The Major League Baseball (MLB) 2017 season is nearly at its half-way mark (three games until the All-Star break) and the Houston Astros have the best record in baseball, followed by the Los Angeles Dodgers over in the National League. Having gone in the tank in the early part of the decade to stock up on high draft picks, the Astros are now seeing the benefit of their intentional losing campaign which saw three consecutive seasons (2011-2013) with over 100 loses each season. How bad was the Astros’ intentional attempt to lose? One Astros player who lived through that miasma said, “It was like we were trying to find a way to lose a game. You’d say sometimes in the morning, ‘Oh, I gotta go to the ballpark.’ It wasn’t fun.” Other teams could not wait to feast on Astros pitching.

Yet in baseball, high draft picks do not always succeed at the MLB level. So, it is more than tanking and having high draft picks, it is developing your talent. As reported by Tyler Kepner, in a New York Times (NYT) piece entitled “Astros’ Successful Recipe: Mix Power with Contact, the basis of the Astros success, has been their ability to hit with punch and not simply slap at the ball. Hitting coach Dave Hudgens said, “I don’t want guys swinging at a pitch unless they can hit a homer. I don’t want guys swinging at a pitch unless they can do damage. If you go in with that mind-set, you’re not going to miss your pitch as often.””

This is all punctuated with the Astros leading the majors in slugging percentage while having the fewest strikeouts. This is indeed a rarity, as “according to the Elias Sports Bureau, only two teams since 1910 have led the majors in slugging percentage while recording the fewest strikeouts: the 1948 Yankees and the 1995 Cleveland Indians.” The real key is not simply the slugging percentage but in not having the strikeouts, which General Manager (GM) Jeff Luhnow called “rally-killing”. Putting the same concept in any manner, Luhnow said “contact is your friend, all the time, whether it’s putting pressure on defense, moving runners, scoring one run with a guy on third.”

To add to the young talent obtained through the draft and developed in their farm system, the Astros “made a decision to try to change the nature of our lineup by adding guys that made hard contact.” They replaced a group of free swingers with “veterans who more reliably make contact: Reddick, Nori Aoki, Carlos Beltran, Brian McCann and Yuli Gurriel, a rookie with a long track record in Cuba. All but Aoki have power. The Astros lead the majors in on-base plus slugging percentage from the 8 and 9 spots in the order, essentially using 12 everyday players to shuffle seamlessly in and out of the lineup.”

Today’s lesson from the world of sports informs our discussion of compliance and the risk management process; consisting of forecasting, risk assessment and risk management. By starting with forecasting, a compliance function utilizes risk assessment to consider issues which forecasting did not predict for or issues which the forecasting model raised as a potential outcome which warranted a deeper dive. If you are moving into a new product or sales area and are required to use third-party sales agents, a risk assessment would provide information that a company could use to ameliorate the risks.

Risk-based monitoring follows on from the issues that your risk assessment identified as your highest risks. Ben Locwin, Director of Global R&D at BioGen and an operational strategist in pharma and healthcare, said, “Risk-based monitoring tends to look at things on an ongoing basis, and the models that are behind the risk-based modeling, risk-based monitoring models, they’re continuously refined based on incoming data.”

All of these three tools tie back into process management and process improvement. Locwin has stated, “There’s always this balance between what’s actually important for our business or for proper execution, versus what’s actually going on in the whole process. If you’re not measuring at a high enough resolution, you’re not capturing a lot of the environmental, market force, external factors that probably are of high leverage to your operations in business that you just don’t know about.”

In other words, it comes down to execution. This means you must use the risk management tools available to you and when a situation arises, you remediate when required. This is not only where the rubber hits the road but the information and data you garner in the execution phase should be fed back into the process loop. From this, you will develop continuous feedback and continuous improvement.

Hui Chen, in her interview by Matt Kelly on his Radical Compliance podcast, added the root cause analysis to the compliance officer’s toolkit to help build a picture of risk and how to management it, noting that when some event does occur, whether it be a Foreign Corrupt Practices Act (FCPA) violation or simply an internal policy violation, “it is really important that companies begin by looking at what happened.”

The Astros seem to have put all of this to use, at least in the first half of the 2017 season. Will they continue to have their sterling record? History tells us Astros fans not to get our hopes up to high. An economist might say regression to the mean is the standard in competitive sports. A television weatherman might say freezing temperatures are predicted for Hades in late October.

Yet GM Luhnow remains hopeful, noting, “It’s not as if I taught strikeouts one year and I’m not teaching strikeouts this year. But the style of offense that has developed here has been a perfect blend.” All-Star second baseman Jose Altuve added, ““I guess not striking out is one of the reasons we’re in first place, but I’m not against strikeouts,” Altuve said. “I don’t like people going up there and trying to not strike out. That’s not the right approach. The right approach is going up there and trying to drive the ball.” NYT reporter Kepner summed it up nicely, “Contact, indeed, is their friend. The Astros hoard it for themselves, and the relationship is serious.”


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© Thomas R. Fox, 2017