When is Gutting Payroll the Right Thing?

HR-Sports Post Alert!

Many of you probably cared less about the recent trade between Major League Baseball’s Miami Marlins and Toronto Blue Jays (check out the details here) – suffice to say the Marlins were able to decrease their annual payroll from $188M to around $35M in one giant trade!  Classic rebuilding type of move, right?  People/fans are saying the Marlins shouldn’t do this to their fans and they gave up on some great talent.  Let’s take a look back at recent Florida/Miami Marlins history:

1997 – Won the World Series (payroll at $47.8M)

By 1999 – they gutted their roster of high priced talent for younger up and coming talent (payroll at $15.2M)

2003 – Won the World Series (Payroll at $76.9M)

By 2006 – they gutted their roster again (payroll at $15M)

The difference the Marlins and large market teams like the Yankees and Red Sox is that the Marlins can’t make giant financial talent mistakes without something major happening in the next year or two.  They took some gambles over the past couple of years trying to assemble a world series capable team (they’ve done this before – twice!) and it didn’t work out.  So, change needed to happen – rebuilding needed to begin.  Any fan of the Marlins could have predicted this.

So – what does this have to do with HR – or my company?

There is some huge wisdom in how the Marlins manage their talent finances that we can all learn from.  Let’s make no mistake about this – this is not Moneyball, in fact he might be the opposite of what Billy Beane had envisioned.  But, many would argue that the Marlins version, had worked out better, certainly from a results standpoint.  My question is – could this type of talent financing work in a corporate setting, or in your company?

Think about it that for a minute.

How could you make this happen?  I tend to think about it in terms of your high priced – A talent – not necessarily your executives.  What if your company was looking to drive and increase in market share in your industry.  Your main competitor currently had 50% of the market, while you only had 25%, with the other 25% spread amongst competitors 3-10.  Your goal was to grow your market share to 35% in 3 years – a large task for most companies in most industries.  Conventional corporate wisdom would work this way – Step 1 – we hire away one of competitor 1’s executives to tell how they did it; Step 2 – The new executive brings over as many people as he can get, usually starting with a solid player from competitor 1’s marketing department; Step 3 – you re-brand and spend a crap ton of money; Step 4 – 3 years later you’re at 28% market share with less margins. Ouch.

If the Marlins management ran your company here is what they would do:

Step 1 – Go hire the top sales person from your main competitors – all of your competitors and pay them double what they are making.

Step 2 – Go directly after every single account the competitors have with the inside knowledge you just gained in your sales staff.

Step 3 – Build their market share to 40% within 24 months

Step 4 – Systematically let go of all of their high priced sales people – losing about 5% of their market share.

Step 5 – At 3 year mark be at their 35% market share with roughly the same payroll as they had 3 years prior.

I mean it could happen that way!

We/HR/Management tend to believe we have to keep our people on forever – even after they stop being rock stars, but are still getting paid like rock stars.  The Marlins have said, ‘look this is a dual benefit play – we get our championships and the players gets a giant check, then we both move on’.  It’s not “traditional” so everyone tends to think its wrong.  I don’t know if it’s right, but I’m sure their are some Chicago Cub fans that would take 2 World Series championships in the last 15 years!

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