Moneyball, Talent, And Where This Is All Going

Do you have a nearly limitless budget for hiring employees? Can you go to every length to get every single candidate? Do you regularly raid other companies and take their best employees and pay top dollar?

Because this post isn’t for you.

In fact, the whole point of my war for talent post was that nobody has the resources to recruit the way recruiters often advocate. Unless you have that unlimited budget for hires, you aren’t going to hire all A players (if you can even identify them to begin with). A players play for A player money. Unless you are willing to pay A player money on every (and I mean every) hire, you aren’t getting all A players and you aren’t going to war and we can drop the cheesy fighting metaphors.

So if you can’t pay everyone anything they want to get the absolute best every time, let’s take a look at another way. It’s called the Moneyball approach and if you haven’t read Michael Lewis’ book Moneyball or watched the movie, I’ll briefly explain the premise. Under the guidance of General Manager Billy Beane, the Oakland Athletics baseball club has overachieved in comparison to their player payroll. The New York Yankees and other high spending teams spend multiples over what the A’s typically spend and either get marginally better results (on a much more expensive payroll) or sometimes even do worse.

How does he do it? Well, that’s playing Moneyball. Essentially, it is a buy low/sell high scheme of getting the most wins per dollar spent. Using some advanced stats and valuing players that bring in stats that his system values, he drafts and selects players that may be undervalued by other franchises but work well according to his system. If they end up very successful, he has a cheap contract or rookie scale to work on for awhile and then they end up losing them to a team that is willing to pay to the moon for them. Then the process starts all over again.

It is a great lesson in dealing with constraints, talent evaluation, figuring out what really matters and knowing when to let go. Recruiters and HR folks are gung ho about the concept, too.

Fast-forward a few years and everyone knows about Moneyball. Guys who pay a lot of money to players pay attention to this stuff. It would be tough to find anyone doing player evaluation or looking at stats the same way they did even 10 years ago.

And look at that: the A’s are still at a disadvantage. They were second-to-last in payroll by a few thousand dollars in 2012 yet they made the playoffs. That’s with everyone knowing and understanding Moneyball, too. So how did they do it?

They knew when to select A, B and C players. Like most companies, they weren’t in a position to get all A players. If you take a closer look at their payroll from 2012, you’ll notice that their median salary per player was lower than everyone else. Half of their players were making less than $500,000 a year. They were still getting their Moneyball players at even a lower cost. That meant more room on the upper half to do some strategic spending on some mid-tier hitting and pitching that wouldn’t be as risky as a pure Moneyball approach.

So beyond just making good talent evaluations, you also have to know when you really need someone with those higher level skills that you will be paying more for out of the gate, when you can pass on that for lower-level talent and the confidence to stand up to hiring managers and executives to make the case for this approach.

I’m excited more companies are getting into Moneyball-type talent approaches and looking at data in new and interesting ways. Know that there will come a time when Moneyball by itself won’t get the job done when all of your competitors figure it out as well.