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	<title>Milwaukee &#187; Matt Arnold</title>
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		<title>Investing in Executive Structure</title>
		<link>http://milwaukee.locals.baseballprospectus.com/2016/08/09/investing-in-executive-structure/</link>
		<comments>http://milwaukee.locals.baseballprospectus.com/2016/08/09/investing-in-executive-structure/#comments</comments>
		<pubDate>Tue, 09 Aug 2016 16:01:56 +0000</pubDate>
		<dc:creator><![CDATA[Nicholas Zettel]]></dc:creator>
				<category><![CDATA[Articles]]></category>
		<category><![CDATA[David Stearns]]></category>
		<category><![CDATA[Doug Melvin]]></category>
		<category><![CDATA[Matt Arnold]]></category>
		<category><![CDATA[Ray Montgomery]]></category>

		<guid isPermaLink="false">http://milwaukee.locals.baseballprospectus.com/?p=6057</guid>
		<description><![CDATA[One of the curiosities of the 2016 Brewers rebuild withstood the trade deadline. Mysteries about whether Jonathan Lucroy would be traded (he would), relievers would be traded (they would), starting pitchers would be traded (nope!), any position players would be traded (Aaron Hill), or any top prospects graduated to the MLB (Welcome, Orlando Arcia!) were [&#8230;]]]></description>
				<content:encoded><![CDATA[<p>One of the curiosities of the 2016 Brewers rebuild withstood the trade deadline. Mysteries about whether Jonathan Lucroy would be traded (he would), relievers would be traded (they would), starting pitchers would be traded (nope!), any position players would be traded (Aaron Hill), or any top prospects graduated to the MLB (Welcome, Orlando Arcia!) were all answered. So, the inquiring fan might like another question to dig into as the season runs deeper: where have <a href="http://milwaukee.locals.baseballprospectus.com/2016/06/21/opposing-rebuilding-economics/">the Brewers spent their $40 million to $60 million</a> surplus? This question is especially interesting given the Brewers&#8217; (expected) coming surpluses in the next few years.</p>
<p>Related Reading<br />
<a href="http://milwaukee.locals.baseballprospectus.com/2016/04/26/the-new-professional-orthodoxy/">The New Professional Orthodoxy</a><br />
<a href="http://milwaukee.locals.baseballprospectus.com/2016/07/18/mlbpa-elitism-and-minor-league-pay/">MLPA Elitism and Minor League Pay</a></p>
<p>When the issue of the Brewers&#8217; additional revenue surfaced earlier in the season, fans typically stated that the club could plug that money into a huge Latin American July 2 spending spree, <a href="http://milwaukee.locals.baseballprospectus.com/2016/06/03/improve-minor-league-pay/">improving minor league pay or resources</a>, or other analytic or research and development projects. (With a couple of affiliate contracts expiring, it is also worth investigating the value of purchasing and controlling minor league clubs). Thanks to the prospect industry press, fans know that the Brewers did not spend very much in the International Free Agency season (perhaps finding &#8220;the new market inefficiency&#8221;?!?), although the club did spend the penalty-free maximum in June&#8217;s Rule 4 draft. Minor league spending, analytics spending, and research and development will unfortunately not make the press, given the typically opaque nature of MLB information sharing.</p>
<table border="1" width="100%" cellspacing="0" cellpadding="0">
<tbody>
<tr bgcolor="#EDF1F3">
<th align="center">2016-2017 Revenue Surplus ($M)</th>
<th align="center">$80 to $120 Million</th>
</tr>
<tr>
<td align="center">$10</td>
<td align="center">Research and Development Infrastructure</td>
</tr>
<tr>
<td align="center">$20</td>
<td align="center">Minor League Pay / Nutrition / Conditions</td>
</tr>
<tr>
<td align="center">$30</td>
<td align="center">July 2 International Amateur Free Agency</td>
</tr>
<tr>
<td align="center">$60</td>
<td align="center">Executive Pay and Extensions</td>
</tr>
</tbody>
</table>
<p>Now that the rebuild is coming along steadily, one might advocate for investments in corporate structure and front office positions, perhaps more than improved minor league pay or sinking capital into machines and other analytical production enterprises. There is a real sense that if the Brewers are going to successfully rebuild, the future values must come to fruition from the minors (hence necessitating improved minor league pay and conditions) <strong><em>and</em></strong> <em>the club must produce good knowledge.</em></p>
<p>It remains to be seen if the current front office will successfully rebuild the club into a consistent contender. However, at the moment, one can use various tools to argue that <a href="http://milwaukee.locals.baseballprospectus.com/2016/08/02/grading-the-system/">the club has excelled at acquiring future value throughout the system</a>. So, in this sense, the Brewers ownership board could be quite justified in investigating extensions and promotions for key front office members. As it stands, the Brewers feature a number of potential future GM candidates within their front office. Vice President, Amateur Scouting Ray Montgomery <a href="http://m.mlb.com/news/article/82864982/padres-interview-third-candidate-for-general-manager-job/">was already a GM candidate</a> when the Brewers hired him into his current position; Vice President and Assistant General Manager Matt Arnold <a href="http://www.draysbay.com/2015/10/5/9446677/is-the-rays-front-office-at-risk-of-losing-talent">was also quite a sought after executive</a> prior to coming to Milwaukee.</p>
<p>It is extremely early to ask such a question, but the Brewers do not have the market status to mistakenly undervalue front office talent: when should Milwaukee rekindle the President position (last held by Doug Melvin) and provide promotions for their braintrust?</p>
<table border="1" width="100%" cellspacing="0" cellpadding="0">
<tbody>
<tr bgcolor="#EDF1F3">
<th align="center">Brewers Corporate Structure</th>
<th align="center"></th>
</tr>
<tr>
<td align="center">Chairman and Principal Owner</td>
<td align="center">Mark Attanasio</td>
</tr>
<tr>
<td align="center">Chief Operating Officer</td>
<td align="center">Rick Schlesinger</td>
</tr>
<tr>
<td align="center">General Manager</td>
<td align="center">David Stearns</td>
</tr>
<tr>
<td align="center">Executive Vice President Finance &amp; Administration</td>
<td align="center">Bob Quinn</td>
</tr>
<tr>
<td align="center">Vice President Departments</td>
<td align="center">Administration / Baseball Operations / Consumer Marketing / Corporate Marketing / Entertainment &amp; Broadcasting / Finance / Human Resources / Information Systems / Media Relations / Miller Park Operations / Brewers Community Foundation</td>
</tr>
</tbody>
</table>
<p>One can expect fans to despise such an idea. Milwaukee is hardly three trading cycles into their rebuild, and the current staff has not proven they can build a winner. However, one can also argue that the rebuild is a &#8220;process;&#8221; in this sense, the process itself can be analyzed, including the extent to which each transaction either expands future value for the big league club, potential trades, or current performance value for the MLB club. There are multiple layers to this within the Brewers system. Furthermore, by the time the Brewers are on the cusp of contending, a couple of hiring cycles could pass, thereby opening the Brewers braintrust to new interviews and front offices eager to reward an analytical proponent with a shot at running their own organization.</p>
<p>The simple issue is whether the Brewers can afford to lose members of this team prior to contending (or on the cusp). If this front office has begun the process toward contending, and they are producing effective systems of knowledge, the Brewers arguably cannot afford to underprice this team of executives.</p>
<table border="1" width="100%" cellspacing="0" cellpadding="0">
<tbody>
<tr bgcolor="#EDF1F3">
<th align="center">Highest Paid Executives</th>
<th align="center">Approximate $(M)</th>
<th align="center">Years</th>
<th align="center">Title</th>
</tr>
<tr>
<td align="center">Friedman (Dodgers)</td>
<td align="center">$35.0</td>
<td align="center">2015-2019</td>
<td align="center">President of Baseball Operations</td>
</tr>
<tr>
<td align="center">Epstein (Cubs)</td>
<td align="center">$18.5</td>
<td align="center">2012-2016</td>
<td align="center">President Baseball Operations</td>
</tr>
<tr>
<td align="center">Duquette (Orioles)</td>
<td align="center">$10</td>
<td align="center">2015-2018</td>
<td align="center">Executive VP Baseball Operations</td>
</tr>
<tr>
<td align="center">Hart (Rangers)</td>
<td align="center">$6</td>
<td align="center">2002-2004</td>
<td align="center">Preceded Jon Daniels</td>
</tr>
</tbody>
</table>
<p>Unfortunately, executive compensation data are not as readily available as player compensation figures. This should not be surprising to the extent that the purpose of MLB front offices is to control information; while a strong labor structure benefits from freely available contract information, it is less apparent how a front office will benefit by advertising its compensation scheme. Front office members are also rewarded with additional aspects of professional prestige unavailable to MLB players (the most basic being that MLB players cannot receive a promotion via title and responsibilities). While data are scarce on Cot&#8217;s Contracts, FiveThirtyEight <a href="http://fivethirtyeight.com/features/statheads-are-the-best-free-agent-bargains-in-baseball/">recently modeled front office analysis and professional development</a> in several different directions. Suffice to say, analysts may be underpaid, too.</p>
<table border="1" width="100%" cellspacing="0" cellpadding="0">
<tbody>
<tr bgcolor="#EDF1F3">
<th align="center">Corporate Structure</th>
<th align="center">Potential Brewers Front Office (Yr/$M)</th>
</tr>
<tr>
<td align="center">President Baseball Operations</td>
<td align="center">David Stearns (4/$26)</td>
</tr>
<tr>
<td align="center">President Baseball Systems</td>
<td align="center">Matt Arnold (4/$17)</td>
</tr>
<tr>
<td align="center">President Scouting</td>
<td align="center">Ray Montgomery (4/$17)</td>
</tr>
</tbody>
</table>
<p><em>[Of course it is worth stating that if each of these three executives were promoted and signed to four year, $20 million contracts, they would each surpass Theo Epstein&#8217;s Cubs contract.]</em></p>
<p>Offering extensions and promotions could appear more palatable if one considers that (1) the salaries for top baseball executives have suddenly exploded, and (2) the Brewers will also have an additional $40-to-$60 million to stash in 2017. With this in mind, the Brewers could fortify their organization by improving minor league pay and investment, sinking a huge sum into the July 2 deadline (unless the new Collective Bargaining Agreement changes that process), and putting an elite executive compensation structure into place. Here, the Brewers can ensure that each aspect of their process, from labor to management to research apparatus, will be financed in a manner that creates incentive for success while also aggressively rewarding the first steps of the rebuild.</p>
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		<title>Is Just Catching Up Enough For The Brewers?</title>
		<link>http://milwaukee.locals.baseballprospectus.com/2015/10/29/is-just-catching-up-enough-brewers/</link>
		<comments>http://milwaukee.locals.baseballprospectus.com/2015/10/29/is-just-catching-up-enough-brewers/#comments</comments>
		<pubDate>Thu, 29 Oct 2015 13:00:28 +0000</pubDate>
		<dc:creator><![CDATA[J.P. Breen]]></dc:creator>
				<category><![CDATA[Articles]]></category>
		<category><![CDATA[David Stearns]]></category>
		<category><![CDATA[Editorials]]></category>
		<category><![CDATA[Market Inefficiencies]]></category>
		<category><![CDATA[Matt Arnold]]></category>

		<guid isPermaLink="false">http://milwaukee.locals.baseballprospectus.com/?p=2467</guid>
		<description><![CDATA[The Milwaukee Brewers have issued a clear statement of intent over the past two months. With new general manager David Stearns and assistant general manager Matt Arnold, the organization has signaled the beginning of a new era in franchise history &#8212; one that will seemingly embrace new analytical and operational trends in professional baseball. Stearns [&#8230;]]]></description>
				<content:encoded><![CDATA[<p>The Milwaukee Brewers have issued a clear statement of intent over the past two months. With new general manager David Stearns and assistant general manager Matt Arnold, the organization has signaled the beginning of a new era in franchise history &#8212; one that will seemingly embrace new analytical and operational trends in professional baseball. Stearns and Arnold come from Houston and Tampa Bay, respectively, which are two of the most &#8220;sabermetric&#8221; front offices in the league, though you can be sure that both would (rightfully) bristle at my usage of the word.</p>
<p>This isn&#8217;t to suggest that Milwaukee will suddenly embrace statistical analysis &#8212; they already had &#8212; or begin to eschew day-to-day scouting activities. Instead, I simply mean to indicate that Stearns and Arnold represent a level of youth, creativity, and research that has not really existed in the Brewers organization. The appointment of Ray Montgomery was perhaps a harbinger of this transition, but Stearns cements the Brewers&#8217; full commitment to the &#8220;new&#8221; model within baseball &#8212; one that seeks to utilize rigorous statistical analysis, painstaking research methods, extensive scouting, on-the-field coaching, and roster creativity to maximize the success of the team.</p>
<p>The challenge for Stearns and Arnold, though, isn&#8217;t going to be whether the club can emulate successful rebuilds like the one in Houston or the one in Chicago. The <em>real</em> difference maker in Milwaukee will be discovering the next competitive advantage that no one has exploited, the next market inefficiency, if you will. Simply using mountains data on framing, spin rates, defensive efficiency, and the like to drive coaching methods and roster decisions won&#8217;t be enough. Houston is doing that. Los Angeles, Boston, and Chicago are doing that. The Brewers must catch up in this area, sure, but the organization must employ something new. Because all things being equal, if the Brewers simply catch up and start doing what the successful organizations are doing, the organization&#8217;s small-market status will always keep them from reaching the levels they hope to achieve. All things being equal, the four clubs mentioned above (among others) will always be able to outspend Milwaukee. That will <em>always</em> be the competitive advantage that trumps all when everything else is equal.</p>
<p>Of course, the club will be able to field the occasional contender, if they score big on a couple back-to-back drafts (which they may have done in 2014) or if they orchestrate a couple of perfect trades that infuse the farm system with controllable, elite talent. The goal, though, is consistent contention. With a smaller budget than much of the league, the Brewers&#8217; front office has to be <em>better</em> than the existing quality ones that already exist and will come to exist in the future.</p>
<p>I suspect a lot of talk will surface next season of expanded scouting networks in Asia, of increased budgets in the analytics department, of greater amounts of advanced-scouting data being given to the coaching staff. That&#8217;s great, and needed, but the true barometer of success will be what comes out of Milwaukee that is truly novel. Does the organization finally pour money into the lower levels of the system, providing things like team chefs to ensure the players eat well and aren&#8217;t relying on Burger King at 11pm after a three-game series in Kane County, Illinois? Does the organization pay their minor leaguers enough so they can devote all their offseason to training, instead of working odd jobs to pay rent? Does the organization discover a way to better prevent arm and shoulder injuries in their pitching staffs? Does the organization pioneer a new strategy in the bullpen or the rotation, maximizing the effectiveness of the whole pitching staff without overtaxing arms?</p>
<p>I obviously don&#8217;t have any specific examples of undiscovered advantages in Major League Baseball. My relatively-barren bank account is proof enough of that. However, I do believe the organization&#8217;s fundamental challenge is that it&#8217;s not good enough to do everything well that the other teams are already doing. That will just bring the occasional brief window of contention to Milwaukee, a boom-and-bust cycle that is inherently unsustainable. For the Brewers to bring a consistent winner to the state of Wisconsin &#8212; something for which Mark Attanasio desperately pines &#8212; the front office must be smarter than everyone else. They must be willing to buck the league&#8217;s trends, be willing to stand out and be criticized. They must be willing to do things that the majority of us won&#8217;t immediately understand. They must constantly be ahead of the curve.</p>
<p>That&#8217;s obviously a tall order for any front-office staff. I wonder if that&#8217;s even remotely possible. Perhaps the best for which the Brewers organization can hope is occasional contention &#8212; and, really, I think that can be enough for a franchise that largely avoids the spotlight of the national sports media &#8212; but I&#8217;m increasingly convinced that sustainable, long-term success in Milwaukee can only come if David Stearns and Matt Arnold are able to create something special, something no one has seen before.</p>
<p>And, if we&#8217;re truly being honest, that would only be able to last so long before a team like the Dodgers or Yankees open up the checkbook and make an offer Stearns or Arnold cannot refuse. Just ask Andrew Friedman and the Tampa Bay Rays about that.</p>
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