Finding Talent When You’re Not a Big Boy
The Pirates seem to be close to a deal with the New York Yankees to trade a minor prospect or two to the Yankees for veteran starting pitcher A.J. Burnett. The deal, on its surface, would seem to be the exact opposite of the Pirates’ MO. It’s not though, it is anticipated that the Yankees will assume all but $10 Million of the remaining $33 Million owed to Burnett over the last 2 years of his contract. As it turns out, this is just another creative way to put a talented player (especially one who may be even more talented than he appears) on the team at a relatively low price.
In addition to my excitement as a Pirates’ fan, I think its worth drawing a relationship to the business world. Hiring in business is one of the most difficult tasks any company faces whether that company plays baseball or builds software. While there are clearly some differences between hiring baseball players and hiring talented people for your company (no stat sheets for companies, no need to placate season ticket holders, etc…) there are enough commonalities to be interesting. In particular, I think small companies can learn these three things from baseball:
- The first similarity is that great people have a ton of value, especially in the right position. Mark Zuckerberg is famous for saying that a great engineer is worth 100 average ones and he’s probably only exaggerating slightly. In 2001, statisticians estimate, that the Giants won 12.5 games more than they otherwise would have because Barry Bonds was in their lineup (if the Pirates had won 12.5 more games last year they would have been over .500). This may not be true of a great starting pitcher (who only plays once every 5 games), a relief pitcher (who only plays 80 innings in a season), or a catcher (who has to give up some offensive ability to play solid defense) but finding the great ones and paying them appropriately is worth every dime.
- Like Baseball though, not every company has the dimes to pay the all-stars. Albert Pujols, the LA Angels first baseman, makes an average of $24M per season, that’s more than half of the Pirates’ payroll. If the Pirates wanted to hire him, they literally would have to fire 3/5 of their starting rotation, their best reliever, their starting shortstop and their catcher. Similarly, Facebook and Google have made headlines paying lower level engineers millions. I’m not calling the big companies (and big payroll teams) wrong for doing this, I’m just saying that most companies (and most teams) need to get comfortable with finding another way than straight giant contracts to lure talented people.
- Like baseball, there are ways to come up with talented people at companies without spending a fortune. In baseball there is an odd twist in the rules that allows teams to hold on to players for the first 6 years of their major league careers for much less money than they could make as free agents. It’s this little rule (and maybe a bit of luck) that is the basis for the Pirates ability to compete for most of last season without spending a fortune on players. Similarly, small companies have a lot of tools at their disposal to find and retain talented employees without spending a fortune. Having a strong network helps you find people the big guys may miss. Having a fun or interesting corporate culture helps you retain people who aren’t money driven. Offering people a chance to win with the underdog (and benefit financially) is something a company like Google can’t do.
How do you like that, I managed to go almost 600 words of relevant business wisdom just so I could brag about the Pirates on the blog!