RADICAL HRM INNOVATION AND COMPETITIVE ADVANTAGE ...

How is it that Moneyball (Lewis,2003), a book seemingly aboutbaseball, was among the Economist’sBooks of 2003 in the Economics &Business category, was a New York

Times bestseller, is referenced in LarryBossidy’s most recent book (Bossidy & Cha-ran, 2004), and motivated an argument inthe National Review that American educa-tion would do well to adopt the rigorousanalysis employed by Billy Beane, the gen-

eral manager of the Oakland Athletics(Lips, 2004)?

Moneyball is a book about baseball. Whenread through the lens of a management re-searcher, however, it is also a book abouthuman resource management, innovation,resistance to change, competitive advantage,and achieving excellence. The focus of thisarticle, therefore, will be on what HR execu-tives and scholars can learn from the Money-ball phenomenon. While many would agree

RADICAL HRM INNOVATION AND

COMPETITIVE ADVANTAGE:

THE MONEYBALL STORY

R I C H A R D W O L F E , PAT R I C K M . W R I G H T, A N DD E N N I S L . S M A R TMoneyball (Lewis, 2003), a New York Times bestseller, is a book about base-ball. When read through a broader lens, however, Moneyball is also a bookabout innovation, resistance to change, competitive advantage, achieving ex-cellence, and, of most relevance here, human resource management. Whilemany would agree that the radical innovation described in Moneyball repre-sents a “new vision of management” in baseball, this article describes howMoneyball lessons might contribute to a “new vision of HRM” in various typesof organizations. The focus of the article is on what HR executives and schol-ars can learn from the Moneyball phenomenon. More specifically, the authorsaddress a number questions related to the Moneyball story that have rele-vance to successfully implementing HRM innovations; these questions have todo with overcoming resistance to the implementation of radical innovationand how HRM innovation can contribute to sustainable competitive advan-tage. © 2006 Wiley Periodicals, Inc.

Correspondence to: Richard Wolfe, Associate Professor of Sport Management, Division of Kinesiology, Univer-sity of Michigan, Ann Arbor, MI 48109-2214, Phone: 734-615-5218, E-mail: [email protected].

Human Resource Management, Spring 2006, Vol. 45, No. 1, Pp. 111–145

© 2006 Wiley Periodicals, Inc.

Published online in Wiley InterScience (www.interscience.wiley.com).

DOI: 10.1002/hrm.20100

112 HUMAN RESOURCE MANAGEMENT, Spring 2006

that the radical innovation (sabermetrics) de-scribed in Moneyball represents a “new visionof management” in baseball, this article de-scribes how adopting a broader lens mightcontribute to a “new vision of HRM” in vari-ous types of organizations.1

First, a bit about the book. Lewis’s best-seller describes how Billy Beane revolutionizedMajor League Baseball (MLB) by demonstrat-ing how maximizing efficiency can leveragelimited resources to create a successful out-come. Bill James, author of the comprehensiveHistorical Baseball Abstract (2001), spent threedecades challenging the national pastime’sconventional wisdom, applying rigorous sta-tistical analysis (sabermetrics) to determine thetraits most associated with a player’s true valueto his team. James’s findings were inconsistentwith most baseball experts’ opinions, and his

research was ignored for years. Until, that is, Billy Beane em-

braced sabermetrics and put it intopractice. Beane maximized histeam’s efficiency, focusing on play-ers with the traits most importantfor winning ballgames, rather thanthose with impressive traditionalstatistics. The strategy worked: overthe past five years, Beane’s Athlet-ics have been near the top of theleague’s standings despite beingoutspent by nearly all their com-petitors (Lips, 2004).

Outside the “Club” of base-ball’s establishment, the level of in-terest in the ideas presented in thebook has been considerable. TheOakland Athletics’ front office has

had calls from a cross-section of U.S. businessand sports entities: teams from the NFL, NBAand NHL; Wall Street firms, Fortune 500 com-panies, and Hollywood studios. The peoplemost certain they had nothing to learn fromthe book, however, were in the front offices ofother major league teams (Lewis 2004). Lewisargues that “they were ‘a Club.’ In business ifsomeone exposes the trade secrets of yourmost efficient competitor, you’re elated. Evenif you have your doubts, you grab the book,peek inside, check it out. Not in baseball. Inbaseball many of Beane’s competitors were fu-

rious. In the Club there was no need to readthe book, and, with the exception of severalowners who took an interest, baseball execu-tives bragged that they hadn’t read the bookbecause, well, it was offensive” (Lewis, 2004).

Moneyball thus describes how Billy Beanerevolutionized Major League Baseball by ex-ploiting an inefficiency in the baseball labormarket (i.e., the ability to get on base hadbeen seriously undervalued). Beane exploitedthe inefficiency by implementing a radicalhuman resource management innovation—an employee (player) performance measure-ment and feedback system that allowed himto field a highly competitive team while hav-ing one of the lowest payrolls in Major LeagueBaseball. The purpose of this article is to in-vestigate the Moneyball story to glean whatlessons are contained therein for HR execu-tives and scholars concerning innovation, re-sistance to change, and competitive advan-tage all within the context of human resourcemanagement. We address four questions re-lated to the Moneyball story that have rele-vance to successfully implementing humanresource management innovations: (1) whydid it take so long for the sabermetrics inno-vation to be adopted? (2) how is it that Beanewas successful in having sabermetrics imple-mented by the A’s? (3) does sabermetrics pro-vide a competitive advantage, and if so, how?and (4) is the competitive advantage providedby sabermetrics sustainable?

In investigating each of the above ques-tions, we discuss (a) current management lit-erature related to the question; (b) how thatliterature plays out in the Moneyball story;and (c) implications for the HR executive.The article concludes with a general discus-sion of the relevance of the Moneyball storyto HR executives. Prior to addressing thesequestions, we briefly describe the relevanceof the Moneyball story in today’s HR contextand the radical innovation at the center ofMoneyball—sabermetrics.

Moneyball and the Current HRContext

As firms face increasing global competition,rapid technological change, and a growing

Beane maximized

his team’s efficiency,

focusing on players

with the traits most

important for

winning ballgames,

rather than those

with impressive

traditional statistics.

Human Resource Management DOI: 10.1002/hrm

Radical HRM Innovation and Competitive Advantage 113

trend toward commoditization of productmarkets, they must find ways to better lever-age their human capital (Wright & Snell,2005). This requires a massive rethinking ofthe role of HR and a revolutionary approachto managing people in organizations. Unfor-tunately, a number of writers have foundthat HR functions serve as bureaucratic ob-stacles, rather than drivers of positive changein organizations (Hammonds, 2005; Losey,Meisinger, & Ulrich, 2005; Stewart, 1996).

While many authors bemoan the currentstate of HR, few present a coherent plan orvision for how to dramatically change thefunction. Such change requires radical inno-vations in how HR professionals design andimplement processes aimed at building com-petitive advantage through people. These arechanges that do not generally characterizeHR functions. While one might look to com-pany stories such as Continental Airlines(Carrig, 1997), or IBM (Gerstner, 2002) forideas concerning how to drive organiza-tional change, perhaps the story presented inMoneyball serves as an appropriate bench-mark.

Sabermetrics:The Foundation ofMoneyball

Sabermetrics refers to a statistically based ap-proach for developing and applying objectiveknowledge to baseball. This statistical ap-proach is an important determinant of playerevaluation and of “in-game” tactics (e.g.,bunting, stealing). The term derives fromSABR, the acronym for the Society for Ameri-can Baseball Research. Historically, assessingplayer talent favored future potential overpast performance; sabermetrics, on the otherhand, focuses on past performance as a pre-dictor of future performance. While statistics(e.g., batting average [BA] and earned run av-erage [ERA]) were used previous to its advent,sabermetrics has contributed different statis-tics, which it is argued, are better predictorsof player contribution to team performance(e.g., on-base percentage plus slugging per-centage [OPS]). In addition to player assess-ment and selection becoming oriented moretoward performance, as opposed to potential,

and there being more of a focus on (new) sta-tistics, certain in-game decisions (e.g., sacri-fice bunts, stolen bases) are discouragedwithin a sabermetric approach. Although, inthe traditional baseball view, these tactics areoften associated with a team’s ability to“manufacture” runs by advancing a base run-ner, the sabermetric approach eschews gametactics that accept a very likely out to ad-vance a runner without significantly increas-ing the probability of scoring runs (James,1986; Katsunori, 2001; Lewis, 2003). That is,in-game decisions based on tradition or intu-ition give way to decisions basedon statistical probability, whichworks against bunting and steal-ing.2

Sabermetrics and HR

In essence, the sabermetrics ap-proach described in Moneyball isrelevant to issues corporationsand HR functions confront. First,firms must develop a competitivestrategy. Such a strategy should beconsistent over time, providing away to differentiate the firm fromcompetitors while requiring ap-propriate tactical decisions madein response to industry and localconditions. Sabermetrics has resulted instrategic modifications in terms of humancapital strategy and in-game, tactical deci-sions in baseball.

Second, firms must hire individuals to ex-ecute their strategy. These hiring decisionsentail identifying relevant knowledges, skills,and abilities (KSAs) and then developingmeasures that validly assess those characteris-tics. Sabermetrics focused baseball’s attentionon different KSAs than were previously con-sidered relevant and then offered new waysof assessing those characteristics. It is theseareas of overlap (i.e., modifications in humancapital strategy, in tactical decisions, in rele-vant KSAs, and in KSA assessment) that makeMoneyball an interesting example of howfirms might exploit better information tobuild human capital strategies that result incompetitive advantage. We argue that the les-

In essence, the

sabermetrics

approach described

in Moneyball is

relevant to issues

corporations and HR

functions confront.



sons gleaned from sabermetrics (as describedin Moneyball) may provide unique insightsinto how firms might achieve competitiveadvantage, and it is in this context that weexamine the questions that follow.

Why Did It Take So Long forSabermetrics to Be Adopted?

New statistics similar to those used in saber-metrics were proposed close to 50 years priorto the Athletics’ adoption of sabermetrics in

2001. Bill James, author of thecomprehensive Historical BaseballAbstract (James, 2001), spentthree decades challenging the na-tional pastime’s conventional wis-dom, applying rigorous statisticalanalysis to determine the traitsmost associated with a player’strue value to his team. James’sfindings and his approach were ig-nored for years. In 1954, long be-fore James’s seminal work, BranchRickey, then-general manager ofthe Pittsburgh Pirates, proposed anew statistical approach for as-sessing batting proficiency(Rickey’s approach emphasizedon-base percentage, as does saber-metrics). These early signals con-

cerning new, potentially superior approachesfor assessing player talent were ignored fordecades. How might we explain that?

The Management of InnovationLiterature

We turn to the management of innovation lit-erature for insights concerning delays in imple-menting novel ideas. As argued in that litera-ture, implementing organizational innovationsis dependent upon an appreciation of the at-tributes of a focal innovation (Damanpour,1991; Wolfe, 1995). Attributes that are most rel-evant to the adoption and implementation ofHRM innovations are as follows:

• Uncertainty—lack of knowledge con-cerning the link between an innovation’sinputs, processes, and outcomes;

• Organizational Focus—administrativeversus technical—the aspect of the or-ganization to which the innovation ismost relevant;

• Radicalness—the extent to which an in-novation is novel, represents change,and thus implies new behaviors;

• Magnitude—the extent of change to ex-isting structure, personnel, and financialresources implied by an innovation; and

• Pervasiveness—the number of organiza-tional members who are expected tochange their behaviors due to the inno-vation (Wolfe, 1995).

While uncertainty is inherent to the im-plementation of most innovations (Kanter,1988; Storey, 2004; Tushman & Nelson,1990), given that they are intangible, admin-istrative innovations, HRM innovations tendto be characterized by considerable uncer-tainty. Radicalness, magnitude, and perva-siveness can each contribute to the uncer-tainty that surrounds the implementation ofan HRM innovation. Uncertainty, in turn,contributes to innovation resistance, which isoften unrelated to the objective merit of aninnovation, depending rather on the struc-tural and personal consequences it implies.

In addition to an innovation’s attributes,organizational context is an important deter-minant of innovation adoption and imple-mentation (Damanpour, 1991). In tradition-bound organizations, strategic frames ofreference, which had provided direction,often become blinders; established processes,which had provided efficiencies, becomemindless routines; commitment to particularconstituencies (e.g., employees, suppliers),which had provided resources, restricts flexi-bility; and values, which once unified andinspired, harden into rigid rules and regula-tions (Sull, 1999). Tradition-bound organiza-tions thus are not prone to change, certainlynot to radical innovation (Hamel, 1996;Miller, 1990) as “core capabilities” become“core rigidities” (Leonard-Barton, 1992). Intradition-bound institutions such as MajorLeague Baseball (MLB), the frames of refer-ence, established processes, constituencycommitments, and restrictive values de-

In addition to an

innovation’s

attributes,

organizational

context is an

important

determinant of

innovation adoption

and implementation.



scribed by Sull can interact in a manner thatreinforces the status quo.

The Management of InnovationLiterature and the Moneyball Story

Tradition

Why would it be that MLB teams, wealthyand otherwise, would be resistant to adopt-ing means of assessing talent that would re-sult in paying less for a given level of talent?We suggest that one explanation lies in MLBbeing very tradition-bound and character-ized by deep respect for convention andprecedent. The past commissioner of MLB,Fay Vincent, expressed this powerfully andsuccinctly: “Baseball is all about memories”(Vincent, 2005).

MLB has a very rich history and strongtradition. Continuity and common experi-ence are endemic in MLB. Since 1990, ap-proximately 85% of field managers have hadMLB playing experience. The remaining 15%have had significant minor league manage-rial, major league coaching, and/or front of-fice experience (Holtz, 2005). Similarly, vir-tually all MLB coaches have considerableprofessional baseball backgrounds, andscouts are former professional players and/orhave been trained by the MLB Scouting Bu-reau. Until the advent of sabermetrics, thiswas the case with front-office personnel (e.g.,general managers, directors of baseball oper-ations, scouting directors) as well.

Although certain aspects of baseball havechanged over the years (e.g., the designatedhitter rule, specifications concerning the ball,the height of the pitcher’s mound), preferredplayer characteristics have remained constant.The desired attributes of position playersfocus on the “five tools” (hitting for average,hitting for power, fielding, foot speed, andarm strength) while those of pitchers focus onthree factors (arm strength, number of pitchesthrown, and control). “Make-up” (i.e., charac-ter, personality) attributes such as aggressive-ness, instinct, dedication, and work ethicapply to both position players and pitchers.Until very recently, changes in the evaluationof potential talent have been due to techno-

logical advances and related improvements inthe precision with which physical characteris-tics (e.g., running speed, arm strength) aremeasured, not in the characteris-tics that are assessed.

Resistance

The roles of the field manager andof the scout change dramaticallywith the adoption of sabermetrics.These changes imply serious chal-lenges to the extant skills as wellas to the job security of individu-als in these roles. In MLB’s con-ventional way of doing things,field managers have significantcontrol over talent selection andover in-game tactics. This “fieldmanager-centric” orientation,however, is inconsistent with fullimplementation of sabermetricswherein the field managers have agreatly diminished role (e.g., intalent selection and in-game tac-tics that are based to a consider-ably greater extent on statistics).As described in Moneyball, Beanehired Art Howe as the Athletics’ manager be-cause he believed that Howe would followthe instructions of the front office.

Adopting sabermetrics also results in a dra-matically decreased emphasis on professionaldiscretion and an increased emphasis on sta-tistics on the part of scouts and administratorsresponsible for evaluating and selecting talent.Moreover, these scouts and administrators areunlikely to have considerable training in sta-tistics. The inherent routinization of sabermet-rics means that making and implementing de-cisions becomes relatively simple, and thesupply of people qualified to fill related rolesbecomes more abundant. Resistance to saber-metrics thus can be understood as the naturalreaction to a radical innovation that chal-lenges extant skills as well as job security. Thefollowing statements are indicative of this:

A lot of what scouts feel they do is basedon gut instinct, their history of being inthe game . . . their experience. They

The inherent

routinization of

sabermetrics means

that making and

implementing

decisions becomes

relatively simple,

and the supply of

people qualified to

fill related roles

becomes more

abundant.



have a hard time quantifying it. . . .they see all these . . . charts and graphs. . . and maybe when you don’t under-stand something, you feel a little chal-lenged by it. (Gary Hughes, ChicagoCubs’ assistant GM and MLB scout for30 years, in Schwarz, 2005)

. . . the main adversarial thing is thatsome of our old-time guys are losingjobs that we didn’t feel they should belosing. . . . we correlate it to the fact thatsome of the computer stuff is causingthat, and we resent it. (Eddie Bane, the

California Angels’ scouting di-rector, in Schwarz, 2005)

We see then that due to itstradition-bound nature, MLB hasnot been prone to change, cer-tainly not to radical innovation. Asargued above, in tradition-boundinstitutions such as MLB, frames ofreference, established processes,constituency commitments, andvalues interact in a manner that re-inforces the status quo. Moreover,the attributes of sabermetrics (i.e.,it is a radical, administrative, per-

vasive innovation with considerable magni-tude) create considerable uncertainty andresistance to its implementation. This uncer-tainty and resistance are exacerbated by theperceived threat of sabermetrics to extant jobskill sets and to job security.

Implications of the Moneyball Storyfor the HR Executive: Relating the HRContext to MLB

While the context of HR varies considerablyat the level of the organization (e.g., publicvs. private, large vs. small, technology vs.manufacturing vs. service, etc.), the profes-sion of HR in many ways resembles the tra-dition-bound nature of MLB. HR has beencriticized for its administrative bureaucracy,unwillingness to change, and inability toadd value from Drucker (1954) to Stewart(1996) to Hammonds (2005). While willingto occasionally chase after certain fads such

as T-groups or handwriting analysis, most HRprofessionals can be characterized as risk-and change-averse.

However, HR professionals are not alonein resisting to change to HR practices. Snelland Dean (1994) have noted that HR systemsare notoriously intractable. Wright and Snell(1998) suggested that this stems in part fromindividual users’ (e.g., HR’s managerial clients)discomfort with changing their normal rou-tines. For instance, despite significant researchsupport for the superior validity of structuredbehavioral interviews over traditional unstruc-tured interviews, many companies and inter-viewers continue to use the latter. In manycases, interviewers are unwilling to cede deci-sion-making control to a formulaic score, pre-ferring to use their intuition built up overyears of experience.

While all firms seek to leverage theirhuman capital as a competitive weapon, fewseem to have done so successfully. The pastfew years have increasingly focused HR prac-titioners’ attention on HR metrics (Becker,Huselid, & Ulrich, 2001; Fitz-Enz & Davison,2001), but in large part these efforts have notled to developing better measures to assesspreviously identified phenomena or to mak-ing better use of existing measures. With thenotable exception of the Sears story (Rucci,Kirn, & Quinn, 1998), efforts to develop HRmetrics have seldom led to comprehensivequestioning of either business tactics orhuman capital strategy. This omission stemsfrom HR professionals tending to be tradi-tion-bound and risk-averse (Hammonds,2005) and from the fact that such a compre-hensive, sabermetrics-type approach wouldbe radical, of significant magnitude, quitepervasive, and, therefore, characterized byconsiderable uncertainty. We now return tothe Moneyball story to see how sabermetricswas successfully implemented in spite of asimilarly unfavorable context.

How Did Beane SuccessfullyImplement Sabermetrics in theOakland Athletics?

As described earlier, MLB is a tradition-bound institution with what have become

HR has been

criticized for its

administrative

bureaucracy,

unwillingness to

change, and inability

to add value…



limiting frames of reference, processes, andconstituency commitments that interact in amanner that reinforces the status quo. Con-siderable force or energy would be necessaryto counter these inertial forces. What was theforce, or energy, that resulted in sabermetricsbeing adopted by the Oakland A’s?

The Management of InnovationLiterature: Overcoming Resistance

Given the uncertainty surrounding mostHRM innovations (HRMIs) and due to po-tential resistance, HRMI implementation isdetermined by a combination of the powerof an innovation champion and by organi-zational context. The presence of an inno-vation champion—the individual who pro-vides energy and momentum to theimplementation process by advocating andpromoting an innovation—is an importantdeterminant of successful innovation imple-mentation (Howell & Higgins, 1990). Achampion’s efforts are necessary to counterinherent organizational resistance tochange; a new idea either finds a championor dies (Schon, 1963, 1976). PredictingHRMI consequences is inherently uncertain,and the innovation’s very existence can bethreatening to vested interests, so such in-novations tend to stimulate political activity(Johns, 1993). The relative power of organi-zational actors resolves such activity. Whilea champion is necessary to personify andmake an administrative innovation tangi-ble, his/her power is also necessary tocounter threatened groups with necessarypower and authority (Galbraith, 1982). Acritical component of successful implemen-tation of HRMIs, therefore, is the existenceand power of an innovation champion(Wolfe, 1995).

In addition to the power of the innova-tion champion, organizational context is animportant determinant of HRMI implemen-tation. These two innovation determi-nants—champion power and organiza-tional context—interact in HRMIimplementation such that one can compen-sate for the other (Wolfe, 1995). The morecongruent an innovation is with an organi-

zation’s context, the less “pushing” of theinnovation and trying to enlist increasinglevels of organizational support is necessaryon the part of the champion.

As argued earlier, MLB had become anunwitting prisoner of industry convention.Hamel and Getz (2004) argue that tocounter such convention and resulting iner-tia with radical innovation, an understand-ing must emerge that standard industrypractices have become “dogma” justifiedsolely by precedent. An innova-tion champion, therefore, is nec-essary to challenge deeply heldconvention. In addition, a semi-nal element of organizationalcontext, discontinuities in tech-nology, is often an important de-terminant of radical innovation(Hamel & Getz, 2004).

The Moneyball Story andOvercoming Resistance

As discussed earlier, the contextsurrounding the Oakland A’s wasinhospitable to sabermetrics. Thevery strong influence of traditionand history (i.e., “Baseball is all about mem-ories” [Vincent, 2005]) worked against inno-vation. The threat of sabermetrics to extantskills and to livelihoods resulted in consider-able resistance to the innovation. As sug-gested in the innovation literature, in suchsituations, innovation implementation is de-pendent upon the innovation championhaving considerable organizational power.

As described by Lewis, Beane was the pro-totypical innovation champion. He had thenecessary energy, commitment, and organi-zational power to propel the adoption andimplementation of sabermetrics. Lewis de-scribes Beane as a man of boundless energy:“It was hard to know which of Billy’s quali-ties was most important to his team’s suc-cess: his energy, his resourcefulness, his in-telligence, or his ability to scare the living s---out of even very large professional baseballplayers” (2003, p. 153). In addition, Beanewas committed to sabermetrics; it wasBeane’s way or the proverbial highway. Only

A champion’s efforts

are necessary to

counter inherent

organizational

resistance to

change; a new idea

either finds a

champion or dies.



one-half of the scouts that were with the A’sfor the 2002 draft described in Moneyball re-main with the team. In addition, Beane was(almost) all-powerful, reporting only to teamownership.

A second important determinant of theimplementation of sabermetrics were ad-vances in computing technology, mainlypowerful PCs, that provided the fast, pow-erful computational capabilities necessaryfor implementing the innovation. We seethen that both a powerful innovationchampion and discontinuities in technol-

ogy were in place for the adop-tion and implementation ofsabermetrics by the Oakland A’s.

Implications of theMoneyball Story for the HRExecutive: The Importanceof the InnovationChampion

HR professionals are not generallyknown for their organizationalpower or their ability to effectivelychampion change within their or-ganizations. Authors who advo-cate implementing HRM innova-

tions inevitably cite the need for “supportfrom top management” as a prerequisite to ef-fective implementation. This is not surprisinggiven the history of HR and its place as a stafffunction. Consequently, adopting a sabermet-rics-type approach to HR requires an energeticand charismatic champion.

Depending upon the nature of the inno-vation, two types of champions might emerge.For internal HR innovations a visionary andintelligent senior vice president of human re-sources (SVPHR) might effectively championthe program. For instance, Randy McDonald,as SVPHR at Verizon, pushed through the de-velopment of an HR scorecard (Walker & Mac-Donald, 2001), one of the first of its kind.Since becoming the SVPHR at IBM, he has im-plemented a similar, yet more extensive HRscorecard. Because the scorecard largely im-pacts only the HR organization, he was able toeffect the innovation without a significantchampion external to the HR function.

However, when an HR innovation im-pacts those outside HR, in particular the lineorganization (i.e., it has significant magni-tude and pervasiveness), an external cham-pion will likely be required. For instance,Dave Pace, SVPHR at Starbucks, describes thefact that after reading Moneyball, the chair-man and CEO, Howard Schultz, tasked HRwith the challenge of identifying Starbucks’sequivalent of OBP. Such a champion, exter-nal to HR, bodes well for Starbucks’s abilityto push this innovation through to success-ful implementation.

The implementation of global HR infor-mation systems (HRISs) has become almostubiquitous within large multinational corpo-rations. These systems compile and store avast amount of data on all employees, acrossall jobs, worldwide. These data provide thefoundation for building a sabermetrics-typeapproach to HRM. The effective use of HRISin this manner, however, as in the case ofsabermetrics, necessitates effective champi-oning as well as significant technologicalknowledge and support.

Does Sabermetrics Provide aCompetitive Advantage, and if So,How?

The Strategic ManagementLiterature

In an effort to assess how sabermetricsmight provide a competitive advantage, weemploy the resource-based view (RBV) ofthe firm, a perspective that has emerged asa major strategic paradigm (Berman, Down,& Hill, 2002). According to Barney (1991), afirm’s resources “include all assets, capabili-ties, organizational processes, firm attrib-utes, information, knowledge, etc. con-trolled by a firm that enable the firm toconceive of and implement strategies thatimprove its efficiency and effectiveness” (p.101).3 As argued by Barney (1991, 1995),the RBV stipulates that firms are endowedwith heterogeneous bundles of resourcesand that competitive advantage accrues if,and only if, a resource (or bundle of re-sources) is:

…adopting a

sabermetrics-type

approach to HR

should require an

energetic and

charismatic

champion.



(1) valuable, in the sense of enablingan organization to conceive of and/orimplement strategies that exploit op-portunities and/or improve its effec-tiveness and

(2) rare, among current and potentialcompetitors. A resource that is pos-sessed by a large number of organiza-tions will not be a source of competi-tive advantage.

The Moneyball Story and theStrategic Management Literature

Sabermetrics works. The Athletics’ ap-proach to identifying hitters with superiorskills at reaching base without paying amarket premium for them has resulted inwinning games at a discount relative to thecompetition. Beane’s A’s have been nearthe top of the league’s standings despitebeing outspent by nearly all their competi-tors (Hakes & Sauer, 2004; Lips, 2004).Table I presents evidence of this.

Since Billy Beane took over the Athlet-ics prior to the 1998 season, the team’swinning percentage has increased dramati-cally, while the team’s payroll has de-creased just as dramatically. By identifyingplayers with superior skills not so identifiedby competitors, sabermetrics meets theRBV “value” criterion. When implementedby Beane (in preparation for the 2002draft), sabermetrics met the RBV “rare” cri-terion as well. Based on the RBV criteria,therefore, we see how sabermetrics can pro-vide a competitive advantage.

Implications of the MoneyballStory for the HR Executive:Achieving Competitive Advantagevia HR Innovation

One can certainly see how sabermetrics en-ables the Oakland Athletics to achieve supe-rior performance at lower cost. The superioruse of data to exploit information asymme-tries gives the team the ability to attracthigh-quality players at a lower than marketprice. Imagine how valuable it would be forcompanies to have the ability to identify, at-tract, and retain superior talent at a cost ad-vantage relative to competitors.

Returning to the HRIS example, notethat vast reservoirs of data now exist thathave the potential to provide insight con-cerning the characteristics of the most tal-ented employees and their location withinthe organization. While such data may beembedded in the system, without the abil-ity to exploit that data, an expensive HRISbecomes virtually useless for gaining com-petitive advantage. For example, one HRexecutive in a working group on HR func-tional excellence described his firm’s HRISas follows: “$200 million later, now I knowhow many employees I have . . . almost.”

On the other hand, IBM has increas-ingly focused on how it might exploit theinformation embedded in its HRIS as a wayof outperforming competitors. IBM’s HRIScontains information on each consultant’sskills and experience relevant to a numberof different types of consulting projects aswell as each consultant’s salary and loca-tion. IBM’s consulting opportunities arise


1991–1997 1998–2005 2002–2005*

Win % 47.5 56.5 58.3

Win % Rank** 18.1 8.2 8.3

Payroll Rank 12.7 24.8 22.3

Cost/Win Rank 17.6 4.4 5.8

* since the Moneyball draft.** among 30 teams

T A B L E I Oakland A’s: Wins/Costs


all around the globe for limited periods oftime; the firm needs to identify the skillsets of consultants and how they matchvarious project requirements. Conse-quently, IBM has gained a competitive ad-vantage through leveraging the informa-tion in its HRIS to find (a) the rightconsultant (i.e., with the relevant skills andexperience), (b) the right place (i.e., at orclosest to the project geographically), and(c) the right price (i.e., the lowest cost con-sultant). Thus, IBM is able to exploit HRISinformation to have successful projects

that are extremely cost-effective(Kirkpatrick, 2005). As doessabermetrics for the Oakland A’s,IBM’s HRIS contributes a com-petitive advantage by providingvaluable information that is rarein its industry.

Is the CompetitiveAdvantage Provided bySabermetrics Sustainable?

The Strategic ManagementLiterature

We return to the RBV to addressthe potential of sabermetrics providing a sus-tained competitive advantage. In addition tothe RBV “value” and “rare” criteria discussedearlier, to contribute to a sustained competi-tive advantage, a resource must meet twofurther criteria that we consider in turn.

(3) It must be imperfectly imitable/sub-stitutable in the sense that competingorganizations face cost and/or qualitydisadvantages in developing a dupli-cate of the resource or in developing anappropriate substitute for it.

In addressing imitability, it is helpful toconsider the importance of history as well associally complex resources. As organizationsevolve, they acquire skills, abilities, and re-sources that may be unique to them. When-ever the acquisition or development of valu-able and rare resources depends upon uniquehistorical circumstances, those imitating

these resources will be at a disadvantage.While it is relatively easy to purchase physi-cal resources or software, this is not the casewith socially complex resources (i.e., organi-zational phenomena such as trust, friend-ship, teamwork, culture, and reputation).

The importance of history and related so-cially complex resources foreshadows thefourth RBV criterion:

(4) organization; the firm must be or-ganized such that it can realize a com-petitive advantage based on resourcesthat add value, are rare, and are imper-fectly imitable/substitutable.

Organizational components are consid-ered complementary resources as they havevery limited ability to contribute to compet-itive advantage directly. Their true valuecomes in combination with other resourcesand capabilities (Barney, 1991, 1995). Nu-merous aspects of a firm’s organization (e.g.,structure, control and reward systems, com-munication, and leadership) are relevanthere.

In his article “What Is Strategy?” Porter(1996) makes some RBV-related argumentsthat are relevant to the sustainability of com-petitive advantage. Porter argues that com-petitive advantage arises from an organiza-tion’s choice of unique activities and/or byperforming activities more efficiently thancompetitors. He argues further that increaseddiffusion of best practices in today’s environ-ment often results in competitive advantagebeing temporary.

Porter proposes that activities—theirchoice and/or their performance (i.e., howthey are implemented)—form the bases ofsustainable competitive advantage. He statesthat firms’ competitive advantages (e.g.,those of Southwest Airlines and Ikea) arebased on unique, tailored sets of interlockedactivities, with entire business systems of ac-tivities fitting and reinforcing one another.Strategic fit among activities reduces costsand/or increases differentiation and is funda-mental to the sustainability of competitiveadvantage. In other words, it is more difficultto match an array of interlocked processes

In addressing

imitability, it is

helpful to consider

the importance of

history as well as

socially complex

resources.



and activities than it is to imitate one or twoprocesses, or activities.

The Moneyball Story and SustainedCompetitive Advantage

The Oakland A’s created competitive advan-tage through their choice to implementsabermetrics. During and following the 2003season, however, two senior managers fromthe Athletics’ front office were hired as gen-eral managers by the Toronto Blue Jays andthe Los Angeles Dodgers (Saraceno, 2004). Inaddition, the Boston Red Sox hired the fatherof sabermetrics, Bill James, in an advisory ca-pacity (Hakes & Sauer, 2004). Obvious ques-tions that come to the fore are: (1) is saber-metrics, as implemented by the A’s, imitable?and (2) given the movement of senior man-agers from the A’s, who were closely involvedin implementing and administering saber-metrics, has the Athletics’ competitive ad-vantage been lost?

Very preliminary analyses indicate thatcompetitive advantage provided by saber-metrics may not be sustainable. Hakes andSauer (2004) argue that sabermetrics hasspread with sufficient speed that prices inbaseball’s labor market no longer exhibit the“Moneyball anomaly,” that the market ineffi-ciency disappeared when Athletics’ man-agers were hired to run competing fran-chises. We maintain, however, that itremains too early to make a definitive state-ment concerning the sustainability of theAthletics’ sabermetrics-based, competitiveadvantage, as their advantage may be sus-tained by performing sabermetrics more effi-ciently than their competitors. It might bethat the Athletics’ unique historical circum-stances and related organizational structureand systems developed by Beane, as well ashis leadership, will result in a disadvantagefor those attempting to imitate sabermetrics.

Porter’s ideas concerning interlocked ac-tivities as well as Barney’s proposition that tosustain a competitive advantage a firm mustbe appropriately organized are relevant here.In addressing whether the Athletics’ saber-metrics-based competitive advantage will besustained, it is useful to consider whether the

Athletics’ socially complex resources (i.e., thefront-office structure, teamwork, and culturedeveloped by Beane as well as his leadership)will result in those attempting to imitatesabermetrics being at a disadvantage. Whilea competitive advantage was created by theAthletics’ choice of implementing sabermet-rics, their competitive advantage may be sus-tained by performing sabermetrics more effi-ciently than their competitors (Porter, 1996).

Moneyball, Sabermetrics, andSustained Competitive Advantage:The Future

Preliminary research of the imple-mentation of sabermetrics pro-vides some insight into anotherway that this innovation mightlead to a sustainable advantage.This research indicates that anMLB team, the Cleveland Indi-ans, under the leadership of Gen-eral Manager Mark Shapiro andhis top management team, hasadopted an innovative, inter-locked systems approach in im-plementing sabermetrics. The In-dians have done so through thedesign and implementation of two propri-etary programs—DiamondView and Player-Plan. These two innovative programs incor-porate the four functions of the HRM cycle(recruiting and selection, appraisal, training anddevelopment, and compensation). Consistentwith Porter’s interlocked business systems ar-gument, the HRM cycle should operate as acongruent, reinforcing system. Also consis-tent with Porter, to the extent that sabermet-rics is limited to any one HRM subsystem(e.g., recruiting and selection), its sustainabilitywill be limited while to the extent that saber-metrics is implemented in a systematic, ho-listic manner, the sustainability of advan-tages gained will be greater.

The Indians’ DiamondView is a compre-hensive player database system that is up-dated electronically on a daily basis. It con-tains scouting reports, player statistics,biographical information, injury reports,video footage, player contract and team

Very preliminary

analyses indicate

that competitive

advantage provided

by sabermetrics

may not be

sustainable.



payroll information, and notes from tradediscussions for the nearly 6,000 major- andminor-league professional baseball players.The purpose of the system is to increase theprecision of appraising players’ performanceand value. DiamondView thus facilitates re-cruiting and selection and has also facilitatedthe determination of optimum team salarydistributions (Vinella & Mangels, 2003).

PlayerPlan is a detailed program forplayer training and development. The objectiveof PlayerPlan is to precisely evaluate and im-prove each player’s skills. Coaches and in-

structors determine a player’sneeds (physical, baseball funda-mentals, mental) and develop aplan to overcome identified defi-ciencies. The manager and playerdiscuss the plan, with the objec-tive of the player taking owner-ship. The plan is added to theplayer’s file in DiamondView(Vinella & Mangels, 2003).

We see then that the Cleve-land Indians use DiamondViewand PlayerPlan in (a) recruitingand selection, (b) appraisal, (c)training and development, and(d) compensation. We believe thatthis systematic, holistic approach

taken by the Indians in applying Moneyballinsights, consistent with Porter’s argumentsconcerning unique, tailored sets of inter-locked activities that reinforce one another,will contribute to the sustainability of advan-tages gained. Importantly, the Indians’ HR in-novations have been implemented by whatChen (2004) has described as “the new breedof front-office executives: fresh, Ivy League-educated faces . . . men who often have less(than) impressive baseball credentials . . . (butare) believers of the importance of statisticalevaluation.”4 Outcomes related to the inte-grative approach taken by the Indians in ap-plying Moneyball insights are presented inTable II (Mark Shapiro assumed the role ofgeneral manager subsequent to the 2001 sea-son). One notes all of the outcomes movingin the desired direction. Dramatic decreasesin payroll have been accomplished by sub-stantial increases in the winning percentage.

Implications of the Moneyball Storyfor the HR Executive: AchievingSustained Competitive Advantage

The potential of a sabermetrics-type HR ap-proach to constitute a source of sustainablecompetitive advantage is relatively high.Such an approach would require HR profes-sionals with substantial skills in strategicthinking, analytics, and change manage-ment. In a recent study conducted by TowersPerrin (2005), however, these were three ofthe five lowest-rated skills of existing HR pro-fessionals.

In particular, HR professionals facile withdata are few and far between. As Carrig andWright (in press) note, analytical skills be-come more and more important within aninformation-based economy. Too often, “in-formation” is defined only with regard toproducts and services related to external cus-tomers, rather than information being recog-nized as having critical importance to the in-ternal workings of organizations. Yet few HRprofessionals have requisite skills to analyzedata in a way that might enable the firm tocreate performance advantages.

Note that this state of affairs stems logi-cally from the facts that (a) HR has never hadto analyze much data because (b) organiza-tions did not have much data to analyze and(c) past technology did not allow for efficientdata analysis. As we have seen and discussed,the technology now exists, and it is beingcombined with vast reservoirs of data. Theonly missing piece to the puzzle is the HRprofessional’s competency to use the tech-nology and data to derive superior humancapital strategies.

The potential for the sustainability ofsuch an advantage stems in large part fromthe rareness of HR professionals with theseanalytical skills along with a professionalculture that values fads to a greater extentthan research-based knowledge (Rynes, Col-ber, & Brown, 2002). Firms that build the ca-pability to develop and implement informa-tion-based human capital strategies willlikely be able to maintain that advantage fora significant period of time. As is the casewith the implementation of sabermetrics,

The potential of a

sabermetrics-type

HR approach to

constitute a source

of sustainable

competitive

advantage is

relatively high.



new skill sets and a supportive organiza-tional culture will be necessary for the suc-cessful implementation of information-based human capital innovations.

Conclusion:The Relevance of theMoneyball Story to HR Executives

Moneyball describes the story of how theOakland Athletics overcame cultural obsta-cles to implement sabermetrics—a data-based approach to organizational decisionmaking—in a manner that created a compet-itive advantage. We have explored this storythrough the lens of the management of in-novation and strategic management litera-tures to draw some implications for HRM.This leads us to the following concludingthoughts.

Information/Data BecomesIncreasingly Important to EffectiveHuman Capital Management

The recent obsessions with human capitalmanagement, HR metrics, and HRIS havetended to travel parallel paths with little syn-ergy. While some of the metrics have focusedon human capital, and human capital mightbe an input to an HRIS, what seemingly hasbeen missing is an integrated approach tohuman capital strategy that realizes the syn-ergies among these different components.

Just as MLB had a focus on talent (i.e.,human capital), on statistics (i.e., metrics)and recently on information technology, itwas not until sabermetrics provided the plat-form for integrating all three that the Oak-land Athletics were able to exploit the infor-

mation asymmetries inherent in their com-petitive environment. These three levers allnow exist within the larger corporate envi-ronment, but the question remains concern-ing who will be the first to integrate them,and thus, identify and exploit the informa-tion asymmetries that exist.

The Competencies of HRProfessionals Will Have to Change

As academics that have taught HR profes-sionals throughout their undergraduate andgraduate careers, we have had numerousopportunities to observe how they ap-proach certain courses within the curricu-lum. Regardless of the university, future HRpractitioners almost universally shy awayfrom the more analytical classes such as sta-tistics, research methods, operations man-agement, management information sys-tems, accounting, and finance. If notrequired, future HR managers avoid theseclasses. If such classes are required, they areendured in order to receive a passing gradewithout truly capturing the knowledge pro-vided. In a “Moneyball” world of HRM, theknowledge and skills required will be pro-vided in the very classes that prospectiveHR professionals detest.

Efforts by baseball teams to adopt saber-metrics have brought about “the new breedof front-office executives: fresh, Ivy League-educated faces . . . men who often have lessimpressive baseball credentials than GarthBrooks. For a stat-head to break into the bigleagues was, not long ago, almost unheardof. Now believers of the importance of statis-tical evaluation are infiltrating management


2002 2003 2004 2005

Win % 45.7 42.0 49.4 57.4

Win % Rank* 20.0 25.0 17.0 6.0

Payroll Rank 9.0 26.0 27.0 26.0

Cost/Win Rank 25.0 11.0 3.0 2.0

* among 30 teams

T A B L E I I Cleveland Indians: Wins/Costs


and infusing teams with a Wall Street-stylesensibility for ‘beating the market’” (Chen,2004, p. 64). There will likely have to be par-

allel changes in the type of individuals whowork in HR for sabermetric-type HR innova-tions to be implemented.


RICHARD WOLFE is an associate professor and director of the Michigan Center for SportManagement in the Division of Kinesiology at the University of Michigan. He holds aPhD from the Stephen M. Ross School of Business at the University of Michigan. Re-search that Professor Wolfe is currently involved in includes managerial efficiency inMajor League Baseball; the turnaround of sport franchises; the application of consumersatisfaction, loyalty, and profitability model to sport; and professional sports and corpo-rate social responsibility. Related research has focused on organizational innovation andstakeholder management. His work has appeared in journals such as Organization Sci-ence, Human Resource Management, the Journal of Management, the Journal of SportManagement, the Academy of Management Executive, the Journal of Applied Behav-ioral Science, the Journal of Management Inquiry, the Journal of Management Studies,and Business and Society.

PATRICK M. WRIGHT is a professor of human resource studies and director of the Cen-ter for Advanced Human Resource Studies in the School of Industrial and Labor Rela-tions, Cornell University. He holds a BA in psychology from Wheaton College and anMBA and a PhD in organizational behavior/human resource management from MichiganState University. Professor Wright teaches, conducts research, and consults in the areaof strategic human resource management (SHRM), particularly focusing on how firmsuse people as a source of competitive advantage. He has published over 50 research ar-ticles in journals as well as over 20 chapters in books and edited volumes. He currentlyserves on eight editorial boards. Dr. Wright served as the chair of the HR Division of theAcademy of Management and has served on the board of directors for the SHRM Foun-dation, World at Work, and the Human Resource Planning Society and was recently in-ducted as a fellow in the National Academy of Human Resources.

DENNIS L. SMART is an associate professor of management in the McCoy College ofBusiness at Texas State University–San Marcos. He received his PhD in strategic man-agement from Texas A&M University. His current research interests include the identifi-cation and development of competitive advantages through innovation and entrepre-neurial activities in large organizations, organizational restructuring/diversificationstrategies, leadership, and sport management-related issues. Previous research hasbeen published in a variety of journals, including the Academy of Management Journal,Advances in Strategic Management, the Journal of Management, the Journal of Man-agement Inquiry, and the Journal of Sports Management.

NOTES

1. The term innovation is often used loosely and in-terchangeably with terms such as change. One ofthe most frequently cited academic definitions ofinnovation suggests that it refers to “any idea,practice, or material artifact perceived as new bythe relevant unit of adoption” (Zaltman et al.,1973). Differentiators of innovation are scale (theextent to which there is a radical break with thepast) and domain (the extent to which the innova-

tion is new to the world or simply new within aspecific context). In the main, most analysts areinterested in innovations that make a significantimpact rather than mere routine and incidentalchange (Storey, 2004, pp. xvi–xvii). Sabermetricsis clearly a radical innovation, one that remainsnovel; the first “sabermetrics draft” was con-ducted by the Athletics in 2002 (Lewis, 2003), andonly five (or so) MLB teams have adopted it todate. As it diffuses, of course, sabermetrics willbecome less novel. As that occurs, however, we


embrace the perspective that sabermetrics will bean innovation to each team that adopts it since itwill be new to that organization (Rogers, 1985).

2. Adopting a sabermetrics approach thus implieschanges in a number of areas: in performance sta-tistics, player assessment, and in-game tactics.Baseball teams can “dabble” in aspects of saber-metrics; in considering sabermetrics a radical inno-vation, however, we are referring to its broad-based use, as exemplified by the Oakland Athletics.

3. While we adopt Barney’s broad definition of re-sources, others differentiate resources from capa-bilities (e.g., Hoopes, Madsen, & Walker, 2003;Makadok, 2001), defining a capability as “a specialtype of resource—specifically, an organizationallyembedded, nontransferable, firm-specific resourcewhose purpose is to improve the productivity ofother resources possessed by the firm” (Makadok,2001, p. 389).

4. Central to the implementation of these initiativesby the Indians are Mark Shapiro, executive VP andgeneral manager, graduate of Princeton University;Chris Antonetti, assistant general manager, gradu-ate of Georgetown University; and Mike Chernoff,assistant director of baseball operations, graduateof Princeton University.

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Different strands of evidence suggestthat Michael Lewis’s (2003) book,Moneyball, has attracted the atten-tion of management scholars.Thaler and Sunstein (2003) gave it a

glowing review in the New Republic, the finearticle by Wolfe, Wright, and Smart (2006)in this issue grew out of a well-attended ses-sion at the 2005 Academy of Managementmeetings, and Roberto (2005) recently wrotea Harvard Business School case on this topic.Moreover, our own informal conversationswith colleagues indicate that the book hascaught their eye. Some of the reasons forscholars’ growing interest in Moneyball maybe independent of its implications for man-agement. After all, baseball is the greatAmerican pastime, and many of us havedeep connections to the game. We played itas kids and we are longtime fans. Indeed,one of us has been an ardent Yankees fan forabout 50 years, whereas the other has beena loyal Red Sox fan for approximately 30,living proof that coauthorship conquers all.Aside from having an affinity for the sport,management scholars are sympathetic tothe sabermetrics method, a data-driven ap-proach to making decisions that is consis-

tent with the scientific enterprise in whichmany of us are engaged.

Perhaps more to the point, Moneyballprovides a playing field for many topics ofinterest to management scholars, spanningmicro and macro levels of analysis. At themicro level, Moneyball speaks to an ongoingdebate in human judgment and decisionmaking: whether people in organizationsshould rely on hard data (e.g., systematicallyrecorded evidence) versus soft data (e.g.,those gathered from intuition) to form judg-ments and make decisions. In the clinicaland organizational psychology literatures,this debate finds expression in the long-standing question of whether data gatheredfrom tests or structured interviews are morepredictive of behavior than is informationgleaned from unstructured interviews orclinical impressions (Meehl, 1954).

The “hard versus soft” distinction alsoappears to apply to the decision-makingstyle used by the longtime chairman of theFederal Reserve, Alan Greenspan, and hissuccessor, Ben Bernanke. In the New YorkTimes (Andrews, Porter, & Uchitelle, 2005),one of Mr. Bernanke’s long-time colleaguespredicted that Mr. Bernanke will “probably

COMMENTARY ON

“RADICAL HRM INNOVATION AND


THE MONEYBALL STORY”

J O E L B R O C K N E R A N D F R A N C I S J . F LY N N

Correspondence to: Joel Brockner, 420 Beechmont Drive, New Rochelle, NY 10804

W H Y O R G A N I Z AT I O N A L S C I E N T I S T S C A R E A B O U TM O N E Y B A L L


work towards depersonalizing monetary pol-icy.” That same colleague also suggested thatMr. Bernanke is an advocate of Bill James’sbooks on sabermetrics, “which often arguesfor statistical analysis over intuition. . . . Per-haps the best way to establish transparency,Mr. Bernanke has written, is to set up an eas-ily understandable process. It is in manyways the opposite of the image that Mr.

Greenspan has helped cultivate,that of an oracle.”

The tension between usinghard and soft data also underliesthe veritable explosion of theoryand research in the related fields ofbehavioral decision making, be-havioral economics, and behav-ioral finance (e.g., Belsky &Gilovich, 1999). The normativeview in classic economic modelswould have us believe that peopleare tough-minded scientists whorely on hard data to form judg-ments and make decisions. In-stead, we find that people also relyon cognitive shortcuts, intuitions,and “gut feelings,” often leadingto decisions that deviate from a

classical definition of economic rationality. In considering prospective talent for his

organization, Billy Beane, for his part, drawsmore on statistical evidence (i.e., objectiveindicators of a player’s previous perform-ance, which is assumed to be the best pre-dictor of future performance) than on themore subjective impressions of so-called ex-perts in judging talent. Perhaps this is be-cause reliance on subjective impressions ledBilly Beane to be misjudged early in his play-ing career. As a high school player, BillyBeane seemed to fit the profile of someonewho could develop into a major league star.He possessed impressive physical skills thatoccasionally helped him to perform greatfeats on the field. Relying on this representa-tiveness heuristic in appraising Billy Beane,major league scouts somehow did not takeinto account the harder evidence—for exam-ple, the fact that his on-field performanceplummeted from his junior to his senior yearof high school.

Sabermetrics further suggests that thehard data underlying subjective impressionsmay themselves be problematic. It is notsimply that Billy Beane relies on objective in-dicators. Rather, he relies on the kinds of ob-jective measures that have statistically beenproven to be more valid indicators of aplayer’s true value than those conventionallymeasured. For example, players, fans, man-agers, and Hall of Fame election committeeshave long believed that a player’s batting av-erage is a tried and true indicator of hisvalue. Batting average is important, to besure, but may be less revealing of a player’strue value than is his on-base percentage.Rather than being anchored to the conven-tional wisdom about how players should beappraised, Beane has relied on a different setof criteria, enabling him to be a considerablymore efficient manager of human resourcesthan his counterparts at some of the morefree-spending major league teams.

By touching on topics of interest to man-agement scholars, Moneyball may help tostimulate further thinking and research. Toprovide just one example, whereas sabermet-rics predicates the use of hard data over soft,certain conditions may exist under whichthe latter is more diagnostic. In Blink, Glad-well (2005) reviews scientific evidence that“snap judgments” may be remarkably accu-rate, sometimes more so than judgments ar-rived at on the basis of hard facts. To be sure,decisions are usually more likely to be ac-cepted and implemented in organizationalsettings if they appear to be based upon ahard-nosed analysis. However, the hard-nosed analysis itself may not be necessary forimproved judgment and decision making.Thus, an extremely important matter for fu-ture research is to delineate when and whydata-driven versus soft approaches lead tobetter judgment and decision making.

As with most complex matters, contin-gency theories may be more useful thanhard and fast rules in mediating this debate.For example, sabermetrics suggests that cer-tain in-game strategies, such as bunting andstealing, are not advised. However, theymay make sense in certain situations (e.g.,in stealing, when a base runner is excep-

…an extremely

important matter for

future research is to

delineate when and

why data-driven

versus soft

approaches lead to

better judgment and

decision making.


Why Organizational Scientists Care About Moneyball 129

tionally quick or a pitcher is unusually slowto the plate). Moreover, sabermetrics isbased on the premise that a player’s pastperformance is the best predictor of his fu-ture performance. Right off the bat (so tospeak), we know that this is not always thecase, such as when a player has been in-jured or has reached a certain age. Clearly,contingency approaches may be helpful tobaseball executives, but what may be mostinteresting to management scholars is de-termining how much complexity (e.g., theabsolute number of contingencies factoredinto a single decision) is sensible for practi-tioners to consider.

At the macro level of analysis, Moneyballhas important implications for theory andresearch on organizational innovation andorganizational change. The innovation lit-erature has concerned itself with two re-lated questions. First, what factors predis-pose organizations to adopt certaininnovations? Second, what factors makeadopted innovations more versus less likelyto be successful? Moneyball speaks to bothof these matters. Whereas Billy Beane wasthe first baseball general manager to basehis decisions on sabermetrics to a signifi-cant degree, sabermetrics had been aroundfor a long time; Bill James began writing hisbooks in the 1970s. Why, then, was itadopted by Billy Beane and not others, andrelatedly, why did it take so long for base-ball executives to take heed? Moneyball re-minds us that innovation adoption isjointly determined by personal and situa-tional factors. Some of the personal inputshighlighted in this case include BillyBeane’s high level of energy, his credibility(having played the game), and his powersof persuasion. Situational factors includethe fact that his organizational superiorsgave him a wide degree of decision-makinglatitude.

Moreover, as Wolfe, Wright, and Smart(2006) point out, what may have givenBeane a competitive advantage over hiscounterparts who did not adopt sabermetricsis that major league baseball (as an industry)is steeped in tradition. Much of the innova-tion literature has examined factors residing

within organizations that affect the likeli-hood of successful implementation of inno-vations. Moneyball (and Wolfe et al.’s analy-sis) suggests that factors residing external toorganizations also have much to say aboutwhether innovations will be successful. Tothe extent that success depends upon beingthe first mover, or on competitors being slowto adopt the innovation, Beane’s early suc-cess may be due to an exceptionally strongindustrywide tendency to maintain the sta-tus quo.

The book also reminds managementscholars and practitioners of theneed to delineate factors that en-able organizations to maintain thecompetitive advantage producedby innovation. One of the poten-tial downsides of being a success-ful innovator is that competitorsbegin to watch your every move,which may threaten continuedsuccess. For example, if Beanewere to express interest in a less-touted prospect (by, say, flyingout to a game to watch him play),richer teams might interpret hisactions as a sign that the player isundervalued, thereby leadingthem to offer the player moremoney than Beane could. Thisdynamic reflects a fundamentalrule about the nature of competi-tion: to the extent that the bases of compet-itive advantage are public knowledge, com-petitive advantage becomes more difficult tomaintain. In fact, several other teams haveactively embraced sabermetrics as a basis ofdecision making, and one (the Los AngelesDodgers) even hired one of Beane’s chieflieutenants (Paul DePodesta). Interestinglyenough, however, the Dodgers did not per-form particularly well on DePodesta’s watch,and he was recently fired.

One of the most intriguing macro themesemerging from Moneyball is the baseball sys-tem’s reactions to Beane’s innovation. Systemreactions (or lack thereof) actually began morethan 30 years ago, when Bill James wrote hisfirst books. James’s approach was potentially asource of huge competitive advantage. Why,

One of the potential

downsides of being

a successful

innovator is that

competitors begin to

watch your every

move, which may

threaten continued

success.



then, was it ignored for so long? The baseballestablishment’s initial (and long-running) re-jection of sabermetrics is reminiscent of an-other example of how a system may dismiss asource of competitive advantage.

In the classic Gunfire at Sea, Morison(1966) describes how at the turn of the twen-tieth century, a junior officer in the U.S.Navy, William Sims, notified his superiors ofa technological breakthrough (known ascontinuous-aim firing) that improved shoot-ing accuracy by 3000%. His superiors re-sponded first by ignoring Sims, then bydenying that such a breakthrough was possi-ble, and finally by branding Sims as a “crack-brained egotist, . . . a deliberate falsifier of ev-idence” (p. 135).

As Wolfe, Wright, and Smart (2006) sug-gest, innovation threatens those with avested interest in maintaining the statusquo. That vested interest sometimes runs sodeep that it may override technical rational-ity, as in, “Don’t bother me with facts, mymind is made up.” In this sense, it is easy tounderstand why the baseball scouts in BillyBeane’s organization would reject sabermet-rics. After all, if sabermetrics was in, it meantthat they would be out (of jobs). However,

Moneyball reminds us that organizational in-novations affect multiple constituents whomay have other reasons for wanting to main-tain the status quo, such as when their senseof personal identity is based upon the systemas it existed prior to the innovation. In hisprologue to the book, Michael Lewis re-counts how Joe Morgan, a baseball Hall ofFamer, and now a baseball announcer forESPN, was in such denial about the implica-tions of Moneyball that he could not evencorrectly identify its author; Morgan insistedthat Billy Beane, and not Michael Lewis,wrote the book.

In conclusion, we believe that Moneyballelucidates many valuable insights unearthedby management scholars. So, while we payhomage to the veridicality of the book’s ideasas they play out on the baseball diamond, wealso feel inspired to conduct future researchthat may lead to greater insights for both theorganizational theorist and practitioner. Mon-eyball and management—now, there’s a greatdouble play combination.

We are indebted to Richard Wolfe for hisconstructive comments on an earlier version ofthe manuscript.


JOEL BROCKNER is the Phillip Hettleman Professor of Business and chair of the Man-agement Division at Columbia Business School, Columbia University. He received a PhDin social/personality psychology from Tufts University. His research interests include or-ganizational justice, self-processes in work organizations, organizational change, andcross-national influences on work attitudes and behaviors.

FRANCIS J. FLYNN is an associate professor of management at Columbia BusinessSchool, Columbia University. He earned his PhD in organizational behavior from the Uni-versity of California, Berkeley. His research interests focus on social influence in organi-zations, particularly how employees can obtain help from one another and how they candevelop healthy patterns of cooperation.

REFERENCES

Andrews, E. L., Porter, E., & Uchitelle, L. (2005, Octo-ber 26). At the Fed, an unknown became a safechoice. New York Times, p. A1.

Belsky, G., & Gilovich, T. (1999). Why smart people

make big money mistakes—and how to correctthem. New York: Simon & Schuster.

Gladwell, M. (2005). Blink: The power of thinking with-out thinking. New York: Little, Brown, and Company.

Lewis, M. (2003). Moneyball: The art of winning anunfair game. New York: W.W. Norton.

Why Organizational Scientists Care About Moneyball 131

Meehl, P. E. (1954). Clinical versus statistical predic-tion: A theoretical analysis and review of the evi-dence. Minneapolis: University of MinnesotaPress.

Morison, E. (1966). Men, machines, and moderntimes. Cambridge, MA: MIT Press.

Roberto, M. A. (2005). Billy Beane: Changing the

game. Harvard Business School Case /9-305-120.Boston: Harvard Business School Publishing.

Thaler, R. H., & Sunstein, C. R. (2003, September).Who’s on first. New Republic, pp. 27–30.

Wolfe, R., Wright, P., & Smart, D. (2006). Radical HRMinnovation and competitive advantage: The Money-ball story. Human Resource Management Journal.



When Moneyball was published in2003, I violated my principle ofnever paying full price for ahardcover book. Waiting a weekor two for the 30% discount to

become available in my local bookstore wastoo high a price to pay given the attractive-ness of a Michael Lewis book about statisticsand baseball for a person like me who: (1)relished Lewis’s previous book The New NewThing, (2) was trained as a mathematicianand statistician, and (3) continued a life-long dysfunctional, emotional relationshipwith the Boston Red Sox. As Moneyball aptlypoints out, you have to question the con-ventional wisdom (e.g., “never buy at fullprice”) and, in this case, I was glad I did.The $24.95 list price was a bargain for in-sights into the game I love. But the bookalso provided me stimulation to thinkabout the job I was doing as the “generalmanager” (sort of anyway, the analogy isnot perfect) of a business school whose en-dowment (both physical plant and dollars)was Oakland A’s–like, suffering in compari-son to the institutes which we call our “peerinstitutions” or “competitors” dependingupon the circumstance.

While most would say that Moneyball isa book about Billy Beane, to me it is a book

about two people—Bill James, the philoso-pher and conceptualizer of the ideas, andBeane, the implementer within an industrydecidedly not receptive to the James gospel.The question “are Moneyball ideas applicableto managing a business school or other or-ganizations?” really has two parts. First, isthe message of the James gospel relevant tobusiness schools and, second, if so, can theselessons be implemented by perhaps taking apage from Beane’s book?

The James Gospel

James’s central message is not to “use statis-tics” in management but rather to apply thescientific method. Baseball’s “violation” ofthe scientific method is noted throughoutthe Moneyball book.

For example,

• To describe the scouting of futuremediocre major league player Billy Beaneas a high-school baseball star we are told:“Each time the scouts saw Billy they sawonly what they wanted to see: a future bigleague star” (Lewis, p. 8, emphasis mine).

• More generally, on the traditional scouts oftalent, “the old scouts are like a Greek cho-rus, it is their job to underscore the eternal

R O B E R T J . D O L A N

Correspondence to: Robert J. Dolan, Stephen M. Ross School of Business, Wiley Hall, Ann Arbor, MI 48109-1234.

COMMENTARY ON



THE MONEYBALL STORY”A P P LY I N G M O N E Y B A L L I D E A S O U T S I D E O FB A S E B A L L : T H E P E R S P E C T I V E O F A B U S I N E S SS C H O O L D E A N

Applying Moneyball Ideas Outside of Baseball: The Perspective of a Business School Dean 133

themes of baseball. . . . the old scouts aren’tbuilt to argue; they are built to agree”(Lewis, p. 30, emphasis in original).

The evaluation of talent in baseball suf-fered from a flaw common to many scientificand management endeavors—namely, theseeking of and granting salience to onlythose data capable of confirming prior be-liefs. James described the result of this atti-tude being “a great portion of the sport’s tra-ditional knowledge is ridiculous hokum”(Lewis, p. 94). James advocated the use ofstatistics but worried that without a morefundamental shift in thinking from seekingconfirming data to a hypothesis testing andrevision model, the wide availability of sta-tistics would create a situation where “we areno longer capable of truly assimilating anyknowledge which might result from them”(p. 95).

Lewis himself describes the “whole pointof James” as adoption of the scientificmethod: “Think for yourself along rationallines. Hypothesize, test against the evidence,and never accept that a question has beenanswered as well as it ever will be. Don’t be-lieve a thing is true just because some fa-mous baseball player says that it is true”(Lewis, p. 98).

At its core, the primary message of Mon-eyball is the same one advancing the scien-tific method at the heart of the researchmethods course taught in graduate schoolseverywhere. It is old advice, just delivered ina more fascinating and engaging way (atleast to a baseball fan) than we typically en-counter in the academic literature.

Defining the “major lessons” of Money-ball in this way renders moot the question of“are Moneyball lessons applicable to manage-ment of business schools and other organi-zations?” Figure 1 draws on the Wolfe,Wright, and Smart article’s partitioning ofthe input to the system as (1) performancecharacteristics of players and (2) in-game de-cisions. The advocacy of applying a rigorous,scientific approach to defining the right out-come measures and developing understand-ing of the workings of the system portrayedin Figure 1 extend to all organizations.

Beane Implementation

Beane is a “necessity is the mother of inven-tion” story. When asked, “How do you, as a$40 million bankrolled team, compete withthe Yankees and its $226 million potential?”Beane gave the smart, yet simple answer:“What you don’t do is what the Yankees do.If we do what the Yankees do, we lose everytime….” (Lewis, p. 119). So, knowing whatnot to do is a good start, but there are stilllots of options left.

Beane could only redefine the output sideof Figure 1 a little bit. It would be hard to dif-ferentiate yourself from the Yan-kees by changing your objectivefunction from “winning games”to “losing games.” Beane’s onlychance was to understand howthe system in Figure 1 worked bet-ter than others did and then usethat improved understanding todevelop the people to operate thesystem and provide them explicitinstructions on what to do withina game (e.g., take a pitch, swingaway, bunt, hit and run, steal, tagup). Why was he successful at the “radicalhuman resource management innovation”?(Wolfe et al., p. 112). Simple—he could con-trol both inputs on the left side of Figure 1.For example, when the previous base-stealingwizard was acquired by Oakland and told tostop attempting steals, he did.

Beane and Business Schools

If Beane were the leader of a business school,he would find more degrees of freedom indefining the objective function. While therereally is only one plausible objective func-tion for a Major League Baseball team, suchis not the case for business schools. While weeach state that we seek to develop leaders,our approaches to that are fundamentallydifferent. There is no World Series championeach year in business schools. On that score,it would be easier to do “what the Yankeesdon’t” on a reasonable outcome measure.

On the other hand, a Beane repotted intothe business school world finds the “tradi-

“…a great portion

of the sport’s

traditional

knowledge is

ridiculous hokum”




tions” more strong and binding than in thebaseball world. The way we evaluate talent iscodified in our tenure standards, and thosestandards are formally adopted by the faculty.There is a “strictness” in our process and cri-teria for selection of talent that is more bind-

ing than baseball. In this circumstance, thejob of the general manager is less an individ-ual understanding of the system’s operationthan guidance of a faculty process to promoteadoption of the right standards and rigorous,scientific application of those standards.

FIGURE 1. Schematic of a Baseball System.

ROBERT DOLAN is dean of the Stephen M. Ross School of Business at the University ofMichigan. He also holds the Gilbert and Ruth Whitaker Professorship and is president ofthe William Davidson Institute, a research organization at the university.

He became dean of the Ross School in July 2001 and implemented a strategy based onthe school’s strengths in action-based learning where students combine classroom workwith in-the-field engagements with companies worldwide. In September 2004, theschool obtained two marks of distinction. First, Stephen M. Ross, a graduate of theschool, made a gift of $100 million to the school in support of its strategy. This was byfar the largest single gift ever made to a business school and the largest in the univer-sity’s history. Second, the Wall Street Journal, based on its polling of recruiters, namedthe school’s MBA program the #1 program in the country, citing its strategy of “Leadingin Thought and Action.” Later that fall, student evaluations placed the school at the topfor leadership training in the BusinessWeek poll.

Prior to becoming dean at Michigan, Dolan was the Edward W. Carter Professor at theHarvard Business School. His case studies and notes published there have sold over 1.25million copies. He is the author or coauthor of eight books including Marketing Man-agement: Text and Cases and Power Pricing (coauthored with Hermann Simon). He pub-lished widely in journals such as the Harvard Business Review, Management Science,and the Journal of Marketing.

He has consulted on marketing issues, particularly product policy and pricing, with abroad range of firms and has served on the boards of both public and private firms. Hehas also held faculty appointments at the University of Chicago and IESE in Barcelona,Spain.

Applying Moneyball Ideas Outside of Baseball: The Perspective of a Business School Dean 135



Professors Wolfe, Wright, and Smartinvestigate the Moneyball story andapply the lessons learned to the roleof the human resources executive.The views presented in the article

should stimulate thoughts within thehuman resources profession and enablethese professionals to be more successful atimplementing innovations in their organi-zations. In this commentary, I consider thearticle in the context of the sports business,with particular emphasis on basketball. Forpurposes of this commentary, it is perhapsmore appropriate to say the “business ofsport,” since the main focus of my thoughtswill be on the business side of sport. Makeno mistake about it—sports itself is big busi-ness, as some individual teams generatehundreds of millions of dollars in revenueand will likely soon be bought and sold forclose to a billion dollars. Therefore, I addressboth the business and sports sides in the“business of sport.”

The Moneyball Approach: Basketballand the Business Side of Sport

The use of statistics to assist in the assess-ment and management of player personnelhas particular relevance in baseball. The rel-atively independent nature of the game and

methods to measure a baseball player’s per-formance and contribution to his team, to-gether with baseball’s long history of col-lecting statistics, ensure that baseball is afertile ground for statistical analysis.

In basketball, however, statistics are notas easily used to measure a player’s contribu-tion to team performance. Due to the natureof the game itself, basketball players aremore dependent on each other for theteam’s performance than are baseball play-ers. Therefore, it is necessarily more difficultto use statistics to assess player personnel inbasketball (and various other sports) than itis in baseball.

Statistics being less relevant in assessinga basketball player’s performance and con-tribution to his team, however, does notmean that statistics are irrelevant. The ques-tions are how relevant are they, how shouldthey be used, and how much weight shouldthey be given in team management? Cer-tainly, statistics such as shooting percentage,points per game, and rebounds per game arepart of the basketball vernacular and aretherefore often used by team management.While we have not yet seen what could bedescribed as a “revolution” in baseball, bas-ketball teams are, as was described in a re-cent Sports Illustrated article (Ballard, 2005),beginning to incorporate statistical analysis

A L A N O S T F I E L D

Correspondence to: Alan J. Ostfield, Palace Sports & Entertainment, 3 Championship Drive, Auburn Hills, MI48326-1752.

COMMENTARY ON



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The Moneyball Approach—Basketball and the Business Side of Sport 137

into their decision making along the linesdescribed in Moneyball. In the years ahead,with the sports business continuing toevolve, the risks of the business continuingto increase, and the success of Moneyballteams in baseball, we might very well seebasketball teams increase their use of statis-tics in the assessment and management ofplayer personnel.

A larger point to be taken from Money-ball and the Wolfe, Wright, and Smart arti-cle that applies to the sport side of basket-ball, the business side of sport, and to moretraditional businesses is the increased use ofobjective data in an organization’s decision-making processes. The “innovation” de-scribed in Moneyball—the use of additionaland more objective data to assist in the as-sessment and management of baseball play-ers—has implications far beyond baseball,player assessment, and sports. Businesses,regardless of the industry, can benefit fromincorporating a wider range of information(including more objective information)into their decision-making processes. AsWolfe, Wright, and Smart state, the “supe-rior use of data to exploit informationasymmetries” is what gives an organizationthe ability to make better decisions thanothers and obtain a competitive advantage.A related issue in considering the applica-tion of the Moneyball approach to baseball,basketball, or business is the way that theorganization and decision makers bring rel-evant disciplines together and balance theuse of the available and appropriate infor-mation. The leader must bring together allof the various disciplines and balance theuse of objective (and perhaps trendy) infor-mation with other subjective (and perhapstraditional) forms of information. The ap-propriate blend of information depends onthe particular circumstances.

Perhaps, in certain cases, the Moneyballapproach has dominated other relevant in-formation and elements of analyses (e.g., thetraditional subjective views of scouts). Orperhaps the Moneyball approach only ap-pears to have dominated in certain cases be-cause it received so much publicity due to itscontrast with baseball’s traditional reliance

on subjective information. A person makingdecisions regarding baseball players (or othertypes of employees) needs to have an appro-priate framework for evaluating players (orother types of employees). This frameworkcould include the traditional, subjective dataas well as the newly publicized and/or devel-oped objective data. Properly balancing andusing all relevant data is what good leadersdo, creates good decision-making processes,and produces effective decisions, somethingto which all leaders (whether evaluatingplayers or “traditional” employees) shouldstrive.

Major Change and theImportance of Timing

As described in Moneyball and byWolfe, Wright, and Smart, theOakland Athletic’s experienced aset of circumstances that createdthe impetus for the implementa-tion of sabermetrics. Significantchange was needed, as the team’srevenue structure did not permitthem to compete with large-rev-enue teams in the traditionalway. The Athletics’ timing wasparticularly right, as they were inthe unique situation of havingseven first-round picks in the2002 draft described in Money-ball. This increased the benefitsof being right and the risks ofbeing wrong, thus placing greater pressureon their drafting decisions. Finally, but per-haps most importantly, the A’s had a leaderwho could make it happen, as Billy Beanehad the pedigree of having been aballplayer, the knowledge that somethingdifferent was needed, the willingness to actoutside the norm, and the security of know-ing that ownership was fully behind him.While other organizations outside of profes-sional sports often experience similar dy-namics that necessitate change, such dy-namics might be particularly applicable toprofessional sports teams given the “haves”and “have-nots” distinction that often existsamong them.

The leader must

bring together all of

the various

disciplines and

balance the use of

objective (and

perhaps trendy)

information with

other subjective (and

perhaps traditional)

forms of information.




Major Change and the Likelihood ofResistance

Moneyball and the Wolfe, Wright, and Smartarticle describe the resistance met by BillyBeane and his like-minded colleagues whenthey tilted the decision-making processtoward reliance on statistics and away fromtraditional subjective assessment. The resist-ance that Beane confronted is understand-able given the tradition-bound nature ofbaseball and the experiences of many of thepeople whom Beane was dependent upon toimplement sabermetrics (the scouts’ experi-ence was limited to baseball and to tradi-tional subjective, as opposed to objective,statistical assessment of talent).

There would likely be resistance to signif-icant change in basketball for many of thesame reasons. However, basketball might bemore accepting of change than baseball,given that factors such as baseball’s long his-tory and significance of tradition are not asinfluential in basketball. Also, National Bas-ketball Association Commissioner DavidStern has been, and continues to be, quiteprogressive. He and his staff often push forand are receptive to new ideas, so change ismore likely to be accepted (and, in fact, en-couraged) in the NBA.

Factors That Enabled the OaklandA’s to Successfully Implement theMoneyball Innovation

By all measures, the Oakland A’s under theleadership of Billy Beane were successful atimplementing a new method of assessingand managing player personnel. But this wasno easy task. The Oakland A’s had strongleadership (ownership, president, and gen-

eral manager), a good public face for thechange in Billy Beane, a very strong belief inthe appropriateness and necessity of thechange, and an infrastructure (includinglike-minded, appropriately educated, youngbaseball operations executives) that was ableto support the desired change. In addition,Beane and the A’s had several “early victo-ries,” both in the form of particular playersdoing well and the A’s making the playoffs,that helped them to overcome initial doubtsand hurdles, provided continued confidencethat they were proceeding along the appro-priate path, and propelled them to contin-ued change and improvement.

To successfully implement change of anysignificant magnitude, an organization needsa variety of factors working together at the ap-propriate time. To increase the odds that im-plementing change will be successful, leadersshould recognize the natural difficulty oftenassociated with change, attempt to implementchange with the right people at the right time(organizations too often attempt to imple-ment change in challenging times, when peo-ple most want to hold on to what has workedin the past), estimate the types and amount ofresistance to be faced and develop a plan foraddressing such resistance and managing thechange. The factors that led to the Oakland As’success in implementing sabermetrics shouldbe emulated to the extent possible by any busi-ness considering implementing a change ofthis magnitude.

Reference

Ballard, C. (2005, October 24). Measure of success:Those stat guys are at it again, and now the Mon-eyball math of baseball has come to the NBA.Sports Illustrated, pp. 78–82.

The Moneyball Approach—Basketball and the Business Side of Sport 139


ALAN OSTFIELD is the chief operating officer of Palace Sports & Entertainment and theDetroit Pistons, responsible for overseeing the business operations, structuring and ne-gotiating significant business relationships, evaluating new business opportunities, andleading the strategic planning efforts. In addition, Ostfield is also the assistant generalmanager of the Pistons and is actively involved in the Pistons’ basketball operations, in-cluding managing the NBA’s salary cap and participating in player transactions. Prior tojoining PS&E and the Pistons, Ostfield was senior vice president and general counsel ofthe San Diego Padres Baseball Club, where he was involved in the Club’s business, legal,and baseball activities. Ostfield has also combined his experiences in professionalsports with higher education, including developing and teaching “Managing a Profes-sional Sports Franchise” in the University of Michigan’s Sport Management Masters Pro-gram, teaching “Sports and the Law” at the University of San Diego School of Law, andwriting articles for various publications and speaking at various universities regardingthe business and legal issues in professional sports. Ostfield earned a bachelor’s degreein economics from the University of Pennsylvania prior to attending Boston University,where he received his JD from its School of Law and an MBA from its Graduate Schoolof Management. Ostfield’s achievements were recognized nationally in 2000, 2001, and2002 when Street & Smith’s SportsBusiness Journal included Ostfield on its annual“Forty Under 40” list (which recognizes the 40 most influential sports executives underthe age of 40), culminating in Street & Smith inducting Ostfield into its Forty Under 40Hall of Fame in 2002.


Wolfe, Wright, and Smart posit asignificant overlap between theapproach to baseball that BillyBeane advances in MichaelLewis’s 2003 book Moneyball

and the challenges faced everyday by HRprofessionals in corporations across thecountry. The reasoning and assessment putforth in this article not only is accurate, butit also previews the increasingly complexand analytical role expected of today’s HRprofessionals.

The race for talent and the impendingdemographic challenges facing employershave been well documented for some time,yet most HR professionals have not yet re-sponded to this reality with new or innova-tive thinking. Most continue to approachtalent management with the same toolboxthat they have always used, relying on in-stinct, experience, and street smarts inmuch the same way that the old-schoolscouts of the Oakland A’s did prior to the ar-rival of Billy Beane.

The transition from intuition to analyt-ics in any field should not be surprising,given the vast amount of information avail-able on any subject. We can instantly learnabout individuals’ performance and generalhuman behavior, and the achievement of

business results. HR professionals must ex-plore these data and identify elements thatdifferentiate the best performers currently intheir organizations as well as the bestprospective hires. If HR can focus talentmanagement efforts on the true differentia-tors and organize that talent effectively, theywill secure the talent required to deliver ex-ceptional performance.

HR can learn from other organizationalfunctions. For example, the finance profes-sion went through a metamorphosis inwhich it moved from the traditional back-ward-looking discipline of accounting to themore forward-looking discipline of analysisand planning. Similarly, the HR professionmust move from the backward-looking dis-cipline of performance appraisal to the moreforward-looking science of predictive analy-sis. Each organizational function has a re-sponsibility to define its decision science;one that allows their organization to lookforward and then act, not just look back-ward and then react.

This need for a forward-looking perspec-tive means that traditional “scorecards” nolonger are sufficient to lead the human cap-ital decisions necessary in every organiza-tion. Scorecards tell you where you havebeen and what has been done. Predictive de-

D AV E PA C E

Correspondence to: David Pace, EVP, Partner Resources, Starbucks Coffee Company, 2401 Utah Ave., South,Seattle, WA 98134.

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Moneyball Lessons: The Transition from Intuition to Analytics 141


cision metrics, while they might be based onanalyses of traditional scorecard data, tellyou where you need to go. HR professionalsshould be held to the same standard of pre-dictive analysis for people decisions that fi-nance professionals are held to for capital-al-location decisions.

This perspective sends a chill down thespine of many HR traditionalists. Much thesame as the traditional scouts for the A’s,many HR professionals have establishedtheir roles as the premier “readers” of tal-ent, able to assess potential based upon aninstinctive analysis of a candidate’s em-ployment history and idiosyncratic an-swers to the “tried and true” questions ofthe HR interview.

While enhanced data analysis and per-formance predictability will no doubt be skillsrequired of the future generation of HR lead-ers, the fact is that many of today’s HR leadersstill have a “get out of jail free” card to fallback on in the absence of such analysis. Thatescape route is the relatively poor quality ofmost human resource information systems(HRISs). For many years, the focus of most or-ganizations has been on the continuous im-provement of traditional financial systemsand/or broad-reaching enterprise resourceplanning (ERP) initiatives. The capture of sig-nificant and meaningful people data, how-ever, has been overlooked and pushed to thebackburner of systems’ priorities. As Wolfe,Wright, and Smart point out, many of theseinitiatives have resulted in little more than anaccounting of how many people work for anorganization and the minimum requisitefunctionality to ensure the completion ofpayroll.

The most likely way that organizationswill respond and install the necessary datasystems required to uncover the parallel ofsabermetrics’ “OPS” (on-base percentage plusslugging percentage) metrics for their humancapital planning needs is if the HR profes-sional drives it. The Towers Perrin analysisreferenced in the article, however, suggeststhat this is unlikely to happen, and that anorganizational change of this magnitude willrequire the bold leadership and passion thatBeane showed with the A’s.

Thus, we’re left with an uncomfortabledilemma; a decision science is needed on thepeople side, but the systems required to pro-duce the foundational data are generally in-sufficient, and the most likely analysts arenot that interested in going in this direction.Therein lies the potential for short-termcompetitive advantage. Those who dig anddiscover these analytics will no doubt createcompetitive advantage for their organiza-tions, but what they are creating is amethodology that is not necessarily propri-etary. Once the methodology has been docu-mented and described, others will be able toapply it in their own organizations, muchthe same as other Major League Baseballteams have attempted to follow the path laidout by Billy Beane. This adoption by othersoffsets any potential competitive advantage.

If you buy into the approach ofBeane and the analysis of Wolfe,Wright, and Smart, what is re-quired to set this up in your organ-ization to achieve, at least, a short-term competitive advantage?

The recipe for success fallsupon several factors. First, the or-ganization must have a strategi-cally oriented, analytical chief peo-ple officer who is comfortable inthe role of change agent. This offi-cer must define a vision that can beembraced not only by his or herfunction, but also by the entire or-ganization. Second, a sophisticatedHRIS must be in existence to pro-vide the raw analytic material.Data fields must go beyond name, address,salary, number of dependents, and beneficiarydesignation. Third, the HR executive will needa team of sophisticated “miners” to tear apartthe data, in order to uncover those nuggetsthat will form the OPS for their corporation.This team will likely be the nontraditionalistswithin the organization, much as the IvyLeague analysts have emerged as the “seers” ofMajor League Baseball talent. This group willneed resilience, as the traditionalists no doubtwill attack their conclusions.

Once these elements are in place, it stillwill be up to the senior functional leader to

…the organization

must have a

strategically

oriented, analytical

chief people officer

who is comfortable

in the role of change

agent.



find those truly predictive factors, so that theresult is not just another “HR scorecard.” Se-nior staff will require convincing, and theywill want to see the link between these dataand financial and customer data in order toensure that these predictors actually lead tobusiness performance.

Even with all of this in place, judgmentstill will be required. It is unlikely that wewill see a day when HR professionals aretransformed into backroom statisticians,

deciding on the best combination ofhuman traits and behaviors through an al-gorithm developed by a staff of Ivy Leaguewonders. The predictability of human per-formance and the effectiveness of organiza-tions will always have some unknown fac-tors. However, we can do better, and it is upto all of us in the HR profession to move ourdiscipline from the abacus to the laptop ifwe are to adjust to the changing workplacearound us.

DAVE PACE joined Starbucks Coffee Company in July 2002 as executive vice presidentof Partner Resources responsible for the company’s overall partner (employee) and or-ganizational strategies. From 1981 to 1999, Pace held a wide variety of positions withPepsiCo Inc. and subsequently with the spun-off Tricon Global Restaurants (now YUM!Brands Inc.). From 1995 to 1999, Pace served as senior vice president of human re-sources for Tricon Restaurants International, which employed more than 300,000 peoplein 92 countries. In addition, Pace held overseas executive assignments in Cyprus for theMiddle East/Africa region of Pepsi-Cola International and in London for its European op-erations.

Between 1999 and 2000, Pace served as the chief human resources officer for Home-Grocer.com, a Seattle-based Internet start-up specializing in the online sale and deliveryof groceries to the home. Prior to joining Starbucks, Pace held the position of executivevice president for i2 Technologies, the Dallas-based software firm providing industry-leading solutions in supply-chain and supplier relationship management.

Pace currently serves in board positions with the Starbucks Foundation, the Human Re-source Policy Association, the Cornell University Center for Advanced Human ResourcesStudies (CAHRS), the University of Southern California’s Center for Effective Organiza-tions (CEO), and AmericaSCORES, a national nonprofit organization that serves at-riskchildren through after-school programs that combine soccer and poetry to improve thehealth and literacy of America’s youth. In 2005, Pace was inducted as a fellow in the Na-tional Academy of Human Resources. He has previously served in board positions withboth the Taco Bell and i2 Foundations and was chairman of the Board of Governors ofthe United Hockey League, a minor league professional organization from 1998 through2002.

Pace received his bachelor of science degree in industrial and labor relations from Cor-nell University.


The business of baseball as described inthe Moneyball story has more in com-mon with HR and effective organiza-tions than we might think. Five les-sons from experience common both

to baseball and business are the following:First of all, past performance—track record—tends to predict future success. Second, thedifference between success and failure is oftenat the margin, the 10% of positive or negativeperformance that comes from alignment, ef-fort, and execution. Third, everything is aboutreconciling competing priorities betweenquality of performance and the costs associ-ated with delivering that performance. Next,nothing happens without talented people. Fi-nally, we never truly know how things willturn out; that’s why we play the game.

In addition to the above commonalitiesbetween baseball—indeed all professionalsports—and business, there are universaltruths that bind these worlds together—people hate change and love to win. It is,therefore, the leader’s role to define a crys-tal-clear connection between changing andwinning.

As we think about the role of leaders, con-sider an emerging trend in Major League Base-ball. Among others, teams including the NewYork Yankees, Boston Red Sox, Cleveland Indi-

ans, Texas Rangers, Tampa Bay Devil Rays, Ari-zona Diamondbacks, and Oakland Athleticshave hired general managers with a commonattribute—relative youth and inexperience. Atthe time of their appointments, most of theseindividuals were 28–35 years old, while severalwere in their late 30s or early 40s.

Clearly, these baseball executives were notselected merely because they are relativelyyoung and inexperienced by traditional base-ball standards. So, what is going on? Quitesimply, these new leaders have brought an eyefor talent supported by financial acumen andquantitative analysis, a healthy disrespect forcertain traditions, and a willingness to aggres-sively advocate for the correlation betweenchanging and winning. This trend is aboutrecognizing the critical importance of changeagents—leaders who have the ability to lovethe game of baseball from within while objec-tively standing outside of strongly held con-ventions and executing on a mandate tochange the way the game is played. Not a badset of capabilities for any successful leader ofchange, especially HR leaders.

With this parallel between baseball execu-tives and HR leaders as a foundation, there areeight implications for how the Moneyballstory might help HR professionals and allbusiness leaders rethink talent management.

I A N V. Z I S K I N

Correspondence to: Ian V. Ziskin, Corporate VP, HR and Leadership Strategy, Northrop Grumman, 1840 CenturyPark East, Los Angeles, CA 90067

COMMENTARY ON



THE MONEYBALL STORY”T H E L E A D E R ’ S R O L E : D E F I N I N G T H E C O N N E C T I O NB E T W E E N C H A N G I N G A N D W I N N I N G



Strategy versus Structure

Every baseball team has nine players in thefield and nine batters in the lineup. Theirstructures are basically the same. However,their strategies of how to play the game varyconsiderably, as do their levels of talent.Strategy and talent to execute are muchmore important than structure. In fact,strategy and talent are flip sides of the samecoin.

Track Record versus Potential

Long-term potential is a legitimate reason totake a risk on a talented individual. But rely

more heavily on a past track recordof performance as the best predic-tor of future success when placingpeople in tough assignments.High-potential people are labeledas such based on how we have seenthem perform in the past.

Strengths versus FlatSpots

Focus the majority of develop-mental actions on building andcapitalizing on people’s strengths,the 80% of capabilities that breedtheir success. Create self-aware-ness of and work on developmen-tal needs, but do not overinvest

in fixing things that represent 20% or less ofa person’s path to success.

DNA versus Coachability

We cannot coach DNA, especially understressful conditions when people retreat totheir comfort zones. Selecting the right peo-ple for the right situation at the right mo-ment is much more effective than coachingthem to hit a curveball as it approaches homeplate. Select for DNA, coach for technique.

Will versus Skill

Talent is a state of mind, the drive to succeed,in addition to a set of skills and capabilities.Over the long run, average talent with ex-traordinary drive will outperform better talentwith little drive.

Diversity versus Unity

Diversity is fundamentally about surroundingourselves with teams of the very best peoplewho complement one another, making every-one feel included and creating a unity of pur-pose. Team unity should not be confused witheveryone doing the same thing, in the sameway, at the same time. Diversity is about or-chestrating and valuing differences, not creat-ing sameness. Managed well, diversity andunity are one and the same.

Yes versus No

The single most important talent manage-ment decision a leader can make is the an-swer to the question “Should I pick this per-son to be on my team?” The differencebetween a good decision and a bad decisionis enormous, because good people and badpeople have a significant multiplier effect oneveryone around them—but in completelyopposite directions. Sometimes not choosingsomeone to be on our team is the best selec-tion decision we can make.

Judgment versus Data

Moneyball teaches us there is a place for dataand analysis in managing talent, and in creat-ing a compelling nexus between changing andwinning. While data may inform decisionsabout talent, however, data never should sub-stitute for good judgment. After all, great lead-ership is about making good judgments de-spite bad data. Likewise, good data will rarelyovercome bad judgment.

Moneyball teaches

us there is a place

for data and analysis

in managing talent,

and in creating a

compelling nexus

between changing

and winning.

The Leader’s Role: Defining the Connection Between Changing and Winning 145


IAN V. ZISKIN is corporate vice president, chief human resources and administrative of-ficer for Northrop Grumman Corporation. He is responsible for HR strategy, compensa-tion, benefits, HR information systems, ethics, diversity and EEO, employee and labor re-lations, learning and development, talent management/succession planning, talentacquisition, organization effectiveness and change management, process excellence, ac-quisition integration, security, environmental, health and safety, real estate and facilities,travel services, command media, flight operations, community relations, and theNorthrop Grumman Foundation. Ziskin is a member of the Corporate Policy Council, thesenior leadership team responsible for company governance.

Ziskin has 24 years of human resources and leadership experience, including more than18 years with TRW, one of Northrop Grumman’s heritage companies. Most recently, hehas served as corporate vice president, human resources and leadership strategy forNorthrop Grumman, executive vice president and chief human resources officer forQwest Communications, and president and founder of Executive Excellence Group, afirm that builds executive and organizational credibility.

During his career, Ziskin has had responsibility for all aspects of human resources at thecorporate, sector, operating unit, and staff levels. His experience includes the aerospaceand defense, automotive, electronic components, information services, and telecommu-nications industries in both service and manufacturing environments in over 25 coun-tries in North America, South America, Europe, and Asia/Pacific. He has led large-scaleorganizational changes, including four multibillion-dollar acquisition integrations inthree separate companies.

Ziskin has been a speaker and author in areas including acquisition integration, global-ization, HR strategies and competencies, and leadership/talent development. He holds abachelor’s degree in management from Binghamton University, where he graduatedmagna cum laude, and a master’s degree in industrial and labor relations from CornellUniversity. He is also a graduate of executive human resources programs at the Univer-sity of Michigan and Cornell University, as well as general management experiences in-cluding the Thunderbird Global Leadership Program, TRW's Advanced Management andBusiness Leadership Programs, and LEAD1NG One Northrop Grumman, where he alsoserves as a faculty member and program leader. Ziskin is a board member or participantin multiple professional organizations, including the HR Policy Association, the Centerfor Effective Organizations at the University of Southern California, the Center for Ad-vanced Human Resource Studies at Cornell University, and HR50.

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