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What "Moneyball" Has To Teach Boards Of Directors

A group of about ten older men sitting around a meeting table were droning on uninspiringly, making their recommendations to the general manager of a baseball team. That scene of the Oakland Athletics scouts in Moneyball reminded me of too many meetings of boards of directors. Most familiar of all was the group’s reliance on the same tired old perspectives, none of which had proven successful in helping to build a championship baseball team.

There is a difference between team scouts and the board of a corporation. A board has the ultimate authority, while scouts are merely advisors. But scouts are the general manager’s brain trust; they function like an executive cabinet. Their job is to discover and sign new players from high schools, colleges and the minor leagues. As such, their role is to envision the organization’s greatest potential, and identify and assemble the right team to build a successful enterprise.

Until 2002, scouts made their recommendations based on intuition, tradition, superstition, and the good old that’s how we’ve always done it attitude.  As told by Michael Lewis in Moneyball: The Art of Winning an Unfair Gamethe book on which the movie was based—the game-changer for baseball came when the GM of the Oakland A’s relied on the guidance of Paul DePodesta to apply an innovative approach to building a successful and cost-effective baseball organization. DePodesta had just graduated from Harvard with a degree in economics and no experience in pro ball. "Paul shouldn’t have even been in the draft room," according to Lewis in Moneyball. As you might suspect, the scouts treated DePodesta like a pariah. Ultimately, once DePodesta showed them how to build the team in a whole new way, other teams followed suit, and the GM and DePodesta changed the game and the business of baseball.

Perhaps boards of directors can take some lessons from Moneyball. Surely in today’s dynamic environment, boards need to identify and recruit bright, young, worldly, new candidates who bring fresh insights and experiences from around the globe. For companies seeking to compete in a high-tech universe, and create and sell products and services in emerging markets, boards might want to include women and men from diverse and international backgrounds who grew up after the era of rotary phones and mimeograph machines.  

Unfortunately, this is not the case; old, homogeneous boards are holding on for dear life. "The dramatic drop in board turnover from 2009 to 2010 reveals a continued risk aversion among the leadership of the Fortune 500," says Bonnie Gwin, vice chairman and head of the North American board practice at Heidrick & Struggles.  Furthermore, "the average age of newly appointed directors stayed the same at 57. Women appointments were up slightly but overall, diversity metrics did not appear much changed year over year."

As far as age goes, only 618 board seats out of a universe of 35,505 board seats are occupied by people under 40, according to Corporate Board Member’s database. "Most of the younger crowd are with newly launched public companies that they joined in start-up days, representing early investors. The majority of the others are on the boards of small to midsize corporations, ones with a market capitalization of $1 billion or less, where activist investors have placed them to shake things up and increase value."

Maybe one day Michael Lewis will be able to write a book about the year that boards finally engaged young people with fresh perspectives. Perhaps he'll be able to say that that's also when companies increased shareholder value. What do you think?

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[Image: Courtesy Sony Pictures]