Thursday, March 31, 2011

Talent Arbitrage - Wall Street strategies applied to talent selection and management

How did one of the worst teams in professional baseball from a small market with a small budget turn themselves into one of the top teams?

It wasn't by hiring super stars.

It wasn't by focusing on results and outcomes.

Focus on a disciplined talent selection strategy allowed the Tampa Bay Devil Rays to use a Wall Street approach to building a "talent portfolio" of a team. The budget conscious management team focused on identifying affordable professional players with specific skills needed to complete the team.

In this Harvard Business Review HBR IdeaCast, Sarah Green interviews stock market and sports author, Jonah Keri, author of The Extra 2%: How Wall Street Strategies Took a Major League Baseball Team from Worst to First.

From Amazon:
What happens when three financial industry whiz kids and certified baseball nuts take over an ailing major league franchise and implement the same strategies that fueled their success on Wall Street? In the case of the 2008 Tampa Bay Rays, an American League championship happens—the culmination of one of the greatest turnarounds in baseball history.

In The Extra 2%, financial journalist and sportswriter Jonah Keri chronicles the remarkable story of one team’s Cinderella journey from divisional doormat to World Series contender. When former Goldman Sachs colleagues Stuart Sternberg and Matthew Silverman assumed control of the Tampa Bay Devil Rays in 2005, it looked as if they were buying the baseball equivalent of a penny stock. But the incoming regime came armed with a master plan: to leverage their skill at trading, valuation, and management to build a model twenty-first-century franchise that could compete with their bigger, stronger, richer rivals—and prevail.

Together with “boy genius” general manager Andrew Friedman, the new Rays owners jettisoned the old ways of doing things, substituting their own innovative ideas about employee development, marketing and public relations, and personnel management. They exorcized the “devil” from the team’s nickname, developed metrics that let them take advantage of undervalued aspects of the game, like defense, and hired a forward-thinking field manager as dedicated to unconventional strategy as they were. By quantifying the game’s intangibles—that extra 2% that separates a winning organization from a losing one—they were able to deliver to Tampa Bay something that Billy Beane’s “Moneyball” had never brought to Oakland: an American League pennant.


By focusing on a talent selection process the Devil Ray's management team took the franchise from a $60 million valuation cellar dwelling performance to a $300 million valuation and two ALCS titles!

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