After about a 20 year hiatus, I have enjoyed following the game of American football closely over the past two years. Go Hawks! Watching how teams hire and fire coaches, build their rosters and manage their seasons is almost more interesting to me than the game itself. There are many management lessons to be learned from successes and failures of various teams.
Here are three management lessons from the 2016 NFL season.
1. Don’t be fooled by sunk costs
A sunk cost is a cost that has already been incurred and cannot be recovered. Like a gambler who feels like he has to keep playing to win back his losses, people in business often compound bad decisions without realizing they are being fooled by sunk costs. When an expensive machine that turns out to be a horrible and expensive fit for the production system, it should be scrapped rather than forced into service. When you’ve already paid for something AND you can’t get that money back, it’s a sunk cost and has no place in future decision making.
This year more than one team spent many millions of dollars on a franchise quarterback and realized that he was either not ready or terrible and needed to be benched. These teams refuse to cut the player and move on because the team has a sunk a high draft pick or many millions of guaranteed dollars to him in the coming years. Management will argue that with coaching, the quarterback will be better in the next year, but they are fooling themselves. This is wishful thinking and they are only delaying recovery of the franchise. In reality, they are better off admitting their mistake, moving on, and fixing their scouting process that led to big, bad bets.
The best strategy to avoid having sunk costs in the first place is to make investments additively and incrementally, as a startup would do, testing out the investment before making larger commitments. This can be harder to when hiring star athletes, but it can be done. Or, one can avoid sinking cost into a type class of star athlete altogether, as we see in the next lesson.
2. Optimize the total system and not its individual parts
This season the New England Patriots traded away star defensive player Jamie Collins mid-season for relative low value. “We did what we felt like was best for the team and that was really it,” said head coach Bill Belichick. “Sometimes it doesn’t work out one place and works out somewhere else and that’s life. A lot of us have been in those situations.” Collins was a great player, but after losing him the Patriots defense actually improved.
A defensive player who reacts to what he sees from an offense to leave his assignment in order to make a big play takes a chance. If he reads the situation correctly he gains personal glory. He may also blow his coverage and allow the opposing offense to make a big play, hurting his team. This is what Belichick saw and did not hesitate to replace a player who did not fit the system.
This is not the first time that Belichick has cut star players who commanded a higher price than he was willing to pay, either in terms of the next year’s salary or in terms of not doing their job the way he wanted them to do it.
It is not unusual to see teams within business, government or non-profits that performs better when a strong individual performer who plays outside the system is removed. The same is true in team sports but not all team managers and coaches realize this.
3. Rely on stable, available, capable, flexible processes and not on individual heroics
The Seattle Seahawks are a team full of great coaches, players and staff. I question their management’s understanding of risk. The year was essentially lost when quarterback Russell Wilson suffered an ankle injury in week 1, then a knee injury shortly thereafter, and the team opted to let Wilson heroically play through injury rather than rely on the young backup for a few weeks. While they talk about “next man up”, they bet on individual heroism over team performance, and the result was several nearly scoreless games, which cost them a real chance at a championship.
Wilson’s injury resulted from a notorious lack of consistency in the Seahawks’ offensive line, tasked with protecting Wilson from defenders. A defender blasted through the line in game 1 of the season, stepped on Wilson’s ankle, and took away his mobility and also the flexibility of the run game for the entire offense. Over the past years, the flaws in the offensive line, while not hidden, had been made tolerable by Wilson’s athleticism and ability to run away from defenders. His lost mobility and the poor offensive line created a vicious circle, and there was no way out of it this past season.
Late in the season, the Seahawks also lost superstar defender Earl Thomas to injury. He had previously never missed a game in seven years. Thomas can cover great distances quickly and had an instinct for being in the right place at the right time. At safety, he was a reliable last line of defense that allowed others to play more aggressively.While the defense overall was very strong, the loss of Thomas made it clear how important he was to erasing the mistakes of other players. It was a reliable quality assurance process had suddenly been removed and the lack of strong backup plan was revealed.
Relying on heroic individual performers to cover up for flaws in your system is a very risky strategy. All it takes is for that hero to be removed and the team performance suffers. Worse, management may believe that they have a reliable and stable system, when in fact it is barely being held together by a handful of key players. Management often is unaware of their delusion, creating other narratives for failures, which leads to sinking costs in the wrong areas. The combination of a system that relies on such players, and the lack of preparation to adjust the system in the face of the loss of such key players, is deadly.
Based on his demonstrated football acumen, management skill and will to out-prepare the other teams, I believe Bill Belichick is a week away from winning his fifth Superbowl.