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Moneyball Lessons: Can they be applied to business?

Published in the Rochester Business Journal

There’s a line in the book “Moneyball: The Art of Winning an Unfair Game,” that raises a red flag for anyone working in HR or – for that matter – anyone who’s ever had to hire an employee. Author Michael Lewis asks: “…if gross miscalculations of a person's value could occur on a baseball field, before a live audience of thirty thousand, and a television audience of millions more, what does that say about the measurement of performance in other lines of work? If professional baseball players could be over- or under- valued, who couldn't?”

Lewis’ book and the movie that followed recount the true story of Billy Beane, general manager of the Oakland Athletics, and his untraditional approach to hiring ball players. Beane’s challenge was to build a winning baseball franchise with a payroll that was dwarfed by his competition. Sound familiar?

Instead of turning to the usual metrics such as a pitcher’s Earned Run Average (ERA) or the “gut feel” of his staff, Beane focused on the strong correlation between “on-base” percentages and winning games- throwing convention and subjectivity out the window.

Beane’s experience got me thinking about today’s hiring processes and what lessons can we learn from the Oakland A’s?

Here’s what I came up with (along with a few lines from the movie):

Job Descriptions

"I pay you to get on first, not get thrown out at second." - Billy Beane

Beane’s limited payroll forced him to define what the team needed to win. I asked Brad Smart, PH.D, renowned management consultant to many Fortune 500 companies and author, how businesses can nail down what they are looking for:

“Today there are millions of job descriptions that are ambiguous, and there are just as many employees that don’t really understand what it is they are going to be held accountable for,” said Smart who wrote of Topgrading: How Companies Win by Hiring, Coaching, and Keeping the Best People. “What I emphasize is to isolate one year’s worth of measurable accountability…be prepared to tell someone what number you have to put on that scoreboard to succeed.”

In Smart’s view, business is more akin to a decathlon than baseball. A good job description typically includes several specific items that an employee needs to be held accountable for “or not go home with a medal,” Smart said.

Management needs to nail down what they really want this person to do, and be prepared to hold the person accountable. “Too many times companies set up a failure scenario because there are too many different agendas,” he said. “After everyone chimes in you end up with a job description that no one can reasonably do.”

Avoiding Duds

"Billy, of the 20,000 notable players for us to consider, I believe that there is a championship team of twenty-five people that we can afford, because everyone else in baseball undervalues them." – Peter Brand

In the movie, subjectivity was removed from the process of recruiting and acquiring talent by integrating a predictive science that established the unique behavioral characteristics to the best performers. They did not target the players with established track records who required more money than they could afford. They hired the players who possessed the DNA for the position based on what science told them and the specific observations in camp.

Cindy Domanowski, president of Percio Strategies, a Raleigh-based firm specializing in hiring top talent, recommends following three sequential steps when evaluating a candidate.

Fit: Will a candidate thrive in the company culture based upon preferences such as type of work environment, compensation and leadership style?

Talent: Does a candidate have behavioral talent to be successful in the role? To answer the question, Domanowski recommends using an assessment. While an assessment tool never should indicate the final yes or no for a candidate, it will measure a candidate’s aptitude in areas related to the best in the job. Behavioral-based questions used during the interview will help identify potential gaps in the assessment.

Skills: Similar to the movie Moneyball, an employer needs to observe as many of the skills as possible to determine how long it will take for this person to become a first-string player.

Domanowski notes that hiring managers often start with skills - impressed by the prior experience or learned abilities that the candidate highlighted on the resume. “We have found that hiring candidates based on listed skills rather than taking into account other aspects, such as fit and talent, often times leads to turnover in the first year,” she said.

The cost of a mis-hire is significant. Depending on the position, a poor hire may cost a company between six to 15 times the base salary. If that seems high, consider both the costs of recruiting the candidate, and the long-term “lost opportunity costs” of a poor hire. Lost opportunity costs may include missed sales targets or deadlines, lost customers, or having to rebuild a business unit after a toxic manager leaves.

Smart’s strategy for avoiding a mis-hire include:

  • Conduct in-depth interviews, with detailed questions that delve into each position the candidate has held. Discuss successes, failures, key relationships and appraisals by every boss.
  • Make sure candidates understand that they will need to arrange reference calls with their former bosses. Smart refers to this as “truth serum.” Half to two-thirds of resumes contain deliberately false information, and this requirement quickly weeds out those who may be hiding information.

The Uber Metric

"It's about getting things down to one number. Using the stats the way we read them, we'll find value in players that no one else can see…" – Peter Brand

I asked Brad Smart if there was a single metric that businesses should consider when hiring. Surprisingly he answered yes.

“Resourcefulness is the mega competency,” he said. “It is the passion a candidate has for figuring out how to get over, around or through barriers in order to succeed. According to Smart it is the one thread running through every ‘A’ player, defined as someone who is in the top 10 percent of talent available for the job. B players are in the next 25%, and C players are in the bottom 65%, according to Smart.

Similar to Beane, Smart believes traditional “credentials” don’t cut it. Measurement is the key. “Credentials in this area and five years exposure to such and such don’t count for much if you don’t zero in on what the person was held accountable for job after job,” he said. “You need to find out how this person performed … nothing is just subjective, everything can be measured.”

Conclusion

Recruiting is a flawed process – resumes are distorted and candidates are trained on how to interview. So employers need to be prepared. As Beane discovered, gut reactions and managerial instincts need to be replaced with a systematic hiring process that improves the odds of hiring the best fit candidates.

Remember to ask yourself: Are there areas within your business that if you improved talent would make a significant difference to profits and growth? Are you still recruiting in the same way, using the same old conventions that have been around for the last 20 years?

 

© HR Works, Inc. Originally published February 23, 2012. 

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HR Works, Inc., headquartered at 200 WillowBrook Office Park in Fairport (Rochester), New York, with offices in Syracuse, is a human resource management outsourcing and consulting firm serving more than 1000 clients throughout the United States. HR Works provides scalable strategic human resource management and consulting services, including: affirmative action programs; benefits administration outsourcing; HRIS self-service technology; full-time, part-time and interim on-site HR managers; HR audits; legally reviewed employee handbooks and supervisor manuals; talent management and recruiting services; and training of managers and HR professionals.