Friday, July 8, 2011

It's Claire as Day: Why in a "Free Market", Corporate Initiatives Tend to Degrade Quality

In many posts including the
previous entry
, I touched on the set of issues in Baseball that gets
exacerbated when there's an imbalance between the Baseball bottom line (game
wins) and the Business bottom line (dollars won). And while it's true that a
great, winning team on the field can have persistent business issues, the
imbalance is generally in the other direction: the team's ownership or
front office values some business consideration more than wins to a degree that
the product itself becomes degraded and then the business side tries to figure
out a way to diminish the baseball part of the product (in favor of mallpark or
other distractions) to cover that up.

I'm about to tell you about an example that beautifully illustrates an almost
universal feature of what passes outside of Baseball as management in this
"Free Market" era. It is a beautiful illustration because it

  • Exposes the intrinsic inability of conglomerated corporations to deliver

  • Illustrates the contemporary hubris of corporate management in believing
    decision-makers don't need domain knowledge, because "we're
    management, we can do anything we want", and

  • Provides an additional nail in the coffin of the idea that a
    publicly-owned corporation can act as a vessel for real capitalism.

I recently lucked into a bit of dialog with Fred
, one of the longest-tenured general managers of contemporary times,
and one of the more successful ones. He was kind enough to send me his book, My
30 Years in Dodger Blue
(Sports Publishing, 2004), and it was a great
read that covered some only-in-this-book MBB  topics (proper book review in
a later post). But the insider commentary most striking to me is what I'll cover
in this post: the breaking of a multi-decade covenant between the Dodgers and
their fans and staff that just about inevitably followed the team's ownership
transfer from family ownership (the O'Malleys) to a contemporary conglomerate
(a set of entities ultimately owned by News Corp.)


To reiterate what I've discussed previously, Baseball differs from Beyond
Baseball business in that Baseball is almost perfectly accountable. The
wins and losses (individual, team, league) are fully measurable, visible to any
who take an interest. And competitive capitalism is at its finest when the
accountability is most knitted into the institution. There's no Enron in
Baseball, no ability to cook the books and fool the observers into thinking a
37-51 team is a great team, or that a batter putting up 180/250/205 should be
batting as DH in the heart of the order of a team that intends to win games.
Pretty much no-one will accept that in an accountable system like baseball.

And true Baseball ownership learns that over time, and the relentless nature
of Baseball sharpens that awareness, so (as stated by Angus' First Law of
Organizational Dynamics: All human institutions tend to be self-amplifying)
over time, owners that hate accountability flee to other, less accountable
organizations, like Business or Non-Profits, and owners who either actively like
or can live with high-accountability environments stay or recruit others like

Family or single-endeavor owners like the O'Malleys' can be ruthless and make
sub-optimal or even dumb decisions, but the accountability they choose to
operate within guarantees some balance, some respect for the covenant between
the team as business-entity and the fans, players, community. The owners that
rely on the team itself for their livelihood and self-image can't escape
accountability for all their decisions. And they have many tough ones (Fred's
book is a gem of a tour through a single team's everyday challenges).


Balancing the Baseball factors with the Business ones is extremely hard. But
when the O'Malleys sold the Dodgers to Fox Entertainment Corp., a conglomerate
owned by the conglomerate of conglomerates, News Corp., that balance was

Actually that's not exactly correct; in reality, the Baseball disappeared
into a set of News Corp.'s existing balancing schemes that were designed to
maximize the returns on various forms of assets through "synergy", the
wild, more-often failing idea that if you sell both cotton candy and nuclear
reactors you can cross-market to your customers, sell you cotton candy to your
power plant as insulation material and ship your nuclear waste to your cotton
candy manufacturing plant as an additive that makes the confection glow in the

So in 1998, the Fox executives who took authority for the Dodgers' corporate
decisions immediately evaluated the team and its individual
"properties" (in Hollywood, a performer under contract, a script, a
set, a sound studio, an owned film,, and realized they could strive to
increase the value of another piece of the conglomerate, a regional
sports-broadcasting network in Florida, if they sent Mike Piazza, already then
the most prolific slugging Catcher in the game's entire history, and a very
popular fan symbol for the team, to the Florida Marlins, where he would
presumably increase the lustre of Marlins broadcasts, ergo the value of this
other piece of Fox Entertainment Group. "Property" then, becomes
commodity, and commodities are not given deep consideration (any more than one
ton of Powder River Basin 8,800 Btu, 0.8 SO2 Coal is treated differently from
any other particular ton of it, or one vanilla teen sitcom is treated
differently from another).

BTW: They didn't consult Fred Claire or any of the Dodger baseball or Dodger
business people about the trade. With zero knowledge and experience of Baseball
or baseball business, they executed a restructuring, just like they would if
they had taken over a small chain of radio stations or cotton-candy plants. With
the kind of grandiose domain-ignorance corporate heroes almost invariably have,
they act out deus-ex-machina movements of people, craft, buildings, debt,
credit, customer service and product quality without little to no consideration
of employees or customers in the name of shareholder. And the irony of it is,
this usually bits the shareholders in the pocket, though with the sub-Baseball
accountability enforced in the corporate world, this usually doesn't have
consequences for the Barons of Botch.

Not amazingly, given their total lack of domain knowledge -- combined with a
religious faith that domain knowledge is not a necessity -- Fox's executive, Chase
, arranged for the Marlins to send a player in the trade who had a
no trade clause in his contract
. The Marlins' front office, of course, had
reason to know that the Dodger "negotiator" knew this public bit of
information, so presumed that this was something for the Dodgers to negotiate
with the player. Well, Hollywood properties don't have no-trade clauses in their
contracts, so Carey didn't realize the implication, and then, when it blew up,
shifted the responsibility to the Dodgers' real front office. 

The trade served the Dodgers neither from a Baseball perspective, nor
further, given the importance of Piazza to the franchise's image, the business
side of the Dodgers. And ironically, it did not pan out in service of  the
conglomerate's interests either, because the Marlins knew they couldn't force
Piazza to sign a contract with them they could afford, so they very quickly
flipped him to the New York Mets for the kind of acquisitions they like better,
promising young (cheap) players whose asset value might go up. So it was a total
lose-lose-lose from every angle, even some aspects we haven't discussed. Not a
shred of the plan worked for Fox or the Dodgers in any way whatsoever....a total

The bigger and more diverse the conglomerate, the less true to any piece of
it tends to drift, the less likely any piece of it can achieve quality (because
quality becomes ever-more-tenuously understood and control of quality ever more
removed from people who value it and because the equation of what "works
for" the amalgamated behemoth becomes ever more disconnected from the core
of the quality of any one operation inside it.


In Baseball, someone who behaved like such an outrageous chump like Carey and
his cadre did, would be purged like so many aging back-up catchers or relievers
who can no longer get anyone out. Beyond Baseball, for example the world of
publicly-owned companies  where accountability is something to be sluffed,
hidden from or even ridiculed, people like Carey and his cadre can escape.
Carey, for example, is now President at News Corp. and has a C-level title to go
along with it.

Fred Claire's Dodger career was inevitably affected...the trade was not good
on the baseball side, perhaps worse on the business side. So he took some of the
blame for the trade he opposed but (accountability) worked hard at to make
functional. More painfully for the book's reader, it's clear that not only is he
accountable, but he's a person who makes a thoughtful and serious effort to be
ethical. Because Claire  was not a jolly cheerleader for their buffoonery,
it made it more likely he would be sacrificed for show, and so that came to pass
-- Claire was let go along with manager Bill Russell in an effort to fool the
rubes that management was going to make changes to the team for the better.

The Dodgers' lustre eroded, the asset became less strategically valuable, so
Fox dumped "the property" (the Dodgers). This eventually resulted in
the team passing into the feeble hands of the McCourts, unleashing another
wave of eccentric and un-accountable non-Baseball foolishness


There are good lessons here, even if your own endeavor is not about to be taken
over by a conglomerate. 

If you are, I think you already know that you are about to be a commodity and
that, far more often than not, the people taking over strategic (and even
tactical) decisions will more often than not be unaware of the fine points of
your line of work, and unconcerned about making critical decisions about it even
from ignorance.

But the lack of accountability and the willingness to make decisions without
regard to social contracts or, for that matter, regard for a foundation of
domain knowledge, is an affliction that transcends the conglomerate. 

There two viable paths, and the most commonly-taken one, which isn't
viable...that is, being a jolly co-conspirator, generally hiding and hoping the
madness doesn't touch down in your own little world. It doesn't work because
that lack of accountability is self-amplifying, so you either stoke the
anti-accountability decay, or get devoured by it regardless of your apparent
fellow-traveling. Remember that within the organization run by people who got to
be decisionmakers by shifting blame away from themselves, your own blamelessness
will become ever-more irrelevant.

The two viable paths are to work, conspire, collaborate with those who find
this model unappealing or realize how ineffective it makes the organization or
start working on your exit strategy. The latter is easier, though the present
Permafrost economy makes that a less clear choice. The first viable path,
conspiring to glue accountability by being responsible oneself while also making
sure people who try to weasel out of their own responsibility are always called
on it, every time, is a long, challenging path to follow.

If you're taking a middle-class or better paycheck from an organization, you
owe it to them to try the challenging path. The alternative is a world dominated
by Fox Entertainment Group-type buffoons.

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