What Can Sabermetrics Teach Us about Measuring Business Success?

Written by Kevin Wang, CPA, CGFM on October 22, 2019

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According to the Society for American Baseball Research, “Sabermetrics is the search for objective knowledge about baseball through analysis of the statistical record.”

Sabermetrics has had (and continues to have) a profound impact at all levels of the game of baseball. It informs many decisions that Major League teams make, it influences the baseball industry’s narrative, and it even affects how the sport is portrayed in popular culture.

In fact, the movie Moneyball was all about how a Major League Baseball team utilized sabermetrics to build a successful program with a relatively small budget. Even the Simpsons have given a nod to sabermetrics in their episodes, not to mention sabermetrics’ prevalence in pub trivia games everywhere.

There’s no doubt that the influence and scope of sabermetrics continues to grow and that more and more conversations about baseball—both among commentators on television and among colleagues gathered around the watercooler—are drawing from its statistical and analytical principles.

But, with all of the emphasis we are placing on these statistics, is there more to sabermetrics than meets the eye? Could the same be said of the statistics that we use to measure the success of a business?

How do statistics influence the game of baseball?

Ever since baseball statistics have been recorded (long before the term “sabermetrics” was coined), batting average (the average number of hits a player gets relative to the number of chances) has been the primary batting statistic considered when comparing players’ contributions.

For instance, a player with a batting average of .300 (getting three hits out of every ten at bats) is performing significantly better than a player with a batting average of .200 (getting two hits in the same number of at bats).

While batting average is often used to gauge a certain player’s success, it’s important to remember that despite the significance of a player’s batting average, baseball games are won and lost based on the number of runs a team gets—not the number of hits. Yes, hits contribute to runs, but there is a myriad of other factors that could come into play when it comes down to the runs on the scoreboard at the end of the game.

For instance:

  • Batting average doesn’t take walks into account.
  • A hit when the bases are loaded is far more valuable than a hit when the bases are empty, yet that isn’t factored into the batting average stat.
  • A single (hit that gets the batter to first base) and a triple (hit that gets a batter to third base) are also vastly different when it comes to value, yet they are treated equally when simply considering batting average.

This is just the tip of the iceberg when it comes to the batting aspects of sabermetrics and how they translate to actual wins and losses—not to mention that there are pitching and fielding aspects as well.

I’ll leave that for the baseball experts, but what’s clear is that, even though we rely on certain statistics to guide our understanding about player performance, there’s much more to it than just what we see in the numbers.

How do statistics influence the evaluation of business success?

Let’s apply the same principle to how businesses evaluate their own success.

Similar to the game of baseball, any given business considers a slew of aspects that contribute to and define success, but it’s important to step back and consider what those aspects are actually measuring. Certain aspects, such as growth in revenue, reaching benchmarks or team members receiving new certifications or awards, are all celebrated—as they should be.

But, just as batting average may not provide a full picture of a baseball player’s success, your business’s key performance indicators might not provide a full picture of your company’s success either.

  • The number of hours and resources spent on a project may not reflect the value of new efficiencies that your team members identified in their work and research that will improve future projects.
  • Your company’s statistics about acquiring new customers may not reflect the solid relationships that were established that will fuel a partnership between your team and your customers for years to come.
  • Your employee demographics may not be able to measure willingness of all team members to constantly seek improvements and be open to change—a crucial element of true success.
  • Your growth in revenue won’t reflect the value of cohesiveness and collaboration among your service offerings or departments that contributed to new innovation.
  • Your business’s philanthropic activity is often measured in hours, which often fails to capture the true impact that is being felt throughout the community because of your company’s influence.

In short, businesses often overlook the value in those things that aren’t tangible or quantifiable. Yet, those things are some of the most important aspects to consider when trying to gain a full picture of your business’s success.

What can sabermetrics teach us about measuring business success?

While key performance indicators are excellent metrics to base strategies and conclusions upon when charting the future of your business, it’s also important to remember that much of your business’s success won’t be (and can’t be) captured in statistics alone. It’s true that percentages and metrics and measurements are of paramount importance for evaluating a business’s success, but learning to celebrate the value of the things that can’t be measured also has value in itself.

 

Kevin Wang is the Director of Innovation at Warren Averett—a role in which he considers the Firm’s use of technology and operations in order to foster continuous improvements that will help the Firm reach its business goals. Learn more about Kevin or contact him directly

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