A Pinstripe Predicament

Bringing the House illustration

Imagine that you are the owner of a Fortune 500 media company. You are interested in taking your company to the next level, so you decide to look for a young, talented person that you can groom into a star ad exec. On a recruiting trip to Harvard Business School, you encounter the prized jewel of the graduating class--a second-year MBA student who is nationally recognized as the "next big thing" in the industry. You immediately offer him a job upon his graduation, complete with an insane salary, a gigantic signing bonus, and a luxurious office. He accepts your offer, he graduates, and the marriage officially begins. Over the course of the next several decades, your star ad exec catapults to not only the top of his division, but the top of the company. In addition to closing the most and the largest accounts on a yearly basis, the ad exec has become the face of your company, which has now become the leading media organization in the country. When a person thinks of your company, he/she immediately thinks of the ad exec. They are one.

However, lately, the ad exec's individual performance has slipped to levels not only below his typical output, but below the average for exec's that earn similar salaries. Fortunately, the time has come to restructure his employment contract. What should you do? 

• Should you continue to pay him big money for a level of production that you could get from someone else for a lot less money? 

• Should you try to offer him less money and hope that he understands the offer as strictly a business decision with no hard feelings?

• Or should you simply let him go to another company and start a new chapter in your organization? 

• How will your millions of shareholders react to your decision? 

• Is your public relations department prepared to deal with the implications of your choice?

In essence, the New York Yankees are experiencing a similar predicament right now with its future Hall of Fame shortstop Derek Jeter. The beloved team captain's contract (10-year, $189 million) has officially ended, and it is now time for Yankees General Manager Brian Cashman and his crew to work with Jeter and his agent, Casey Close, on a new deal. Earlier today, November 23, sources confirmed that the Yankees offered Jeter a three-year, $45 million contract. Jeter has yet to publicly deny the offer, but Jeter and his agent have made it clear that the Yankees star wants a long-term deal (at least four years, preferably fix or six). As a result, it appears that the two sides remain at a nightmarish impasse.

For starters, I empathize with each side. If I were Jeter, I, too, would look for a long-term deal to secure my employment. As athletes get older, job security decreases significantly for various reasons, including lower production, higher risk of injury, and the appeal of younger talent. Athletes have only a small window of opportunity to earn money for their athletic ability; the great athletes are usually done by their mid-thirties. Thus, I understand the reasoning behind Jeter's demands. On the flip side, the New York Yankees, like every other baseball organization, is first and foremost a business. The aim of their business is to win championships and make money in the process. All decisions regarding player personnel must be made with this goal in mind. As a result, I can also see where the Yankees are coming from.

But let's be real here:  Derek Jeter and his ego are holding the New York Yankees hostage in this contract negotiation saga. Regardless of what you think about Jeter (I happen to think very highly of him), it is obvious that he is abusing his status as an all-time Yankees legend to milk as much money and as many years as he can out of this deal. Jeter and his agent can make all the arguments that they want to about Jeter's intangibles and non-quantifiable effects on the franchise. Jeter is the face of the franchise--we get it. But how can anyone justify paying top-of-the-line money for mediocre on-field talent? If advertising, branding, and image are worth so much, why not just divert some of the money that you would pay Jeter over to a group of elite marketing executives instead?

Baseball is, and always has been, a game of numbers. Frankly speaking, Jeter's numbers do not warrant the contract that he desires. Jeter is 36 years old and he just turned in the worst statistical season of his career. He was arguably the Yankees' weakest offensive starter, and his defense, despite a highly-questionable Gold Glove award, clearly deteriorated. Last season, Jeter had the third-highest salary among all players in baseball. Earning $22.6 million, Jeter out-earned teammate Mark Teixeira ($20.625M), Detroit Tigers triple crown threat Miguel Cabrera ($20M), Phillies slugger Ryan Howard ($19M), and the list goes on. Furthermore, when you compare Jeter to other shortstops in the league, it becomes even more clear that Jeter is overpaid; Phillies star shortstop, Jimmy Rollins, 32, will make $8.5M in 2011; Dodgers shortstop, Rafael Furcal, 32, will make $12M next season; and 26-year old Florida Marlins shortstop, Hanley Ramirez, widely regarded as the most complete player in baseball, will earn only $11M, half of what Jeter made last season.

The bottom line is that this is an extremely delicate situation for both parties. Derek Jeter has a lot of leverage, and it is clear to me that he is really trying to use that to his advantage. The Yankees, meanwhile, really want Derek Jeter back, but they don't need him back. And that may be the one piece of knowledge that guides them throughout this entire process. No one can predict exactly how this scenario will play out, but I am convinced that, when all is said and done, Jeter will be the one who compromises his wishes the most. While a player and an organization may appear to be one and to be equal (like an ad exec and his media company), a player is never bigger than the team, the organization, or the brand.