For Roy Eisenhardt, Business Is A Ball
The camera zooms in on an elderly couple rocking on the porch of their modest home. The wife, a sweet-looking grandomotherly type, is reminiscing. "Billy was a good boy," she says, "a quiet boy. He stayed out of trouble. He was... polite to everybody. I remember..." As she prattles on, her husband leans toward the camera, eyebrows arched and head shaking in disbelief. "Mother doesn't remember too good anymore," he says.
The old folks are pitching Billyball, a particular brand of baseball practiced by the Oakland Athletics of the American League. Billyball is named for Billy Martin, the capable, pugnacious manager of the team whose image both on and off the field is the exact opposite of what "Mother" is describing. The television spot is only one component in a million-dollar advertising campaign designed to sell the A's to the public.
So far, it's working. Despite a players' strike, which cost the team a quarter of its home dates last season, 1.3 million fans paid to see the A's play in Oakland in 1981, a nice contrast to the mere 307,000 who trickled through the turnstiles just two years earlier.
Of course, there's more to the Oakland turnaround than advertising. Last year the A's won the Western Division of the American League, after spending most of the previous half-decade in the doldrums. With almost all of the talented young players who helped achieve that victory under contract for several years to come, A's president Roy Eisenhardt confidently predicts that 1982 attendance will approach the 2-million mark. At that level, the team might close in on a goal almost as important as another championship: profitability.
The A's current situation is a far cry from the circumstances that greeted Eisenhardt when he took over as president in November 1980. The team had won just 54 of its 162 games during 1979. Most of the previously mentioned 307,000 fans who turned out to watch them that year came out of either boredom or a perverse desire to boo Charles "Charlie" O. Finley, the team's owner, on those rare occasions when he made an appearance at the Oakland -- Alameda County Coliseum.
The final decade of Finley's turbulent 20-year tenure with the A's coincided with a period of change in the world of professional baseball, and Finley himself was responsible for his fair share of it. A self-made millionaire in the insurance business, Charlie knew his baseball pretty well. In fact, he almost single-handedly assembled the teams that won three consecutive championships, teams that included renowned players like pitcher James "Carfish" Hunter and slugger Reggie Jackson. Finley thought that baseball had become colorless, so be personally designed natty green, gold, and white uniforms for his team. He tried for years to convince his fellow owners that, in order to generate a larger television audience, weekday World Series games should be played at night and that teams should be allowed to substitute a "designated hitter" for the pitcher.
Finley promoted his team with flair.He offered any A's player who grew a mustache a $300 bonus in order to boost interest in "Mustache Day" at the Oakland Coliseum and brought the team mascot, a mule named Charlie O, to all of the A's public functions. Finley feuded with his managers, hiring and firing 16 of them in 20 years, and once threatened to fire second baseman Mike Andrews in the middle of a playoff series. To say he was "colorful" is like calling Babe Ruth competent.
Despite the three world championships, however, the A's were a marginal business proposition. In his best season at the gate, Finley could attract only slightly more than a million paying customers. And then in the early 1970s, baseball began to change. Free agency enabled players like Hunter and Jackson, plus a dozen other mainstays of the franchise, to sell their services to owners with deeper pockets. Stubborn as his namesake mule, Charlic simply wouldn't play the game. He refused to meet his top players' highpriced demands, and, finally, sick of it all, took the trend to its logical extreme: He sold, or attempted to sell, every asset he had, including what few star-quality players remained. Funds with the baseball commissioner and other owners ensued, the team's performance grew worse and worse, and at last Finley decided to sell out.
Enter Walter Haas, great-grandnephew of farmed California Gold Rush outfitter Levi Strauss and, at that time, chairman of the company that bears his ancestor's name. Walter Haas's son-in-law, Roy Eisenhardt, was then a professor of business law at the University of California at Berkeley. In August 1980, after helping to negotiate the purchase of the A's from Finley for $12.7 million, Eisenhardt was persuaded to take over as franchise president. His first visit to the club's offices did little to convince him that the investment had bought much more than a shell.
"Here I was," he recall, "in the office of what was supposedly a major-league franchise in the middle of a season and all I could find was a switchboard operator, a controller who collected the gate receipts, and Charlie's cousin Carl Finley answering phone calls and practically running the whole show himself." The only hint of the glorious summers and autumns of 1972, 1973, and 1974, when the A's won their World Series titles, were the three championship trophies -- being used to divide file folders on a secretary's desk. Eisenhardt clearly had a major-league rebuilding job on his hands.
Like any good businessperson in a similar situation, the new president totaled up his assets and liabilities. On the plus side, he had a proven if mercurial field manager in Billy Martin, one of Finley's last major acquisitions; a group of young and promissing, if unproven, players; and the beginnings of a good professional operations staff in the front office. The negatives seemed more significant: a lossing image, disillusioned fans, no scouting system, and not a single proven "star" who could attract fans in spite of a losing team record.
Other professional sports executives, faced with a similar situation, might have opted for the grand gesture -- signing a player of superstar status to a huge contract. Eisenhardt chose another route entirely: He had a five-part market survey conducted throughout the Oak-land-San Francisco area.
"We found that what the fans wanted was very simple," recalls Eisenhardt. "They wanted a team that tries hard. They were tolerant and intelligent enough to know that even the best teams win only 6 out of 10 games."
So the spirit of the new A's was born: They might win or they might lose, but they would get their uniforms dirty. Happily, Eisenhardt had in his manager, Billy Martin, the perfect man to run the show on the field.
In the course of his 12-year managerial career, Martin has earned a reputation as a brilliant field tactician and a hard man to get along with. As least, that was the way all his former employers, like Calvin Griffith of the Minnesota Twins and George Steinbrenner of the New York Yankees, came to feel about him. With Eisenhardt, it would be different. Although almost every major-league baseball franchise has a general manager who is in charge of both baseball and business operations, the rookie president took another path. He hired sports executive Andy Dolich to run the business side of things and put Martin in charge of all baseball operations. Both men would report to him as equals. Eisenhardt calls this a 'bifurcated management system." What it means is that he doesn't try to second-guess his baseball expert. "In baseball matters I generally surrender intellectually to Billy," he says. "If we disagree about something to do with baseball, I'll be right about one percent of the time, so I'm not about one percent of the time, so I'm not about to jeopardize the relationship just to be proven right about that one percent."
But Eisenhardt went beyond giving Martin authority on the field and in the front office: He built a major part of the team's advertising campaign around his manager's combative image. To appreciate how unusual this strategy was, consider the fact that baseball managers tend to have remarkably short careers -- at least in a single location. Finley's 16-managers-in-20-years record is not atypical. Nor is the fact that the Yankees' George Steinbrenner has hired and fired 8 managers in as many seasons.
Managerial turnover rates didn't, however, keep Eisenhardt from listening to the advice of the folks at the San Francisco office of Ogilvy & Mather, one of the country's leading advertising agencies.
"We've worked with a number of professional sports franchises," says Graham Kirk, the A's account executive at the agency. "For most of them, a long-term project is something lasting 60 days. Television ads usually consist of live action clips or they merely plug the next hometown series, without ever establishing an identity for the team. Initially Roy wanted to focus on the A's players, but our research showed that we should, at least for the first season, focus on Billy Martin and Billyball."
During year two, the A's ads have begun to concentrate more on some of their promising young superstars, but the overall goal of the campaign -- establishing a strong team identity -- remains intact. "From the beginning," says Eisenhardt, "we've taken the long view with our marketing, realizing that we'll have to cultivate the fans for several years." He might add that in the fickle world of professional sports, where an injury can sideline the superstar centerpriece of your advertising campaign for an entire year or even a career, building an image for your team is also a good insurance policy.
This year the A's will spend more than $1 million pushing Billyball, "at least twice what any other professional baseball team spends," according to O&M's Kirk. Advertising isn't the only place where the team is spending, though. Eisenhandt has also invested a considerable sum in rebuilding the infrastructure of the franchise itself, particularly the scouting system and the minor-league operations.
Charlie Finley prided himself on his ability to judge baseball talent (not without justification) and never sank much money into scouting. Eisenhardt thought this was equivalent to running a high-technology company with no research and development budget and made the ongoing search for new talent one of his first priorities.
Today the A's employ 25 scouts who cover high-school, college, and minor-league games as well as the team's majorleague opponents; it is one of the largest scouting staffs in professional baseball. The scouts' reports, as well as information the A's receive from the Major League Scouting Bureau (a sort of "super-scout" cooperative located in Newport Beach, Calif, and supported by all the major-league teams) are fed into the club's computer to be analyzed by Martin, whose decisions about who to sign or pursue are final.
Of course, Martin can' be everywhere at once, and his judgments are only as good as the raw material his scouts provide. And most of their hot prospects will spend some time being seasoned at the minor-league level. Oakland supports six minor-league teams, made up of 150 players and dozens of managers, coaches, trainers, and clubhouse workers. "It costs us about $3 million a year to maintain minor-league operations," says Eisenhardt, "which is all cash outflow."
There's no alternative system for developing talent, however. "The only way to do away with the minor leagues is for all the teams to agree to draft only college players, as the National Football League has done," says Eisenhardt. "Even then, you couldn't be sure of getting enough talent."
All of the A's current players spent at least two to three years being groomed in the minors before they made the big leagues. Tony Armas, an American League all-star outfielder, played for several Pittsburgh Pirate farm teams between 1971 and 1976, before being traded to the A's. His teammate, Rickey Henderson, served apprenticeships in Boise, Idaho, Modesto, Calif., Jersey City, N.J., and Ogden, Utah, before he became a major-league sensation in 1980.
"It's awfully hard to tell which of the 150 players we have in our farm system are going to make the majors," says Eisenhardt. "Perhaps two or three players a year might move up; some years no one does. So at $3 million per year for minor league operations, player development could cost us $1 million per man. It's our R&D investment."
If the R&D pays off, of course, the next critical step is keeping the player on the team long enough to turn a profit on the investment. Even the most casual observer of professional baseball knows about free agency, a fact of life which means that a player can, under certain conditions, offer his services to anyone he pleases at the end of his contract. While this concept may not startle anyone used to the basic business principle of free enterprise, the tendency of certain starcaliber players -- including more than a few former Oakland A's -- to pursue this course has driven salaries in baseball sharply upward. It has also divided the baseball world into two fairly well-defined camps: teams that dip into the free-agent market each year, attempting to buy instant success on the field, and teams that depend on their minor-league teams to provide them with a winning edge.
Free agents can be expensive. (George Foster, a renowned slugger for the Cincinnati Reds of the National League, recently signed a five-year contract with the New York Mets for $8.5 million.) And not every team in baseball can play that game at the same level. The Seattle Mariners' gross revenues from all operations, for instance, will probably equal about half of the New York Yankees' entire payroll this year.
Eisenhardt's A's are decidedly in the second camp -- they season their own talent -- although the team did sign two veteran free agents to contracts this year. In part this is because the A's aren't in the same financial league as the New York Yankees. Of greater importance, though, is the fact that Oakland happens to be blessed with some of baseball's best young players, all of whom the club has signed to long-term contracts, though not cheaply. The team's salary obligations will risk to $6.3 million this year, from $3.7 million in 1981.
It might seem insane for the chief executive of a small company to exult over raising the salaries of his top 25 employees by an average of $104,000 each, but Eisenhardt is pleased. "Most of the contracts we've signed are for four years," he says, "many with options for an additional two years beyond that. And while the salaries may seem high, my biggest cost is fixed into the future. I know we'll have time to make the rest of our plans work."
Despite aggressive marketing off the field and aggressive play on it, Eisenhardt still expects the A's to lose about $5 million this year on revenues of about $14 million. It's an admittedly conservative estimate -- "I've inflated costs and deflated potential revenues," he says -- and with another good year on the diamond the team could do much better. Still, Oakland's situation points out how difficult, and sometimes deceiving, the world of professional-sports management can be today.
"Profitability in professional baseball is by no means guaranteed," says Eisenhardt. "Of course, it's hard not to succeed in the National Football League, where you have to sell only 10 or so home games every year. The colleges are the NFL's farm system, and the league has a large television contract. But a baseball franchise has to promote 81 home games a year, and we have to play opponents whether they're an attractive draw or not."
Eisenhardt tends to worry a lot about the general health of the game of baseball, "because baseball, not just the A's, is our product. And to that extent, the health of the entire industry is at least as important as the success of any one franchise.
"Baseball attendance may keep going up," he adds, "but economic viability is what I worry about. The risk of having a poor season on the field, resulting in a big drop-off at the gate, is tremendous. It's part of our "one-more-player" syndrome, which has driven up free agents' and all other salaries."
Eisenhardt is also frustrated by the fact that what he pays his players is dictated by the New York market. "It's a basic problem for baseball. Our costs are not controlled by the revenues in our own market. Salaries are based, comparably, on what players are earning in New York. Yet my revenues are not dictated by New York, but what I can produce in the San Francisco -- Oakland market.
"The free-agent market in baseball is an excellent example of inflationary psychology," Eisenhardt adds. "We rush to buy players on the assumption that if you don't buy today, it'll cost even more tomorrow. We are forced, out of a fear of failure, to do things that, in the long run, are bound to ensure failure."
It's too early, of course, to predict with certainty whether Eisenhardt's approach to the A's will succeed or fail. He knows all too well that even the slickest promotion campaign can't lure fans to the park to see a loser. Few teams can survive the loss of an essential player to injury for very long, and the A's, for all their panache, are woefully thin at some key positions, particularly relief pitching. Will his young stars continue to develop and produce? The sports world has a curious way of turning heroes into villains, and vice versa. Perhaps more important, can his pragmatic, commonsense approach to management and player selection produce the same kind of raw talent Charlie Finley's lone-wolf methods turned up?
Whatever the answers, Eisenhardt has duly impressed a number of baseball's keenest observers, Says Ron Fimrite, a writer for Sports Illustrated: "He's very well thought of by many of the other owners. He's brought business knowledge to running the team. And he's also part of a new breed in baseball, a group of owners that felt last year's players' strike was unnecessary."
Eisenhardt freely admits that's the case. "I don't really view the players as labor," he says. "They're part of a business team. Considering their salaries, I'd put players about on a parity with owners. I believe players are entitled to a certain share of the pie, the same as the invested capital side should be rewarded. But I think big problems arise from labeling our relations as 'labor-management.' The reality is that the players are already partners."
That's a view unlikely to draw much support from baseball's old-line owners. But it could be the only way to approach and begin to solve the problems of the inflationary spiral that Eisenhardt has identified. And solving that, in turn, may enable baseball to stay a small business run by individuals, rather than another conglomerate subsidiary. It would be a shame to see it turn out any other way.