Everyone wants to build a winning team, but at what price?
Most small and growing businesses can't afford to pay top dollar to superstar employees with unassailable credentials. Instead, they attract top talent through the enticement of a startup mission or the evangelism of an impassioned founder (or a so-called superboss).
And sometimes, smaller organizations win talent wars by looking for gifted employees where larger companies often fear to tread: Job candidates who lack skills or experience, but seem like cultural fits based on work ethic and personality.
But entrepreneurs could also learn a few lessons by examining the hiring practices of Major League Baseball teams, most of whom--the ones in small and medium markets--adhere to strict budgets for their payrolls.
Specifically, the Oakland A's approach to finding talent while maintaining a low payroll has received oodles of attention. In Moneyball, Michael Lewis's seminal 2003 book about the Oakland A's 2002 baseball season, the author sought to answer an essential question: How did the A's, with their paltry payroll ($41 million), manage to compete with the big-market New York Yankees ($125 million)? A 2011 movie based on the book dramatized the same question, with Brad Pitt playing the part of Billy Beane, the general manager of the small-market A's.
Lewis's provocative work relied on the assumption that high-priced talent is necessarily winning talent. But a recent analysis on MLB.com found that this is not always true.
The analysis took a deep dive into the talent evaluation strategies of the five winningest regular-season teams of the past three seasons: The St. Louis Cardinals (287 wins), Pittsburgh Pirates (280), Los Angeles Dodgers (278), Kansas City Royals (270), and Washington Nationals (265).
What immediately stands out is that three of the teams--the Cardinals, Pirates, and Royals--are from the A's school of spending: They don't like to do it. By contrast, the Dodgers and Nationals habitually spend like drunken sailors. Which they can afford to do, as large-market teams from Los Angeles and Washington respectively.
While their philosophies and capabilities around spending differ, there are a few common threads shared by most of the teams:
Staying patient with executives as they reverse a losing culture. Before they could become winning teams, most of these franchises endured bouts of losing. And instead of firing the executives at the helm during the losing seasons, the teams remained patient, and showed faith in a long-term process. For example, the Pirates averaged a putrid 94 losses per season during Neal Huntington's first five years as the team's general manager. The Royals averaged 92 losses per season during Dayton Moore's first six seasons as general manager. Not mentioned in the MLB.com article is yet another potential example: The New York Mets, who were patient with general manager Sandy Alderson, despite four losing seasons in his first four years. Last season, the team's patience was rewarded with a trip to the World Series--where they lost to the Royals.
Alignment between ownership and executives. Why did ownership stay patient with these losing leaders? It was because the leaders made sure--at the start of their tenures--that ownership understood reversing a losing culture was a long-term process.
For example, when the Royals hired Moore in 2006, notes MLB.com, Moore "sat down with his bosses and outlined a plan. He said the Royals had no chance of competing without a great farm system, and Moore intended to build one. But it would not happen quickly, and the path would not always be smooth. Young players are like that. Most disappoint." Likewise, Huntington and Pirates ownership were in alignment about how long the rebuilding process would take.
Taking chances on reclamation projects. Before the 2013 season, the Pirates took a chance on starting pitcher Francisco Liriano, even though Liriano had been a subpar starter who'd battled through injuries in three of the previous four seasons. But at the time, he was only 29. And the Pirates believed he could be a superb buy-low candidate, if they allowed him to heal and gave their coaches a chance to assess his mechanics.
The investment in Liriano has paid off handsomely. He has given the Pirates three solid seasons. He has been a key cog in their turnaround. The Pirates saw a gem where others saw a pebble. It's exactly the type of talent discovery that great founders need to make, if they aim to build great teams on shoestring budgets.