June 27, 2002
Continuity: It’s what successful basketball teams and successful businesses have in common
In an attempt to stay ahead of the game during the nation’s slumping economy, board members are reportedly trading in their chief executive officers for new ones. But the key to competitive advantage on the basketball court is consistency, says Management and Organization Professor Charles Hill.
Hill, who studied shared team experience among players in the National Basketball Association, found NBA teams that refrained from juggling their rosters improved their win-loss record by nearly six games per season.
A similar strategy emphasizing continuity should also be applied in the corporate boardroom, argues Hill. But some recent reports indicate that an average of two CEOs are losing their jobs each day.
“As in professional basketball, what you often see occur in companies is boards bringing in new CEOs from the outside to increase performance,” Hill said. “But by making an analogy from what we found in the NBA, that doesn’t necessarily cut it. Hiring a star outsider or a high-profile manager may not necessarily improve performance. It actually may be better business to keep the same management team. We found that it’s better to even keep a losing team together because they will do better next year.”
Hill and colleagues Shawn Berman of Santa Clara University and Jonathan Down of Oregon State University studied 23 NBA teams during the span of the 1980-81 season to 1993-94. Accounting for age, draft position and the experience of each team’s coach, the researchers measured the amount of shared team experience by assessing how many years a player had on a specific team at the end of each season. They found that losing teams that increased their shared team experience during a season won an average of 5.7 more games the following year. Losing teams that mixed up their rosters only won on average about 1.2 more games than the previous year.
Hill says the bigger increase in wins is a result of increased shared experience, or an unconscious or tacit knowledge of each other’s playing styles and individual idiosyncrasies, as well as team dynamics. At many companies, tacit knowledge is a key component used to measure a company’s competitive advantage.
“We found that the more of this knowledge they have the better they’ll perform. This result, arguably, could influence a company’s hiring practices,” Hill said.
Hill said professional basketball was the ideal testing ground to track the amount of shared experience and influence of tacit knowledge. “Each team has 48 minutes of playing time and five players are always on the court,” Hill said. “And the length of a regular season is always the same — 82 games.”
While Hill acknowledges that it sometimes may be necessary to hire new people, he says the theory should still apply.
“The bottom line here is that tacit knowledge is a source of competitive advantage, whether in basketball or at the office,” Hill said. “The best situation would seem to be acquiring high-quality players, or employees, and then keeping them together long enough for significant synergies to be created.”
Hill’s findings were published in the March issue of the Academy of Management Journal.
