In the eighties, a statistician named Bill James developed "SABeRmetrics (Society for American Baseball Research)"--measurements of baseball player performance that enabled a new breed of general manager, like Oakland's Billy Beane, to compete with the Yankees' willingness to overpay established stars. For example, the Yankees paid for hits, not walks, despite the old baseball saw "a walk is as good as a hit". This allowed Oakland to sign, at a discount, players similar to Kevin Youkilis who got on base via their uncanny ability to discern balls and strikes.
Although Michael Lewis' book Moneyball lionized Beane's prowess in underpaying employees, Oakland has not reached the World Series during Beane's tenure. A Beane disciple, Theo Epstein, has won two World Series with the Red Sox during this time. The difference? SABeRmetrics plus a Yankee-sized payroll. He simply paid more for Youkilis than Beane did.
And the Yankees, in spite of an ever-metastasizing payroll, remain the major league's most profitable team.
My team is Unionwear. We can't win a World Series, but we've been able to win apparel contracts by using "Labormetrics" to hack garment industry paradigms and figure out how to pay employees more-and charge customers less-than the competition.
VORP- Value Over Replacement Personnel- is perhaps THE key stat contributed by SABeRmetrics. VORP uses an elaborate formula to calculate how many more runs a player contributes to his team versus the contribution of freely available talent at that position. How many more games will the Yankees win starting Marx Texiera at first base instead of the 31st best first baseman?
Unionwear can actually calculate VORP. Unlike piecework shops, we operate our factory in teams and track team production meticulously because employee bonuses depend on it-we measure runs, not hits. We only hire experienced sewers, so we can see how team production is affected when a veteran is replaced by the best garment worker who is not starting on another team.
VORP assigns a dollar cost to replacing an employee, but its utility is not limited to employee turnover-it works when analyzing any policies that favor new (usually cheaper) employees over veteran employees. For example:
" Deciding, during temporary expansion, whether to offer existing employees voluntary overtime or whether to hire rookies.
" When overtime is necessary, whether to offer it to new or veteran employees
" When veteran employees have circumstances restricting their hours, whether to offer flex time, or to stick to strict hours and have new hires pick up the slack.
" How much to invest in worker safety and ergonomics.
" Company policies toward maternity or family care leave.
" How much to invest in a positive workplace environment that discourages turnover.
NEXT: how to measure VORP.
