What If You Hired Only the Best People and Paid Them Like Superstars?
Posted on Monday, October 22, 2007 by Frank RocheWARNING: US-Centric Post about Baseball and Company Performance Ahead. (Come back in the next section when I say it’s safe.)
Last night the Boston Red Sox won the ALCS and are headed to the World Series. At one point in the series they were down three games to one. But they were never out of it. Know why? They have some of the best talent in baseball. And they pay for it.
In fact, the team payroll for the Red Sox is the second highest in all of baseball, and is more then double that of their opponent, the Cleveland Indians. That payroll pays off. The BoSox have the third best teams stats this year. Guess who has the best? The New York Yankees, which is the team with the highest payroll in baseball. My take: Getting the best talent works. (Yes, baseball aficionados will cite Moneyball, but where are the low budget teams now?)
Now, for the Non-Baseball Fans (it’s safe to come out now)
All that success by high budget teams must mean something. Getting the best talent works. But it’s not cheap. What I’m wondering about is what would happen if a company — big or small — decided that they were going to hire only the most extraordinary talent at every position. I’m talking about getting superstars for everything from the CEO to the lowest level employee. Know how to do it? Pay a lot and make people want to be part of your exclusive club.
Just Say No to ‘Warm Body” Recruiting
What would it take to stop recruiting for “warm bodies” and hire only the best? I’m talking about a real talent solution, one where you cared as much about hiring a dishwasher as you did about hiring your chief executive. I think it would take money. And a boldness that’s not seen except in the world of sports. (Now for the international audience: The same idea goes for Real Madrid and Man U as it does for the Boston Red Sox — great players command big salaries and deliver great victories.)
Sure, I’ll bet there would be rabid criticism of this “go for it” approach to talent. Sure, let’s all rise up in a chorus and sing “We’re all in it for the long term” as our corporate kumbaya. Funny, though, it seems like most public companies release earnings reports every quarter and put financial pressure on their people to win-win-win every year. Cool with me. I say get the superstars. Pay them. And reap the rewards.
How’s that for an HR strategy?
(I have a business idea here that applies to HR I’m going to talk about once I get it fleshed out. It’s about HR superstars.)
NB: John Windsor of The You Blog points out that the Red Sox will be playing the World Series against the team with the 25th highest payroll in baseball. So, my baseball argument might be all wet. But would getting all superstars on your team, in a real company, work?
John Windsor
Oct 22nd, 2007
Careful with statistics, Frank . . .
While the “payroll” for Boston finally came through (having to win the final three games to do it), they’re now going to face the team with the 25th highest payroll (out of 30 teams) — a team that has won 21 of 22 straight games.
Meanwhile, the team with the highest payroll (almost as much as the Sox and the Rox combined) bombed out in the first series, and then fired the manager with the highest salary of all managers in baseball.
It’s a cruel world sometimes.
Frank Roche
Oct 22nd, 2007
John, lol….I’m against stats unless they work in my favor.
I’m really wondering about what would happen if a real company took the high priced approach. I know Netflix is doing it now and I’m going to try to interview them. It’s a fascinating proposition. You’re right about the stats, though. LOL.
albert
Oct 22nd, 2007
one word: Google
Frank Roche
Oct 22nd, 2007
Albert, you got it. Now name another…I’m casting about looking for companies that target the 75th percentile for employee pay…or higher.
albert
Oct 22nd, 2007
Good question. I only know of Google through all that I’ve read in the last few years. And they’re not just hiring top execs for big bucks, it’s the people on the ground actually coding. I wouldn’t know where to start looking for the rest.
rick
Oct 23rd, 2007
I generally agree with your basic concept. I have worked with far too many people who were hired because they were ” cheap” and it was reflected in the quality of their work.
Before larger companies go paying at the high end of the market they need to know what qualities make a quality employee for them. Many do not. Pay cannot substitute for good selection, training, environment, etc.
Frank Roche
Oct 23rd, 2007
Rick, that’s the tick, isn’t it? Ti understand what makes someone really great. In baseball it’s pretty easy to figure out (Read: Moneyball). In business it’s a lot softer. It’s that old pay-for-performance conundrum: What comes first? And what’s “performance”?
Wally Bock
Oct 23rd, 2007
There are two issues here. The first is: Can a team of all superstars win? The answer is “probably not.”
The idea is that you want the best team possible. That usually includes a few special-purpose tools and a few support staff who aren’t superstars. For the baseball angle on this, read Moneyball about Billy Beane and the Oakland Athletics.
I was a passionate playground basketball player growing up. I wasn’t ever the best play on the schoolyard. But I found that if I was willing to hustle and play defense and pass a lot, I kept getting picked to play by the schoolyard superstars.
When we say we want “the best people,” what we should mean is that we want the people who will fit together in talent and temperament to make the best possible team. That leads us to the second issue: “warm body” hiring.
Don’t do it. Don’t settle. I’ve seen individual managers do it and I’ve seen whole companies do it.
What always happens is that you’re filling in or checking on the “warm body.” It ups your stress level and trashes your productivity.
Philip Reed
Oct 25th, 2007
(Yes, baseball aficionados will cite Moneyball, but where are the low budget teams now?)
Frank, since you referred to Moneyball in your comment in a much different context — in understanding what makes great performers great — I’d like to clarify an understanding that I have about that book and about the Red Sox.
I’ve not read the book, but to my understanding the “Moneyball approach” is largely about using certain quantitative analysis in ways that the salty old “baseball people” would find quite surprising — e.g. valuing on-base percentage more highly than traditionally is done, because your leadoff batter walking is almost as good as him hitting a single. And to my knowledge much of this quantitative reinterpretation goes back to the work of Bill James. Of course Bill James now is a consultant to the Red Sox!
So in my mind, the Theo-and-the-trio era Sox are the marriage of Moneyball with a really huge operating budget. Teams like Oakland have to some extent overcome their lower revenues with smart decisions, but obviously if you pit a rich Moneyball team against a poor one, the difference in money will still tell in the end.
Thoughts? And does that have any real-world implications?
Frank Roche
Oct 25th, 2007
Phillip, that’s a brilliant analysis. Yep, in Moneyball it was about getting the metrics right. And as you say, the combo of correct metrics with fabulous talent and watch out!
You really have that right. Maybe it’s Moneyball for Business. It’s the essence of pay for performance and you’re right at it.
BTW: Did you see the score last night? 13-1 Red Sox. Wow, those high priced guys paid off.
Thanks much for this thought provoking analysis.
Jaime Fitzgerald @ Fitzgerald Analytics
Nov 25th, 2007
Philip Reed is spot on…Moneyball tactics (generally speaking, analytics & fact-based decisions) help teams improve their Return on Investment (ROI). But the size of the investment itself (including salaries, management….even the analysis itself!) still matters in the equation.
Your post especially thought-provoking because it highlights the high-stakes decisions at the heart of the professional services business model. The high-stakes decisions you describe are inevitably faced by professional services organizations, whether they recognize it or not. For example, running a consulting firm, a law firm, or even a school demands that we seek ROI on our human capital investments (i.e. what talent to procure, and how to deploy this talent). Like the Oakland A’s, AND the Red Sox, hopefully we recognize the stakes when making these decisions, and invest in the analysis to make them well.
Cheers,
Jaime Fitzgerald
President
Fitzgerald Analytics, Inc.
Visit us at http://www.fitzgerald-analytics.com
Frank Roche
Nov 26th, 2007
Jaime, it’s about the analysis, isn’t it. Excellent points here. Thanks for adding to the thinking here. (BTW: I’m still a fan of working with the very best people money can buy.)