Can Mr Merali Play Moneyball?

When asked why senior executives at Alberta Health Services are so generously compensated, the government’s response is either: I have no idea, those over-the-top supplemental pensions and extravagant expense accounts were before my time (Minister Horne) or the AHS has to pay well in order to attract competent managerial or clinical talent (acting CEO Chris Mazurkewich).

The first response is an abdication of responsibility (see last week’s post).  The second response is based on the flawed premise that paying top dollar will buy top talent.  This isn’t true in the private sector—just review the headlines over the last 10 years starting with Enron and ending with JP Morgan’s $6 billion “mistake”—and it’s not true in the public sector; just peruse the headlines starting with Dr Duckett and ending with Allaudin Merali and Sheila Weatherill.

I suggest we scrap the “top dollar equals top talent” mindset.  It’s time to play moneyball.

In his book Moneyball, Michael Lewis, a financial journalist and former Salomon Brothers bond trader, describes how general manager Billy Beane transformed the Oakland A’s baseball team from a pathetic crew of losers into a top notch baseball team.

Lewis sets out 5 simple rules for making a good hire.  While the fit to the government recruiting process isn’t perfect, let’s see whether Mr Merali would have made the team.

Rule #1—clearly identify your objective.  The A’s objective was to win the pennant (or whatever it is you win in baseball).  The government’s objective is to deliver on its 5 Year Health Action Plan.

Rule #2—identify gaps on the team.  The A’s needed pitchers, first basemen, you name it, they needed it.  They were in terrible shape.  The AHS is a $12 billion operation funded by tax dollars.  It desperately needs a competent CFO.

Rule #3—be prepared to abandon traditional recruiting methods if they produce flawed and unpredictable results.  Prior to Billy Beane’s grand experiment the A’s relied on scouts and agents to identify young players.  Unfortunately many of them failed to develop and were cut.  It’s unclear how Mr Merali made it to the top of the short list but we do know that from 2005 to 2008 Mr Merali worked as CFO for Sheila Weatherill, CEO of Capital Health.  We also know that Ms Weatherill was a member of the AHS board when Mr Merali was hired.  One wonders whether the age-old adage “it’s not what you know but who you know” came into play.

Rule #4—replace ineffective recruiting tools with ones that are evidence-based.  Billy Beane exchanged the “wisdom” of scouts and agents for an analytic tool called Sabermetrics.  This tool focused on on-base and slugging stats which proved to be a better predictor of success than batting averages.  The AHS had facts at its disposal.  The quality of Mr Merali’s work had been called into question by the Auditor General for three consecutive years.  Mr Merali made headlines when he was implicated in the Ontario eHealth expense scandal.  It would appear that an evidence-based review of Mr Merali’s work experience, if one was conducted at all, was not particularly thorough.

Rule #5—understand and believe that an inexpensive team of undervalued players, if properly developed, can beat an expensive team of superstars.  The Oakland A’s, a small team with a payroll of $41 million, successfully challenged superstar teams like the New York Yankees whose payroll exceeded $125 million.

The government has hired HR experts to evaluate its hiring practices and employment contract procedures for senior executives.  So this one is under development.

Time will tell whether the government can free itself from the fallacy of “top dollars equal top talent” and other “traditional” methods of recruiting and commit itself to revitalizing the public service with bright employees who are valued in a non-traditional ways.  It’s the only way to bring a fresh perspective to a bureaucracy that is collapsing under the weight of the old boys’ club.

To paraphrase all those umpires on all those baseball fields all across Canada…let’s play Moneyball!

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9 Responses to Can Mr Merali Play Moneyball?

  1. djharrigan says:

    Excellent post, as usual, although I have not seen the movie Moneyball. I think though you have made a typo. Despite Mr. Mazurkewich’s strong feelings of self-perfection, there really is no “t” at the end of his first name.

  2. Oh that is too funny! David, you’re absolutely correct–it’s Chris Mazurkewich, NOT Christ Mazurkewich. I will fix it immediately!! Thanks for pointing it out.

  3. jillbrowne says:

    Thanks for pitching these ideas, Susan. Yes, I think a serious consideration of the B-team should be a mandatory part of any hiring process. It would be interesting to know whether there have been additional studies from business or the public sector, and whether the Moneyball theory has been tested outside sports.
    Intriguing! Great post.

    • Jill, the Moneyball theory has become a big deal in baseball, but I haven’t found any references to it outside of that sport. When the other “big” name teams (Mets, Yankees, Cardinals, Blue Jays) started using it the Oakland A’s lost their advantage, which is an unfortunate end to the “underdog” story. But it does demonstrate that it’s smart for any organization to pick up the good ideas of another. This was the purpose of this post–given that the government’s “tried and true” methods don’t seem to be working, they would be well advised to try something else.
      PS. Nice use of the word “pitching”.

  4. Pat Hibbitts says:

    Many public service organization have hiring committees made up of internal stakeholders and not actually anyone who knows anything about the job. A hugely flawed process in the public sector as there is an inverse relationship between how a candidate does in an interview and how they do on the job. Second issue is the use of headhunters in Canada, a thin gene pool at best. The result ineffective leadership. In my sector, universities, in 42 institutions 19 Presidents have been fired (seeking unexpected opportunities elsewhere) in the last ten years.

    • Pat, welcome to the soapbox! Your statistics speak volumes about how ineffective the internal stakeholder process is. Given the difficulty in sussing out how well a candidate will perform once he gets the job, it’s critically important to take an objective look at his past performance and his references. Unfortunately in a sector that is rife with cronyism this last step is a merely formality, if it’s done at all. Who needs a reference check when a member of the board will vouch for you? The result is a revolving door of candidates who move from one government post to another. This situation cries out for the sabermetric analysts or their public service equivalents.

  5. Carlos Beca says:

    Susan this is one of those posts that makes it difficult to know what to say that makes sense. 🙂

    FIrst of all I agree with Moneyball that paying big dollars not always means competent people and I do not think I need to give any examples. In Alberta alone there are enough great stories. Secondly I do not understand these gargantuan salaries and pensions anyway. So the premier running the whole show gets 250 thousand and a person running Health gets a million! The problem is that these questions never have any answers, somehow no one is ever responsible for anything these days. Someone was insane I guess and established these salaries and pensions that make one laugh. I read 13 thousand a month – Yes a month. People get paid every month more to be retired than many Albertans make a year. Anyway this is one of those issues I prefer to leave alone otherwise you will have to expell me from this blog. It is quite disgusting what we have seen happening in the last 3 decades since the victorious market fundamentalists took the reigns of the world economy. I just read, for example, that last year Shaw Cable took the profits of a quarter just to pay for retired executives. All in the millions.

    Now the point that Pat Hibbits touched is one that I would like to make a comment. I have worked 3/4 of my life for private industry and I seriously did not see any difference between the hiring practices compared to government. If anything, I thought when I worked for the provincial government the interviews were tougher. Furthermore, interviewers for the government are subject to more regulation to do with all this gong show around human rigths and racism and …..blah blah blah. The private sector has more freedoms in this respect. The problem in my view is that people are claiming more than their real skills in their resumes and get good references no matter what. There is a moral and ethical problem that is more prevalent now than in the past. Not surprising to me when the message out there is ‘Greed is Good’ and ‘Do whatever it takes to get what you want’. When I was a kid the message was completely different and I am sure many of you can confirm this. I am not debating whether it was better before or not but it was definitely different. I for one preferred the old message but obviously when the market decides everything in your life, it is not easy or adequate to follow any other rules other than ‘Run for your life’. No wonder we are drowning in depression, anxiety and psychosis. To be honest Pat, I do not think that private enterprise is actually doing a better job, if they did we would not have disasters like the Gulf of Mexico BP spill or the Enbridge Kalamazoo disaster. Most of these are clearly a lack of competence and blind run for bigger and bigger profits. Last week report on Enbridge clearly stated that there is a total lack of Safety concerns from the top down and this was confirmed on interviews with employees. No surprise to me at all.

  6. Carlos, your comment about the private sector having its own share of problems is accurate. The string of corporate scandals, starting with Enron, Worldcom, Tyco and moving up to Barclays Bank and JP Morgan is breathtaking. It doesn’t seem to matter how many rules and regulations are imposed on the private sector, some bright light still finds a way around them or simply ignores them. By the time their misbehavior becomes apparent it’s too late and a lot of people have lost their shirts.
    You’re right that it all comes down to ethics and good moral judgment. What worries me is I don’t think we can ever design a recruiting methodology that will screen out the selfish or greedy ones. So we need to push our law makers to pass regulations that require transparency and then to enforce them properly. This means jail time and being stripped of one’s professional credentials instead of fines which are often nothing more than a slap on the wrist.

  7. Carlos Beca says:

    Susan, you are absolutely right that regardless of rules imposed, bright lights simply ignore them. This is the crucial problem. The reason why they ignore them is simple, they can get away with it. If you read the book ‘The Thieves of Bay Street’ you will be amazed of what is going on, Conrad Black, for example was in jail only because the Americans went after him. If left to our authorities he would still be laughing to the bank and partying with his elite friends. Like you suggest these people should go to jail just like any of us would for doing way less.
    Again the lack of ethics and good moral judgment is catching up to us and do not blame the new generation for it. They are witnessing what is like to be a grown up in a world where rules are different depending on your bank account or status.

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