What the Cuban baseball pipeline can teach us about management risk

What the Cuban baseball pipeline can teach us about management risk All management comes with inherent risks, checks and balances, and rewards.

The key is knowing where that line between risk and reward is, and how to reduce the former while maximizing the latter. Sometimes, though, leaders take it on themselves to assume a huge amount of risk in order to reap massive rewards.

The money available in Major League Baseball is astronomical. When individual players can receive salary deals that rival the GDP of some nations, it’s a cinch that the temptation to push the limits is always there. One of those limits? Signing players from Cuba.

The benefits are easy to see. Cuba produces some of the most talented and versatile baseball players in the world. The country is absolutely overtaken with the sport, and they take it – and their national league – very seriously. The players love the game, but many dream of playing in the Bigs in the U.S. or Canada. The money’s much better, and the promise of more freedoms remains enticing.

Of course, there’s a catch. Cuba doesn’t want their best players to leave. And they certainly don’t want them going across the Straits to one of their biggest historical enemies. The government of Cuba, as well as the individual teams, go to great lengths to keep Cuban players at home.

Enter the smugglers. There’s a massive and profitable, not to mention incredibly dangerous and illegal, underground trade happening with Cuban baseball players. The route starts in Cuba and, they hope, ends with a Major League contract. But the road from start to hoped-for finish is arduous and harrowing.

While no one is keeping – or admitting – accurate numbers, reports are that at least 25 Cuban players have come into the country to play in Major League Baseball in the past 12 years.

So, how does this apply to management? Sometimes in business, you are presented with an opportunity. In the case of these baseball managers, they are given an opportunity to manage a talent that could benefit their team and their careers in a big way. That leads to a decision. Do I participate in something that makes the player, the team, and myself happy, that I know happens to be illegal … or do I speak out, potentially damaging or even ending my career?

This might seem like an extreme case, but many managers face similar questions. Think about the managers at Wells Fargo and, now, Prudential, who were tasked with compelling workers to set up fake accounts in order to meet “impossible” quotas. Did they make the “right” call? Or did the ones who quit in protest do the “right” thing? This case serves as the other extreme in this example. The managers at Wells Fargo knew what they were doing was not only illegal, it actively hurt their customers.

Here’s another example. You have a shortfall. You have to cut somewhere, but you know that will hurt employees. Still, if you don’t make the cuts, the entire business, and all the employees are in jeopardy. The option is to cut positions or to cut everyone’s pay substantially, which might cause you to lose some key employees anyway, and it will certainly provide a hardship for everyone. What do you do?

Risk-reward. All business has it. Might not be as extreme as the risks and rewards offered by Cuban baseball players and the teams that want them, but it’s every bit as real. How will you make your decisions?

David Milberg is a financial analyst in NYC.