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The Billy Beane Case Study

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The Billy Beane Case Study

1. Based on the “Billy Beane: Changing the Game” case, explain how and why the Oakland A’s economic situation after 1995 shaped its:

a) Compensation strategies
In the world of major league baseball, the Oakland A’s defied the laws of baseball economics. The team spent only $34 million (the 2nd lowest payroll) had won 102 games and lost only 60 in 2001. On top of this, they finished first in their division and made the playoffs. Major baseball teams would hire high school players rather than college players. This made high school players costly. The Oakland A’s strategy is to hire college players to save on resources. They argued that college players have already gained substantial exposure and competition. Beane would recruit new drafts and sign them for less than the going rate. Because of budget constraints, the Oakland A’s recruited Scott Hatteberg, he played six years with the Boston Red Sox’s. He got injured and lacked the prowess in throwing the ball effectively. Hatteberg was, according to the Boston Red Sox’s, a lame player and did not sign him again. With this, Hatteberg’s monetary value diminished and that is why the Oakland A’s recruited him at a much lower salary (because there were no other takers). Unknown to the other baseball teams, Hatteberg is the missing puzzle in the Oakland A’s team. The Oakland A’s noted that Hatteberg had an uncanny knack for getting on base. Management could no longer afford to pay market or above market rate for players, Beane had to employ different methods to compensate players. In order to develop a good compensation plan, management determined the work that must be performed, the knowledge and skills required and the rewards that would be offered. The critical step in the compensation process was to determine which skills were overvalued in baseball and which was to determine

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