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Decision Making

Chicago Cubs Economics: Tribune, Taxes, and Tivo

Just before the Great Recession, when Sam Zell led the ultimately doomed leveraged buyout of the Chicago Tribune, he and his fellow investors planned to sell the Chicago Cubs to help pay down debt.

In 2009, they found a buyer for the Cubs – the Ricketts family. They bought the team for $845 million.  Since the Tribune had bought the Cubs in 1981 for $20.5 million, they were on the hook for a large tax bill.  They tried to avoid paying it by using a leveraged partnership instead of an outright sale.

Fast forward seven years to today.  The Cubs are now worth $2.2 billion and the favorite to win the World Series.

I wonder if the Tribune wishes it held on?

While the Cubs made the Tribune $824.5 million over 28 years of ownership, the Ricketts family made $1.355 billion over just 7 years of ownership.  To add insult to injury, the IRS is still pursuing them for $225 million in back taxes.  The IRS considers the leveraged partnership to be a disguised sale.

Why did the Cubs explode in value during the last 7 years?  The progress on the field had little to do with it. 

The key is Tivo. 

Tivo pioneered the concept of fast-forwarding live TV, time-shifting, and binge watching.  Commercial TV has lost much of its value to advertisers.  The one exception is sports – people will still view them live, without fast forwarding.

Out of all sports, baseball is the one that has the most broadcasts during a season.  TV networks and channels started bidding to win the right to telecast baseball, and the TV money exploded, along with team values.

The Chicago Cubs have always been one of the most watched teams, and are in one of the most TV-friendly markets in the country.  As a result, their economic value was especially affected.

Empowerment Starts With Effective Decisions

I recently conducted several sessions for an international bottling and beverage distributor. The focus of the sessions was to improve the leadership tools that were being used by both front line and middle management. As an introduction to the session the Vice President of Manufacturing spoke of the need to empower employees, absolving front line leadership of the perception that they needed to personally attend to every single task that required execution.

The session went well, but it struck me that there was still a gap that had not been addressed that would hinder the ability of leadership to empower employees, that being the decision making process. The process within which decisions are made will determine the degree of speed, quality and relevance of decisions within the organization. Critical to both employee empowerment and productivity.

When constructing your organizational decision making process, ensure the following considerations are incorporated:

1. Define what the critical components are in an effective decision (i.e. clarity, validity).
2. Define what constitutes organizational value (i.e. strategic goals, customer value).
3. Identify the level of empowerment assigned to leadership (i.e. escalation boundaries).
4. Define the employee empowerment boundaries (i.e. self directed decisions).
5. Specify how decision velocity can be improved (i.e. initiate planned communications).

If the decision making process is not documented and communicated, it's difficult to ever achieve true empowerment either at the employee or leadership level. So if improving upon employee empowerment is an objective, then consider how to integrate the questions above into your decision making process. Faster and more effective decisions are the only possible outcome.

© Shawn Casemore 2013. All rights reserved.

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