Every inch of grass at the southwest corner of the City of Palms Park in Fort Myers, Fla., lay flat after dozens of hard-core baseball fans had braved a night of sleeping bags and fire ants to snag the few remaining standing-room-only tickets for a spring training contest between the Boston Red Sox and the New York Yankees. Days earlier, a single ticket sold for $500 on eBay, an unheard-of sum for a spring training game.
The real baseball season wouldnt start for another month, but the Red Sox Nation couldnt wait another day. Since Sox owner Harry Frazee traded Babe Ruth to the Yankees in 1920 to finance his girlfriends Broadway play, the Sox havent won a World Series—an affliction known throughout baseball as the "Curse of the Bambino." But damn the curse. This year is going to be different. The numbers say so.
Red Sox owners John Henry and Tom Werner have hired some of the best analytical minds in the business and have spared little effort in acquiring sophisticated scouting software, computerized video analysis and business intelligence tools for mining the stacks of statistics at their disposal. The goal: Identify the best talent available, get it before their rivals do, and then figure out just how long to keep it before it stops producing.
Its human capital management on steroids.
Baseball is a business where employee performance can be measured down to every swing, step or throw taken. Baselines are easy to establish, not just in chalk, but on every facet of the athletes physical characteristics, such as height, weight and medical condition, to minutely defined activities, including arm strength, hitting discipline and mental errors. If theres not an available statistic, one is created, through ratings.
Today, every season of every players career, from school play onward, is minutely chronicled. The Red Sox even require players in their farm system to keep a log of their every at-bat.
Imagine if your employees were required to log every significant phone call, presentation, report or other measurable "output" of their days.
And then imagine if you tied this data to some ultimate objective. In baseball, the goal is winning games. And an up-and-coming business executive, such as Red Sox general manager Theo Epstein, can figure out whether a player generates more than the average number of wins. If so, he will know whether to pay $12 million a year for the services of a star pitcher such as Curt Schilling, acquired over the winter from the Arizona Diamondbacks. Or pass on an all-star shortstop, such as Alex Rodriguez, when a threshold that works out to $20.25 million a year is reached.
Theres clearly a payoff for companies that can adapt their own information systems to keep increasing amounts of performance information—think "time spent with customers per day" or "trouble tickets resolved"—that can be delivered to managers and executives. Such measures help identify, recruit and retain the best talent, not necessarily the most expensive. But if a person is that much more productive, the higher salary can lower the overall cost of doing business.
"If every single team adopted this management strategy with equal skill, the [low revenue] teams would forever be stuck in the cellar," says Roger Noll, a Stanford University professor and respected authority on the economics of baseball. Because wealthy teams, like the Yankees, can always simply buy the best talent.
Instead, innovative means of statistically identifying the winning characteristics of "human capital" are the only way companies can get the players who will overcome financial constraints. "The same premise applies in business, but the effects are much more amplified in sports, says Noll.
Avid baseball fans already know this: Low-budget teams such as the Minnesota Twins, Oakland Athletics and Florida Marlins—who beat the Yankees in last years World Series— already have applied this premise to last deep into the playoffs.
Now the Red Sox hope to do the same.