Performing on the Big Stage

In our culture, there is a premium placed upon what is called, “performing on the big stage,” or, “performing in the spotlight.”  It ranges from sports to business to the arts and permeates everywhere else.  In sports, almost the only thing that matters is winning the playoff tournament that follows the regular season.  In the NHL, it was once the case that winning the President’s Trophy, for the best record in the regular season, meant a great deal.  Teams hung banners to celebrate it.  Now, it’s largely an afterthought and teams would rather make sure that they are ready for the Stanley Cup playoffs than fight to win it. 

NASCAR used to decide its champion based upon performance across the entire season, but switched to a system in which the top ten drivers in August compete for the title based upon their performance over the last ten races.  They found that fans were losing interest in the races in cases where one driver had built up a huge lead halfway through the season and was almost certain to end up winning.  They did not care enough about each individual race to watch to see who won.  Only the grand championship mattered enough.[1]

 

This is a shame.  It represents a choice of values and priorities that rewards those things that are flashy and prominent at the expense of day-to-day accomplishments.  Cause and effect is hard to separate, but the playoffs are televised much more thoroughly than the regular season.  Everyone (or, in the case of the NHL, at least a few people)are watching.  So these are the games they really care about.

When it comes to sports, as with many other things, the “best” is hard to define.  Which team is the best?  Very often, the playoff champion is defined as the best, but this is really just a subjective call.  That champion is only the “best” in a definitional sense.  It doesn’t mean that that team would beat every other team.  It doesn’t necessarily mean that you can point to any other standard that would indicate this.  That team is the best because we say it is.  End of story.

This lack of a firm foundation doesn’t mean that that definition is wrong.  There really is no objective measure of the “best.”  An ad hoc definition is the only way can arrive at an answer.  

It’s worth noting that nothing requires having a definition of the best.  While the one-day form of cricket has tournaments, such as the World Cup, test cricket does not.  There is a ranking system, and someone is always the #1 side in the world, but the impression of a fan in North America is that this isn’t considered terribly important.  There is more attention paid to each test, and test series, as it is played than any sort of overall standing.  It is the case that, barring weather problems or terrorist attacks, all of the tests in a series are played, even if the winner of the series has already been determined. 

The decision to base the success or failure of a season entirely upon the playoffs is a value statement.  What it says is that people value maximum effort, highly visible effort over a short duration to achieve a single goal more than they do the long everyday slog of going to work, punching the clock and putting in a decent day’s work today, tomorrow and every day.  We pay lip service to this ideal, but our actions say otherwise.

In sports, it’s the difference between valuing a team that can excel over three short series, with a maximum of 19 games, in which there is no need to test the full depth of the team over a different team that can travel to last place Kansas City for a midweek series in the middle of August, with temperatures reaching 110 degrees on the field, with two starters on the disabled list and manage to grind out at least two wins, and sometimes three, in a three game series under less than optimal conditions.

The same thing happens in business.  Those who lead the big project, or deal with the important clients get lots of recognition.  So long as they do a good job, this is deserved.  Those are critical aspects of any business, but so is the person that sends out the invoices.  She never is part of a highly visible project.  She never lands the big deal.  For the most part, she is never called upon to engage in that maximum effort, short duration Super Bowl.  She needs to come in every day, put in a workmanlike effort, get the bills out and not screw any of them up.[2]  However, that usually gets phrased as, “She only needs to come in every day . . .” 

There’s no only about it.  Coming in and getting the job done every day is a valuable skill.  It’s not a particularly rare skill, but there are still fewer people with it than there are jobs that require it.  This isn’t the employee who just walks in the door every day and then disappears, whether figuratively or literally.  This is the skill that involves grinding through the tedium.  It’s the worker that doesn’t make mistakes that others have to fix or that end up in the final product.  This is the employee who you can count on to beat the Royals on that night in July.   Few of us, when we think of our workplaces, can’t identify a couple of co-workers who lack this ability.

It’s an ability that rarely gets praised.  More often, it is considered a floor, the level that is minimally acceptable.  This is both wrong and a dangerous attitude for a business to develop.  This is the kind of employee that keeps an organization going.  In between the superstar’s big scores, they keep the hamster wheel spinning.

Baseball analysts came up with the concept of Replacement Level about fifteen years ago.  The idea was to identify the production of the best player who is not playing in the major leagues.[3]  This is the guy who would get called up if a starter gets hurt.  In theory, everyone already on the major league roster is a better player than the replacement, although this often isn’t quite true in practice. 

The insight of these analysts[4] was that the value of a baseball player shouldn’t be measured against the average player in the major leagues.  It should be measured against Replacement Level.  If you lose the services of that player, Replacement Level is the production that you will be getting instead.  You can’t find an average major leaguer just lying around.  The value of a major league ballplayer is contained within a statistic called Value Over Replacement Player (VORP), which describes how much value he adds over your next best choice.

The idea of the Replacement Level employee should permeate all businesses.  Obviously, that level will differ from company to company, in general having a positive correlation with how much they get paid.  A company’s Replacement Level defines what is minimally acceptable in an employee.  We may all have an idea of what should be the floor on employee competence.  It can become an ethical discussion, heaping opprobrium on those who don’t meet that standard.  In practice, the best person that you could go out and hire on short notice defines what is minimally acceptable and constitutes the Replacement Level.

Clearly, this is much vaguer in most industries than it is in baseball, where scouts and coaches watch all of the work minor leaguers do, and measure that work empirically on multiple axes.  Most companies might hire someone who is much better than many of their current employees.  However, they might also hire someone who is worse than any of them.  Companies don’t have a reliable way to consistently hire new employees who are significantly better than ones they already have.  If they did, they would hire them instead of the people they have.

This means that companies need to think of Replacement Level as the average quality of a new hire they would make, and accept that there is a wide confidence interval.  What they should not do is to look at the best of their new hires and think that that constitutes the quality of employee with whom they could replace current workers with.  They can’t count on that, and will be disappointed if they do.

For most firms, the grinder who comes in every day and does a decent job has value far above Replacement Level.  Most firms have no idea how much more valuable she is.  For all anyone knows, she is more valuable than the superstar that gets lots of attention.  Forbes isn’t going to write a profile of her, and she isn’t going to get a big bonus. 

This applies all the way up the corporate food chain and right into the CEO’s corner office.  Replacement Level is different for a CEO than it is for the billing clerk, because the next best CEO you could hire is, presumably, a lot more skilled than the next best low level accountant.  Since they are paid more, they also have to produce more value to be a net positive for the company. 

Unfortunately, most companies are more like a hockey team than a baseball team.  Hockey analysts are struggling to come up with an equivalent measure.  The problem is that the game is more complicated and involves more interaction.  At any given instant, a baseball game can be broken down into a contest between at most one player on each side: the batter vs. the pitcher; the shortstop going into the hole to catch a batted ball; the speed of a base runner vs. an outfielder’s arm.  This makes it relatively easy to isolate the value provided by each player. 

It’s easy relative to isolating value in a hockey game or an architecture firm, that is.  At any given moment in a hockey game,  each player is interacting with most or all of the other 11 players on the ice.  When the puck goes into the net, or doesn’t, most of those players impacted the goal one way or another.  Teasing out how much value each player added is difficult.

It is not as difficult, though, as figuring out the value of an employee in industries outside of sports and entertainment.  Here, there are far more individuals involved in each outcome.  That includes not only other employees of the firm, but also competitors, vendors, customers and every other person that made a decision that impacted the chance that the company would make a sale or its value. 

It is likely impossible to quantitatively measure how much value each employee adds.  If it were, it almost surely wouldn’t be cost effective to attempt to determine.  There are two necessary responses to this.  The first is to recognize that a company, or any other complex organization, is not really a meritocracy.  For it to be true that the compensation companies award to their workers is commensurate with actual merit, they would have to be able to measure that merit. 

They can’t.  All they can do is make crude estimates, and often don’t even do that.  When you hear the representative of a company defend how much a particular employee is being paid by referencing how much they are worth, keep in mind that no one actually knows whether or not that figure is true.  When discussing executive pay, this is in addition to all of the other corporate governance issues involved. 

As important as the pay at the top is, pay all the way down a corporation’s org chart is also critical.  Companies try to hold wages down.  Particularly in a poor economy, they use the threat, usually implicit rather than explicit, of hiring someone else in order to cow employees into accepting lower compensation.  They do this because they know what the price to hire a Replacement Level employee is.  The problem is that they have little to no idea what either the current employee or their potential replacement is actually worth. 

Unless they think that they have hired sub-optimally in the past, or are thinking only of the clearly incompetent candidates for dismissal[5], the operating assumption for managers should be that whoever they could hire as a replacement is less valuable than the employees they already have.  Given that they generally don’t know how much less valuable, they ought to be careful in playing this game. 

The risk is particularly high with the grinder.  If a particular skill or virtue goes unnoticed, it is probably also undervalued.  The person that has it has even more VORP than most.  The company that can accurately assess how much this is worth, reward it for it is worth and attract more people who have it will have an advantage in the marketplace.  The manager that figures this out probably won’t have a chance to watch Brad Pitt play him on the big screen, but he’ll have made a better company.

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[1] Obviously this does not include all fans.  Given the etymology of the word “fan,” which is derived from “fanatic,” the actual fans will keep watching.  However, sports leagues often care a lot more about attracting the casual fan, who might easily decide to entertain themselves in some other fashion, than they about serving the desires of their hard core supporters.

[2] Though the recent trend in corporate operations is to get rid of enough employees that she actually does need to give maximum effort.  Of course, it’s not over a short duration.  She needs to give maximum effort every day, in order to do the work that three people used to do.  She doesn’t get the visibility, though.

[3] It’s a little more complicated than this, and replacement level is different for each position, but the general idea serves here.

[4] Typified by the people at Baseball Prospectus, though they may not have come up with the idea.

[5] Managers are a lot less skilled at identifying these employees than they think they are, or than they really ought to be.