Geoffrey Colvin :: Value Driven

Managers may talk a good game, but few have the guts to really run their business like a great sports team.

Committees scarcely exist. They're teams now. Departments are disappearing fast, too -- they've been turned into teams. Which makes sense, because a lot of managers can't speak three business sentences without talking about home runs and strikeouts and which employees hit good solid singles and whose batting average is falling. Hey, that team we've got running this company? They're the 1927 Yankees. They'll be proud of us here on the purchasing logistics team because we're gonna hit the ball outta the park! We're world-class corporate athletes at this place.

And there is not a thing in the world wrong with any of that, except this: Most managers would rather sit through a 99-year budget review than run their businesses according to the real principles of championship athletes. Those principles are excellent guidance for anyone who want to win in business. But most managers can't face them.

With the winter Olympics just over and the baseball season about to start, sports metaphors in business will be sprouting like daffodils. It's an opportune moment to remember what sports can really teach us about winning.

Teams have stars.

One of the favorite people principles of Jack Welch and other hyper-successful managers is differentiation -- the notion that top performers should get paid a whole lot more than mediocre ones. Plenty of managers find this idea almost unbearable. "It disrupts the team," as one said to me not long ago. "How can you have a guy working next to another guy who's making 50% more?"

Get real. Over the past several years, surely the best team in sports -- meaning a group of players who have worked together to achieve extraordinary success at the highest level -- is the New York Yankees. They've won four of the past six World Series. The highest-paid Yankee last year was shortstop Derek Jeter, who got $12.6 million. The lowest-paid Yankee last year was shortstop, D'Angelo Jiminez, who got $200,000. Two guys on the same team with the same job. Most corporate managers would have a cow if you suggested that they pay one of those guys 63% more than the other. But the Yankees didn't pay Jeter 63% more. They paid him 63 times more.

Somehow the Yankee dugout is not a snake pit of resentment -- quite the contrary. The truth is that every team has stars, and everyone on the team know who they are. A lot of corporate teams try to suppress that reality. Winning athletic teams embrace it.

Winners don't carry losers.

Maybe you remember when Jacques Nasser, as Ford's CEO, tried to install a performance rating system for executives. Every manager would have to be rated A, B, or C, with at least 5% required to be in the C category. Not exactly radical, you might think, but it was radical at Ford, where the organization rose up and smote Nasser for his cruel, arbitrary, cold, heartless proposal.

What's amazing is how people who are outraged by Nasser-like suggestions respond quite differently to the performance of ballplayers. If an outfielder can't catch a cold and is batting .125, the fans want him out -- now. He's a really good guy who had a great season in '91? Wonderful, but any manager who kept playing him on that basis would need police protection.

Only 750 players are on the playing rosters of Major League Baseball, yet every off-season the teams make hundreds of player transactions. Most of them involve teams re-signing players to one-year contracts (only megastars get seven-year deals). Do you have to re-sign with your employer every year? How about the people who work for you? On champion teams, most players have to.

The 98th percentile isn't good enough.

An awful lot of companies claim to be world-class. If you can recite your company's mission statement without dozing off, you'll probably get to "world class." Most people have no idea what that really means. At the Winter Olympics, the difference between gold medal and no medal was often less than 2%. Against truly global competition, a lot of stunningly good performers were just not good enough. In the men's 10,000-meter speed skating, the difference between a gold medal and no medal was 1.9%. In the women's giant slalom it was 1.1%; in the four-man bobsled, 0.2%.

A lot of managers claim their companies will "bring home the gold" this year. Terrific, but remember that many excellent competitors went to Salt Lake City (in 2002) and were 98% or 99% as good as the best -- and brought home nothing. By all means, try to bring home the gold, but don't delude yourself about how hard it is.

The sports world is actually full of valuable insights for business people. And, if some people don't want to hear them? That would be a competitive advantage for you. Now, let's play ball.

This is an article from the 18 March, 2002, issue of Fortune Magazine.