No Industry Has A Better Success Metric than Baseball

Success Metric

Mike Trout, Baseball’s Best Player

Baseball’s Wins Above Replacement Player, abbreviated to WAR, is the best success metric there is.  A player’s WAR is the number of additional wins his team achieves above the number of wins the team would have if they replaced one of their players with an average player – a player from their AAA minor league team, for example.

A player’s WAR values are calculated from the quality of their batting, baserunning, fielding, and pitching. A higher value accrues to players who make a larger contribution to a team’s success. A high WAR reflects both excellent performance and a large quantity of playing time.

If you are into math, you can see how it is calculated HERE. But for players other than pitchers the math is based on the idea that additional runs contributed to a team lead to additional wins. 10 runs are estimated to be roughly equal to roughly one win. Therefore, a 1.0 WAR value for a player signifies a contribution of roughly 10 more runs than a replacement-level player. Last year, Mike Trout of the Angels had the highest WAR at 8.6.  This means the Angels won roughly eight more games than they would have if his innings had been played by a replacement level player.

What is great about this success metric is that it defines exactly what a team needs to do to get to the playoffs. There are 162 games in a typical season. A perfectly average team wins 81 games. A team that wins 94 or more is a lock to get into the playoffs. If a team wins over 91 games, they have over a 90 percent chance of making the playoffs.

What this means is that teams need to purchase or develop players with a cumulative WAR of 13 to be a lock for the playoffs. That is easier said than done.

The Net Promoter Score as a Critical Success Metric

I’ve exaggerated a bit in the title – other sports have developed their own version of WAR. But what I really want to point out is the CLARITY of this success metric. This success metric defines exactly what needs to be done to win! That is very unusual in business and industry!

Let’s compare WAR to the Net Promoter Score (NPS). NPS is the key success metric many companies use to gauge their competitiveness. The Net Promoter Score is used to gauge the loyalty of a firm’s customer relationships. It is claimed to be correlated with revenue growth. NPS is calculated based on responses to a single simple question: How likely is it that you would recommend our company/product/service to a friend or colleague?

But let’s say a company’s NPS has fallen below their competitors. What needs to be done to improve it? Should costs be lowered? Service improved? Product quality enhanced? Or does something else need to be done?

Dell’s Experience with the Net Promoter Score

A declining NPS may lead to a company doing a series of surveys with customers to determine what the problem is. For example, five years ago Dell’s NPS fell as the complexity of their supply chain increased. In Dell’s case, when they dug into this by talking to customers, what they heard over and over was “I want you to build, ship, and deliver what I ordered, when you said you would.”

The drop in the NPS caught the attention of senior executives and a supply chain team was put in place to correct the problem. Dell embarked on a journey to improve their Perfect Order Metric. Dell’s definition of the Perfect Order Metric was based on (% of on time deliveries) x (% of complete orders) x (percentage of orders delivered damaged free) x (percentage of orders delivered with accurate documentation). So, the uber metric NPS, is supported by POM, which drills down to other metrics like on time deliveries (OTD).

In Dells case, (OTDs) is where the computer manufacturer performed the worst; so that is where the company focused their attention initially. But as is so often the case, the wrong metrics can drive suboptimal behaviors; metrics can be manipulated. Initially OTD was defined as being on or before a certain date. Order promisers started delivering products early. They might reasonably believe there was a high probability the goods could be delivered in two weeks, but they would set a delivery date of three weeks. This led to longer lead times and higher inventory levels. But it was counterproductive, costs went up but this tactic did not move Dell’s Net Performance Score up as Dell was not delivering the kind of performance customers valued.

Dell realized they needed a REDO. They needed to take an end-to-end view of their processes starting with order receipt, processing orders, fulfilling orders (postponement manufacturing and warehousing), and deliveries. And each step needed to be measured.

Before the end-to-end order fulfillment process was decomposed and measured, the initial belief was that logistics was performing very badly. Actually, logistics was the most predictable, but they were at the end of the process, so logistics appeared to be the problem. Further, if every partner in their supply chain performed to their contractual obligations Dell would have on-time deliveries every time.

In decomposing the end-to-end process, the goal was to “flush out the tricks.” Inventory was not allowed to increase. Lead times could not be padded. If a product was not in stock, it was the job of sales to set the right expectation and then the other parts of the value chain needed to deliver on that expectation. And Dell realized that no one knew how lead times were calculated, they had to invest in a tool to correctly calculate the lead times.

Final Thoughts

Based on this process Dell did improve their NPS. The supply chain executive that led this initiative got a promotion.

But it was not easy.  And it was not quick. And it certainly was not simple!

Wouldn’t life be great for executives in other industries if they had success metric as robust as what baseball has with WAR?

Leave a Reply

Your email address will not be published. Required fields are marked *