Sabermetrics — the Future of Corporate Talent Metrics … Is Already Here

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Mar 7, 2016

If your talent management function absolutely requires advanced metrics covering every aspect of how to manage top talent, look no further than Major League Baseball.

Now hold on for a minute, just because you don’t understand or even like baseball, don’t turn away. Because the baseball metric approach is world-class; it is worth learning about. Also, most corporate CEOs love sports analogies. And fortunately, almost all of baseball’s metric approach can be applied to the corporate world. I have been doing corporate talent metrics for over 30 years and I can attest to the fact that everything that corporations do in the area of metrics is “minor-league” compared to baseball’s approach. Major League Baseball calls them sabermetrics, but maybe they should call them “supermetrics.”

Imagine What Corporate Managers Could Do With Metrics Like These

  • Baseball has performance-under-pressure metrics — what if just prior to putting together a team to work on a critical high-pressure product development project, you were provided a list ranking each of the potential team members based on their proven ability to perform under pressure. Wouldn’t your corporate high-pressure projects have a much higher success rate if only the best at handling pressure were allowed on these critical teams?
  • Baseball can determine if performance on a previous team predicts success on your team — what if with every candidate from a competitor firm, the hiring manager received a metric which accurately predicted whether their high performance at the competitor would continue on at your firm? Well, baseball already has an adjusted “minor-league equivalency” metric, which accurately predicts whether performance in the minor leagues predicts success in the majors. Imagine if corporate recruiters had a similar metric; wouldn’t the average performance of new hires improve dramatically?

Baseball Teams Are Major Corporations

Before you dismiss baseball as irrelevant, consider the fact that baseball is a for-profit industry, just like high tech and banking. In fact, these are big-time firms because the average major league team is worth $1.2 billion. Success in Major League Baseball, just like the corporate world, comes primarily from the effective recruiting and management of top talent. And because baseball focuses exclusively on exceptional talent, those in corporate talent management seeking top performers, purple squirrels, and innovators have an obligation to take notice of their approach.

Also, remember that Major League Baseball, just like any other business, operates in a highly competitive environment, where literally every decision and error is criticized in the media. Baseball teams have goals that go beyond just winning games, because, like most corporations, they also sell merchandise and compete for paying customers (fans) away from other sports and entertainment options.

A Great Deal of Innovation Has Come From Cross-pollination

The concept of learning from other industries is not new; in fact, it has a name, which is “cross-pollination.” Before you reject learning from other industries, realize the metric approaches that we in corporate are still dreaming about have already been implemented in Major League Baseball. Some call it the Moneyball approach, but baseball metrics have come a long way since that book was published. And with the popularity of fantasy sports, their development has been even further accelerated. Today’s sabermetrics have a broad coverage, they are practical, even less educated baseball managers can understand them, and best of all, they are directly applicable to the corporate talent management world. Because in baseball, it’s not the shoes, bats, or uniforms that make teams successful, it’s their talent and how they manage it.

Imagine What You Could Do With These Amazing Metrics in the Corporate World

Some of the amazing metrics and metric features that are already established in baseball are listed below. Unfortunately, almost all on the list have yet to be developed in corporate talent management. So please take a minute to scan them, and while you do, imagine how influential you would be among your executives if you had these metrics at your disposal when your next talent management budget came up for approval.

  • Dollarized metrics — this is the most important of all metrics because it allows you to convert talent factors and results into dollars (a language that all executives understand). Imagine being able to calculate a dollar value on each employee’s current contribution, as well as their future capabilities and their likely future contributions. In Major League Baseball, they are so focused on dollar impacts that they even determine the dollar value of the tickets sold, the number of beers sold, and merchandise sold that a star player will generate. On the business side, Major League Baseball has also led the way in adopting dynamic pricing to maximize revenue (which Disney recently copied).
  • Predict an employee’s future performance –Major League Baseball has an amazing comparison algorithm (PECOTA) that accurately forecasts the future performance of any player. They can also predict whether recruited players who performed well at another major or minor-league team will perform as well when they are on your team.
  • Determining the ROI of an employee — no one in the corporate world has ever answered this most difficult question of all. Which is, “How valuable is each employee when you compare their costs to the value that they produce, which is their ROI?” Major League Baseball already has a single all-encompassing metric covering the value of players by job family. This one statistic summarizes an employee’s total contribution to the organization to date (combining six performance areas into a single index number). It is called WAR, for Wins Above Replacement, and it reveals whether your team will do better or worse when you replace a current player with an available average player from outside. You should also realize that major league baseball is arguably superior to corporate efforts on using data to determine how much to pay and the impact of the different available performance incentives on increasing performance.
  • “Real-time” decision metrics — 100 percent of corporate talent metrics are historical because they tell you what happened “last year.” In contrast, baseball has real-time decision-making metrics. These allow field managers to make accurate decisions using today’s “live” data, as events are happening. These live decisions allow managers to accurately determine who to recruit, who to retain, and even which individuals should participate on a team in order to optimize the likelihood of success.
  • Predictive analytics — imagine having nearly a third of your metrics being forward-looking. So that you are alerted about upcoming talent problems (and talent opportunities) before they become serious. Being warned is always better than being surprised!
  • Which position has the most impact — in talent management, we tend to treat all jobs the same. However, talent management could increase its business impact significantly if it could focus its resources on the jobs that have the highest impact on winning. Baseball has long ago determined which positions when filled with top talent have the highest impact on winning (e. g. a starting pitcher has multiples in value over the right fielder and pitchers contribute up to 75 percent of the defensive accountability for wins).
  • Metrics that quantify “soft traits” — imagine having the capability to effectively quantify soft traits like leadership, whether this player helps others improve, and whether an employee or a recruit’s performance will improve after coaching. Well, it turns out that these soft factors are critical in both baseball and the corporate world. In the corporate world, it’s time to stop assuming that soft factors can’t be measured and quantified.
  • The winning management approach — metrics should cover individual performance. However, it’s equally important to understand which management strategies and approaches are the most likely to increase your success rate. Major League Baseball has predictive statistics that tell managers who should be in their lineup, and which offensive and defensive approaches to use in order to increase their overall winning percentage. In the corporate world, we still use hunches to select team members and winning strategies.
  • Distributed metrics — the reality in the corporate world is that most talent management metric reports go unread. Well, imagine having metrics that are distributed to and eagerly read by all managers and employees. This wide distribution in baseball makes it crystal clear to everyone who is performing and who isn’t, on a daily basis. Distributed metrics increase competition and eliminate the need for performance appraisals. In the corporate world, we occasionally develop “scorecards.” But in baseball, they have an actual physical “scoreboard” that makes it crystal clear in real time who is winning and which players are making a contribution that day. Highly visible metrics simply spur performance.
  • Performance under pressure — imagine being able to accurately assess how well an individual employee will perform in pressure situations? Well, baseball has that already in its LIPS and in its Clutch statistics (i.e. who over time improves their performance in the short term in clutch situations).
  • Succession planning metrics — most succession planning is guesswork in the corporate world. However, in baseball, they can predict when a player is declining in performance and even when they will become obsolete. This capability in the corporate world would allow you to better assess who should be on the succession plan, the layoff list, the “must-keep” retention list, and which recruit will perform best when they are made a replacement.
  • Visual trendlines — statistical tables can be overwhelming to many, even in baseball. So as a supplement, imagine having trendlines that visually reveal the trajectory of each employee and the team. The visualization of increasing or decreasing trend lines also has the impact of forcing managers to make decisions earlier than they would when all they can do is hope things will get better.
  • Algorithms that learn — most corporate metrics are “dumb,” in that after a mistake (i.e. a bad hire that must be fired), they don’t automatically adjust their algorithms. In contrast, baseball metric algorithms continually improve, because there is a feedback loop that learns and updates algorithms after each success and failure.
  • Proprietary metrics — image having access to metrics that are so valuable and predictive that you have to pay just to use them?
  • Statistics are normalized — statistics are more accurate when they are adjusted to the situational context and the unique circumstances at the time. Taking the “when and where” into account allows outlier Major League Baseball statistics to be adjusted, in order to maximize their predictive accuracy.
  • Benchmark comparison numbers — finding benchmark comparison numbers that allow you to compare your performance to others is almost impossible in corporate talent management. But imagine like in baseball, having a sharing system that allows for an easy instant comparison against all benchmark industry standards.
  • Learning about metrics is easy — imagine having a separate professional organization with 6,000 members (SABR) dedicated exclusively to the latest developments in metrics. There is even a field in academia devoted to baseball performance metrics. (Incidentally, if you’re interested in learning about how baseball metrics can be applied directly to the corporate setting, I will be speaking at an event with the Texas Rangers in April).

Taken together, each of these categories of metrics is literally the future of talent management in the corporate world.

Just like in baseball, corporate talent management will be a data-driven function that optimizes individual and team performance because metrics help us know and then influence the factors that increase that performance.

Final Thoughts

Most in corporate talent management struggle with even basic metrics. Fortunately organizations like ERE Media, with its benchmarking analytic effort, are working to dramatically improve the field of talent metrics, but we all still have a long way to go.

So once you get over any concern that these are “baseball metrics,” it makes sense to study and try to adapt all proven advanced approaches, wherever they come from. After studying just a snapshot of the available sabermetrics, it should be obvious to the reader that corporate talent management could make a much stronger contribution and have a significantly higher business impact if it operationalized only a few of the sabermetrics that I have listed here. Unlike Major League Baseball, in corporate talent management, we still struggle with quality of hire and ROI. We still don’t have metrics covering the most effective way to managing teams, when you should replace an employee because they are headed downhill, or who are the best replacement players to recruit.

And finally, why Major League Baseball is so advanced in its approach to metrics. And those primary reasons include: the competition is so open and strong, the pressure from customers and analysts is so intense, and the dollar cost of winning and losing is so clear, that baseball leaders had no choice but to develop these advanced metrics. In my corporate experience, I have found that if talent management leaders were to quantify the tremendous added value of a top performer, the cost of each weak employee, and the tremendous revenue impact of great recruiting, retention and development, we would also feel the same pressure to develop advanced metrics.

Yes, the real secret to getting the resources and the executive support needed to develop advanced metrics is getting executives to realize the tremendous dollar value that great talent management adds to the enterprise. And the longer we wait, the longer the performance of our workforce and our firm will continue to suffer, for no valid reason.