There’s a striking parallel between the challenges facing baseball general managers and hiring managers in the broader economy.
by Chris Keaveney
February 9, 2023
Companies are feeling the effects of an unusual—and unpredictable labor market. Even as the Federal Reserve hikes interest rates to cool the economy and slow down demand, there are an estimated two open jobs for every unemployed worker, and employers are struggling to find talent to fill open roles. Because recruiting is so expensive, a growing number of teams are opting instead to “grow-their-own” talent by investing in training the talent they need.
The world of Major League Baseball offers an analogy to illustrate the troubling paradox facing employers: build or buy? With the World Series behind us and spring training ahead, we’re deep into Major League Baseball’s offseason when general managers pore over mountains of data in search of quality players who can win their team a pennant. Teams are always tempted to sign experienced, big-name free agents who can excite fans, sportswriters and broadcasters. But talented free agents are always in short supply, and only the clubs willing to spend big bucks can land such a prize. Even the wealthiest teams cannot afford to have high-priced free agents at every position.
These big players can come with drawbacks: Veteran players are at risk of injury, declining production and other factors that ultimately make them not worth the huge contracts they signed. Newer, “homegrown” players, on the other hand, present a different risk-reward scenario. They have potential, not experience, and they command lesser salaries than more established stars. Though it might take these young players time to reach the big leagues, a team with a strong scouting and development system can develop talented ballplayers year after year.
It’s a winning formula: The World Series champion Houston Astros led all 2022 playoff teams with the most homegrown players — many of whom were never considered “top prospects.”
There’s a striking parallel between the challenges facing baseball general managers and hiring managers in the broader economy. Currently, most companies tend to build their talent base primarily through recruitment of experienced workers, which is the equivalent of baseball’s free agency in sports. At a time of talent shortages across key industries, companies should move away from the “free agency” hiring model and instead recruit and produce their own early talent.
The “free agency” model is an expensive way to do business that doesn’t always pay off. By one estimate, companies spend an average of $4,700 in hard costs alone to hire each new employee who might not stay; the soft costs of company executives supporting the hiring process can cause the true cost of recruitment to soar.
The two models here boil down to whether a team uses resources for one top free agent or to the development of 20 or more new prospects. The former is a short-sighted approach. The latter, meanwhile, takes time and effort, but it sets teams and companies alike up for long-term sustained success over multiple years. In the workplace, when a company invests in an employee’s professional development, that worker is not only better prepared to succeed within the company, but also more likely to stay as a qualified and satisfied hire.
A growing number of companies are seeing the value of creating talent rather than just consuming it and are shifting more talent and people resources toward increased training and development options. IBM launched a one-year apprenticeship program in 2017 because of chronic shortages of tech talent. Since then, this learn-and-earn program for prospects without four-year college degrees has grown to 25 career tracks, including data science and cybersecurity.
Amazon has pledged to spend more than $1.2 billion over the next three years to train 300,000 of its own employees to advance them into more advanced — and better paying — jobs with the company. Amazon’s Upskilling 2025 initiative also includes new programs to train more employees for high-growth jobs at various tech roles across the company, which they say will help them attract and retain talent and grow their tech business more quickly.
Lucid Motors needed hundreds of workers for its new electric vehicle manufacturing plant in Arizona, which had no history of making cars or trucks. So the company built and equipped its own state-of-the-art training facility. By late 2021, all of the company’s hourly workforce — more than 700 employees — had completed the company’s training and were ready to go when production began on Lucid’s first new vehicle.
But not all companies have the resources to develop in-house solutions. There is a need for smaller companies to have a solution to the talent creation vs. consumption dilemma. There needs to be a way for companies to invest in the development of new talent. The long-term impacts will be beneficial to everyone.
Major League Baseball is a copycat league in which teams try to win by copying what winning teams do. In this year’s hot stove league, a few savvy general managers will look away from the free agent signing frenzy and begin the hard, difficult and ultimately rewarding work of committing to drafting well and coaching up the new young players.
In the world of work, today’s tumultuous labor market is driving momentum for new recruitment and development methods. Businesses that choose to join the wave of investing in early talent development could find themselves on the road to a championship. Those who don’t might find the traditional means of seeking talent might prove to be cold comfort indeed.