The Welches on Joe Torre


Did the Yankees offer the star manager a raw deal? No. A reasonable one is more like it

What is wrong with the Yankees? How could they stick a manager as great as Joe Torre with such a raw deal? —Stephen MacMillan, Boston

Since we're going to take issue with your perspective in a paragraph or two, allow us to begin this column with some points of agreement. First, we wholeheartedly agree with your view of the Yankees. The ownership deserves the Horse's Rear-End of the Year Award for its handling of Joe Torre's contract. Take, for instance, George Steinbrenner's ugly and inhumane "Win or You're Outta Here" pronouncement in a New Jersey paper before the team's playoff series with the Cleveland Indians. Awful!

Second, we agree that Joe Torre is a star: Who else can claim four World Series rings and 12 straight post-season appearances? He also happens to be a high-integrity, good-hearted, first-class human being, deserving of all the admiration he receives.

But did the Yankees stick him with a raw deal? No way. A very reasonable deal is more like it. The offer accurately reflected the marketplace; with a $5 million base salary, Torre would still be the highest-paid manager in baseball. And with a $1 million bonus for every playoff series won, it reflected the ownership's priorities. If the Yankees won the World Series in 2008, Joe Torre stood to receive an $8 million payday, more than any other manager by a factor of two.

Sure, you can debate the Yankees' choice of performance metrics, given the role luck seems to play in a short play-off series. But in the cold light of day, you really cannot call the Torre deal any of the epithets it inspired, from "raw" to "insulting" to "cruel."

Acrimony on the Public Stage

But therein lies the problem. Joe Torre's deal wasn't negotiated in the cold light of day but under the hot glare of media scrutiny—and because of that, it fell victim to an all-too-common dynamic in any industry. When negotiations enter the public realm, reason exits, emotion sweeps in, and deals get transformed from what they should be—best all-around solutions—to gladiator-like death matches, where, at the end, one side gets to proclaim victory and the other gets cast as the smote, humiliated loser.

Examples of this destructive phenomenon abound in business. It is particularly prevalent in labor negotiations, as they almost always play out in the press. New York's contract dispute with its 34,000 transit workers in 2005, for example, was a main stage melodrama if ever there was one, with Mayor Michael Bloomberg publicly renouncing the union as "thuggish" and the union leadership defying court orders. Finally, as always, the adversaries sat down at a table and hammered out a settlement. Please note that this didn't occur until after both sides signed an agreement not to talk to the media.

But it's not just broad-based union agreements that get stung by the irrationality effect of media scrutiny. Any time an acquisition fight falls under the public eye, competing buyers can get a little wacky. Suddenly, it's not about buying a company at a reasonable price, it's about who will be declared the winner and who the loser. The result: overpayment, sometimes to a ridiculous degree.

Joe Torre's Pride

Media coverage can also muck up contracts for big-ticket items. Airlines, for instance, are masters of pitting companies against each other when they shop for a new plane. The "winner" of the order may get to celebrate its big-business headlines, but it then has to spend years clawing back the lost margin with service and parts sales.

The sad truth: Some of the least sensible, most unfortunate deals we know of have been made because the participants felt they had to save face before a watching world, and we'd put Joe Torre smack in the middle of that category. Again, we respect him immensely, but it seems he let all the attention override his rational thinking—replacing it with gut-level feelings of pride and defiance. It's hard to blame him. He's only human, and from where we sit, the Yankees ownership started the media mess, with their appalling public threats.

Sadly, the Torre saga is over. The Yankees have lost a great manager, and that manager lost a great job. But the lesson of those events should not be lost on anyone in business. When it comes to negotiations, conduct them quietly, quickly, and in private, even if that approach appears to cost you more. In the end, it's worth it.

Jack and Suzy Welch look forward to your questions. You can e-mail them and view their new website at www.welchway.com For their podcast, go to www.businessweek.com/search/podcasting.htm.

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