act one moneyball sabermetrics and retail

Act One: Moneyball, Sabermetrics and Retail

Rusty Secrist, Director of Product Management
Kyle Ferlic, Retail Analyst

If you’re a baseball fan, you’ve likely watched the movie Moneyball. Based on a true story and released in 2011, Brad Pitt (Billy Beane) and Jonah Hill (Peter Brand) starred as characters who faced a franchise’s limited budget for players. Nonetheless, they were determined to develop a World Series-winning squad. Beane and Brand realized it was more about inter-team potential than individual skill, so they built a team of undervalued talent by taking a sophisticated statistical approach to scouting and analyzing players. Today, this approach is called sabermetrics. It has many parallels to the trends we see in retail, and this three-part blog series will outline those commonalities (see part two). The goal here is to showcase how, like Beane and Brand, retail technology vendors also seek to help retailers uncover their greatest potential using effective statistical tools.

We’ll begin by defining some necessary terminology, as sabermetrics and its relevant verbiage are not commonly used among retailers! Sabermetrics is a term derived from SABR, the acronym for the Society for American Baseball Research founded in 1971. Sabermetrics can be used for multiple purposes, but the most common usages are evaluating past accomplishments and predicting future performance to determine a player’s contributions to his team for the purpose of putting the right people in the right place. One type of analytic approach used in sabermetrics is to compare key metrics among specific players under realistic data conditions. This evaluation of historical player performance enables an objective overview of how fit each player is for the role they are expected to play. In baseball, the comparison of this data between players can help coaches and scouts mathematically understand the team as a whole.

How does the concept apply to retail?

There is a correlation in this concept with retail, as similarities exist between this approach and engineered standards. Engineered standards are systematic analyses of times and methods done within store operations. They are built based on a hypothetical average worker working under realistic conditions. This type of engineered approach measures each operation and offers a standard amount of time that it should take an average employee to perform that operation’s tasks. In our numerous years of consulting, we’ve seen some retailers use time studies to average out how much time it takes to perform a task. This approach is slightly outdated, so many retailers have moved to using a tool called MOST (Maynard Operational Sequencing Technique).

When you have an engineered standard, you can easily understand an employee’s performance to that standard and use performance management to coach him or her to improve in specific areas. This same approach was seen in Moneyball when they needed a first baseman. The player they selected, Scott Hatteberg, had a very high on-base percentage average with batting, but had poor performance as a first baseman. Through coaching and performance management, the Oakland Athletics (aka the A’s) were able to successfully place him in that position; thus making their team more successful overall. Hatteberg helped the team go on to win 19 straight games and reach the playoffs twice in 2002 and 2003.

We’ve seen this similar story play out in the retail environment many times over the years as consultants. One example was during an engineered standards and performance management rollout at a retail client. Our task was to build out engineered standards in an incentive-based environment. It is extremely important in this type of business ecosystem for the standards to be accurate, because the employees are being measured against the standards to determine their pay. This client then used these newly built and accurate MOST standards to roll out a performance management program. It was remarkable to see the KPIs for measuring success increase very quickly after our project completion. The management team saw performance improve dramatically while their output increased. These are just a few of the many benefits realized with engineered standards.

To summarize

In conclusion, using the concept of sabermetrics as seen in the hit movie Moneyball, it is possible to draw the parallel to engineered standards and performance management within retail. The ever-increasing need to minimize labor costs and increase productivity and output makes it critically important for retailers to build engineered standards and use them to manage performance. Without this accurate knowledge, management teams will have a very difficult time understanding how each employee is performing and how that impacts the entire team’s performance and output. The good news is that lots of vendors stand ready to help retailers employ and best-utilize engineered standards and performance management. That’s a home run!