership control change to the public last October, employees were gathered, given comment cards, hard hats, new polo shirts, and empowered to be ambassadors to a fan base and the corporate sector that had been alienated. More than half of the Rays' employees have been with the organization for six years or more. 

There's a large contingent that has been there since inception 10 years ago. But until now, they were never tapped for their insight, and the office had a culture of closed doors, Silverman said. Meetings that used to comprise two or three people now contain eight.

"Comment cards keep flowing in to this day," he said. Among them was an idea to create a giant fish tank with live Rays swimming in it, which has come to fruition and is being built in collaboration with The Florida Aquarium. "The change has been radical," said Silverman. "There was great institutional knowledge," he said, and the club as adopted something Silverman said he learned while working at Goldman Sachs: "Our people are our greatest asset."

This is information that's usually ignored. If management had been open to the ideas, they would already have tried them out. Listening to them provides a couple of frozen ropes..

The first benefit is that by being listened to, the employees of a sick organization get some rays of hope, and hope triggers higher effort and usually better morale. The second benefit is a lot of ideas. They not all good ideas, but you can be confident they haven't been acted on, and that means every single one is an opportunity to cut some new patterns. By not being MBAs or business majors, the line staff who have been ignored will have stored a ton of ideas no one has had the guts to try. And line staff know a lot of details, inefficiencies, tangles, blockages, that the management that created them haven't seen or refuse to see. The more the situation needs redirection and redesign, the more likely it is the brunt of the pain will have been borne by the line staff, the more likely it is they will buy into changes, even uncomfortable ones.

I'm not suggesting you implement all proffered ideas without considering their value. But if you listen with an open mind and involve a large number of people in steering a turnaround, you have a lot more torque at your disposal. In manufacturing, of course, this is s.o.p., and in many aggressive manufacturing organizations, it's a vital core of their process (check out lean manufacturing blogs, such as my favorite, Learning About Lean, by Joe Ely -- and check out his "Gang of Seven", collaborators who attack from multiple angles specific business problems). In other lines of work, it's just as effective (perhaps more so because fewer competitors have the guts to do it, so it delivers more difficult-to-match innovations).

And one last note: I have had good luck starting at the bottom of the hierarchy and working my way up. And start implementing at least a few promising ones within 48 hours. This tends to electrify the people you haven't talked with yet. As I already mentioned, the higher up you go, the more likely the ideas have been heard and acted upon, so there is a denser backlog of opportunities waiting to be acted on at the bottom of the org chart.

The Devil Rays are not guaranteed to turn it around because they have chosen to involve staff in redesigning the methods & processes of the organization. They are guaranteed not to be replaying the same old crud like a Seth McClung bloodbath that will just never end. They will be  trying something different with broad internal energy.

Monday, February 06, 2006

Moorad is Less Add?: D'Backs
Headman Reuses Craft Knowledge  

Managers who have craft knowledge they acquired in other fields or disciplines can be at a King Gidorah-type advantage -- multi-headed for better perspective, but weighing 30,000 tons (that's even more than one of those steroid-saturated NFL linemen) anyway so back off buddy. 

Every discipline is a way of filtering/removing input. As humans, we're flooded with sensory possibilities. As explained by Garrett Hardin, each discipline/craft is a way of filtering out most input so the practitioner can focus on the specific remnants. That filtering is a useful technique, but for people who come equipped with only a single discipline/filter, a solution toolkit tends to be limited to the central, discussed problems of that discipline, and their management portfolio tends to consist of tested protocols and little else. "By the book," as it were, though not either by baseball's "The Book" (a very flexible tool) or Tango Tiger, et.al.'s freshly released The Book: Playing the Percentages in Baseball, a set of statistical studies on baseball strategies and their historical success.

So bringing in a different filter is likely to let fresh types of observations into the pile a manager considers. Arizona Diamondbacks' General Partner Jeff Moorad worked as a player agent for 21 years before crossing to the other side of the negotiating table and bringing his insights into players' business motivations and agents' contract techniques to his team's toolbox. I've written in some detail about the advantages of a team having an experienced & successful player agent working their side of the equation in this two-year old entry about Dennis Gilbert. But there was an interesting paragraph in Joel Sherman's three-dot wrap 'o leftovers at the end of his column yesterday about Moorad and a specific situation he is now facing from the owner side of the table.

A few teams, the Yankees included, work to avoid giving award or performance bonuses as part of contracts. However, the most interesting case is the ironclad rule of the Diamondbacks. GM Josh Byrnes said, "If anything it helps with budgeting, and sometimes performance bonuses divert from what we should be focusing on, which is team goals." What makes this most interesting is that the edict was installed by team owner Jeff Moorad, who for years was one of the most powerful player agents in the game. In other words, Moorad worked hard in his previous career to make sure that current Diamondback and former client Luis Gonzalez, for example, has a $50,000 bonus for making the All-Star team on top of an $11.5 million salary this year.

Moorad, as an agent, worked to acquire performance bonuses for his clients, and there are three categories of issues that inhabit performance bonus clauses. These are: Pelf, Personality, and Promoting Group Objectives.

Pelf, the money aspect is the easiest to resolve. On one side of the table, as an agent, you don't really want them if you can get the same amount without them. Each performance clause can be a negotiation in itself. It's more work. The team's motivation is the same as the agent's. But both sides end up going into the compound negotiation because it's a way to resolve big differences in base price, and because players who hire agent have come to expect them. An agent who refused to make them part of her or his arsenal would lose some potential clients.

Personality is a less tractable issue. Because some players have performance bonuses, others want them for parity. Some who want them may even want them if the agent could have gotten the price all in salary -- because he may not understand the business aspects as well as a experienced agent (and, having a different profession, the likelihood is as high as Daghara exuding toxic barium that the pro athlete doesn't understand it as well as his professional counsel does). For some players, performance clauses, in negotiation and then during the season, will be a constant distraction, for others an occasional distraction, though for some, no distraction at all. It's just a given in people management, Second Base in the MBB Model, that you have to give different incentives to different people both because they value them differently in their own personal currencies, and because their behaviors will bend to meet those incentives in different ways, and that gets us directly to the last of the three issue categories.

Promoting group objectives is a very tricky issue set because sometimes in the immediate negotiation you can win a logical victory that sets the player up to strive for achievements that end up distracting her from achievements the team as a whole needs from her more. It's even possible (not as likely as it gets talked about but clearly possible) that an individual target could get in the way of advancing the team's objective. I can give you no concrete examples in performance clauses (I told you it's less present than the talk about it), but I'll throw out one example where a personal goal can interfere with a team objective. In 1994, Chuck Knoblauch was in hot pursuit of Earl Webb's all-time single-season Doubles record. Some pundits opined that in cases where he might be able to notch a triple, he might stop at second instead of trying for third, a position his team needed him to be in to increase their chances of tying or winning a game. That season ended prematurely because of a labor action, so it was not ultimately tested, and since Knoblauch ultimately flamed out from pushing himself too hard, it's not a sure thing it would have been a problem. 

Baseball is smarter about performance clauses than other organizations. Beyond baseball, poorly-designed individual incentives that undermine group goals are more common. The most common is organizations with sales groups selling multiple products being rewarded for sales volume, not the net margin collected from the sales each makes. As most of you already know, sales compensation aimed at gross or unit sales gives incentive to the sales agent to cut selling prices or sell the easiest-to-sell items, not necessarily the ones that provide the employer the best profit stream or strategic positioning. And there's a classic military objective case during the Vietnam War where management created a metric of dead enemy, measured in "body count". This gave field officers incentive both to fatten their "body count" (from a pro-war view; from an anti-war view) with non-combatant civilians and to lie about the enemy casualties; a system built like that will reward the minority who are willing to game the system over the majority who are straight-shooters and play by the Army manuals.

Incentive clause and performance clauses if poorly designed can hinder as well as help. It depends on the context, the individual player and the ability of the incentive you're building into the individual's performance objectives to equally advance the team's objectives.

So is Moorad (and the other performance-incentive avoiding owners) approach right? 

Maybe and maybe not. This might be a case of getting Lessad for Moorad. Because sometimes when a person imports a filter from anotehr discipline or experience, they bring a set of prejudices along with it. A lazy practitioner could want to get rid of performance clauses not because they fail to give incentives to pursue the right objectives, but simply because they use up time and effort in the negotiating process.  IF, and this is a big if, you can build performance objectives that are intelligent in that they equally advance the team's objectives, it's worth a lot of agent and team time to hammer them out. Remember, in baseball as in manyh contemporary endeavors, the talent is the product. Getting the most out the talent is the foundation of good management.

If Jeff Moorad simply hated the time it took to earn the resulting chump change that would have been his take from negotiated performance targets and is now unconsciously or consciously imposing his tastes on a process, that would be bad management. If the Snakes can figure out a way to keep performance targets in their toolkit but only give the correct targets and with only the correct players, they can gain additional torque.

After all, if Toho Studios hadn't put a "Reduce Tokyo to Rubble" bonus in King Ghidorah's contract, they never could have made that sensitive paean to the human condition, "Destroy All Monsters".

Wednesday, February 01, 2006

Mining for Lead Means No Silver: 
Is MLBAM Hungry or Scared?  

The question is this: is it Immature Exuberance or Late-Stage Panic?

Major League Baseball's highly successful media group, MLBAM (MLB Advanced Media) has worked out a deal between MLB (the owners) and MLBPA (the players' union) to market fantasy/rotisserie baseball leagues. It's an odd, but not illogical extension of MLB's licensing strategy, which is designed to glean the chaffy bits of extra income from activities related to the National Pastime, like baseball cards and team-logo haberdashery. But, according to Business of Baseball's Maury Brown (posted on The Hardball Times, and thanks to Baseball Think Factory), this has brought the leagues into a legal clash with existing Stats Love Brokers over the right of the competitor fantasy/rotisserie organizations (most of which, but by no means all of which are for-profit endeavours) to use players' names and the stats those players produce. MLBAM refused to grant a license to at least one of them, and the Stats Love Broker sued. MLBAM is going to argue that to use names of public figures (the ballplayers) and numbers that any fan in the stands with a scorebook can get as a by-product of keeping score are intellectual property that should be licensed. 

MLBAM's is an interesting argument, not devoid of merit. There are some good business arguments on both sides, and while legal precedent favors the right of the outsider rotisserie dudes to use the already-public information, it's not an inevitability like a José Mesa spontaneous combustion in an inherited runners situation. I suspect a majority of the recreational schemes' sponsors don't have enough cash flow to fight MLB in court or to miss all the revenue opportunities the 2006 season (at least) has to offer, and will settle. I suspect MLB knows this.

So regardless of how the merits might play out in court, the deeper pockets are likely to win. The winnings will be to an organization as big as MLB... chump change...enough to pay Sergio Mitre's 2006 salary but probably not his 2007 salary.

What's the point for MLBAM? Why create a thousand hours of work for counsel on both sides and kill trees over an amount of revenue that won't pay a mop-up man's salary? You see these situations beyond baseball all the time, and there are three common reasons they happen. I'm going to point these out because knowing this sometimes enables you to recognize all kinds of intel about the atacking organization that they would rather keep secret.

Keep in mind that few organizations will mine for lead if silver is equally available. They might try to market the lead that's the by-product of the silver mining, but probably not if their return on the silver is already enough to fuel returns. Dinging the Stats Love Brokers definitely yields lead-quality returns.

COMMON REASON #1 -- The attacking organization is on a decline it cannot stem with the creative energy & growth in its market & is just trying to squeeze a little more juice out of the old beetle before it folds.

Old corporations with intellectual capital but not much current creative juice will sometimes sue competitors legitimately in the hopes they can slow their own erosion. Usually it's an organization that's too big to still be effective, overcome with the diseconomies of scale, fat with overhead. IBM flirted with this approach a few times, but never fell into it completely. Sometimes the company still has a bit of orgone, but the market they're in is contracting. Business Objects recently won a battle of patents with business intelligence rival MicroStrategy, a company that's had no shortage of difficulty sustaining real profits from real products. Both companies are struggling less because they are out of intellectual steam than that the business intelligence market is very difficult with their prospective customers struggling for margin and viewing the solutions as frosting not cake.

This, btw, doesn't look like MLBAM's reason.

COMMON REASON #2 -- The attacking organization is struggling to survive because even though it has creative energy, its markets are blocked & the chump change it stands to claim is more than it currently has.

In the 80s and 90s, some tech. companies that couldn't get into oligopolistic markets for business technology (operating systems, high-end computers, instrumentation) took this route. For them, the pride of winning is worth something, perhaps another round of venture financing, and the chump change might look like a lot.

This doesn't look like MLB's reason either.

COMMON REASON #3 -- The attacking organization just brought counsel in house or hired new outside counsel and the newcomer is trying to make an impression or the hiring executives want to show off their new toy.

I call this "immature exuberance". When what you have in your hand is a legal weapon, everything looks like Michael Jackson.

I have been a partner in a consulting operation for a long time, The Data Works, Ltd. It started around 1980 by getting a Washington state license and paying taxes and all that boring legit stuff. We took out ads, and did a twice-weekly radio show using our name. Around 1986, the business manager got a letter from an attorney advising us our name infringed on his new client's name (they were Dataworks). We checked with the State (they shouldn't have issued us the name if it was that close) but they didn't have Dataworks on record. I researched around -- there was no evidence of them I could find anywhere. They had no license, didn't pay taxes, had been around only a year, but they had for some reason hired an attorney and had chosen to pay him in equity. The counsel decided to flex his new corporate muscle. He was very disappointed when I called him back and asked him when they first got a license. He had had no idea before he called of any of the facts. Immature exuberance.

I've worked in medium organizations that when they got big enough brought counsel in-house, and this inevitably leads to quick, not always well-thought-out actions from the attorney looking to prove quick returns.

It's classic immature exuberance. They have a mission and time.

I suspect this MLBAM action against rotisserie is a bit of immature exuberance, people at a growing successful young division of MLB flexing their new muscles and seeing what they can do. It's not good for goodwill, and I suspect their take won't cover their outlays.

When you see lead mining beyond baseball, if you can discern your antagonist's reason, your knowledge can be a solid advantage in a negotiation or court battle. With margins thinning, and less growth available in established sectors of the U.S. economy, you can expect to see more lawsuits over intellectual proprty infringement for all three reasons, as operations try to find non traditional ways to attain the growth they wish they had.

In too many cases, it'll be Reason #1. Like an old pitcher who's lost a few m.p.h. of his heater wetting one down. He wants to stay in the game an get outs...he just doesn't have the stuff any more.

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