“The Houston Astros Have a Massive Problem. MASSIVE.” by Phillip Stutts

The Houston Astros and Major League Baseball have a massive problem. MASSIVE.

(Side note: my marketing team wanted me to lead with “Houston, we have a problem” — but I couldn’t sink so low as to use that cliché line — except to explain to you that I won’t use it, which is kind of like using it … but I digress.)

Did you see the recent news about the Houston Astros cheating scandal?

Whoof, it’s bad, really bad.

In a nutshell, the most successful team in baseball over the past 3 years cheated, using sleuth technology to gain a massive advantage over their opponents. And this resulted in winning the World Series in 2017.

Yep, the Houston Astros cheated their way to winning the World Series.

The commissioner of Major League Baseball handed down his punishment to the team just this month — fining the ownership $5 million, taking away valuable draft picks, and suspending the General Manager and Manager of the team for one year (these two leaders were subsequently fired by the Astros’s ownership).

But, Major League Baseball allowed the Astros to keep their World Series championship!

I’m reminded of a joke that I was told as a kid, “The old saying that ‘cheaters never win, and winners never cheat’ is false. Cheaters always win, they just don’t get as much out of it.”

Feels true here. Not only that, it extends further than cheating. It will affect the Astros well beyond the years of the draft picks they lost.

What led to the Astros cheating? Probably some of the same reasons other business owners take shortcuts — money and winning.

The top leadership’s decision to cheat not only helped the Astros win the most coveted trophy in sports, it also grew the organization’s overall valuation (according to Statista) by $350 million since their World Series victory … and $1 billion since 2015.

Holy hell that’s a lot of money.

You’re probably thinking that cheating worked for the Astros … on the surface, well, yeah, they increased their valuation by $1 billion. But if you look a little deeper, you can see a lot of cracks in their foundation.

What’s important to understand, is that the team’s long-term outlook might cost MUCH more than the fast-and-easy rewards of cheating ever got them.

For starters, the valuation of the company will diminish over the next five years as the penalties set in. According to Forbes, the Astros are currently valued at $1.8 billion as of April 2019. *I’m putting a reminder in my calendar to see where their valuation will land in April 2021 when it’s recalculated. I bet it won’t maintain its current 17% year-over-year growth since the ownership bought the team in 2011.

From a marketing standpoint, the Houston Astros brand is completely wrecked. It is outright toxic. That cannot be fixed in the short-run. The amount of revenue lost due to their tarnished reputation is going to be insane. For example:

• How do you think this scandal will affect merchandising sales (which I’ve read make up between 35–45% of revenue)? I predict a massive loss of brand partnerships, fans, and overall sales.
• What do you think their best players will do once they become free agents? They’ll abandon a sinking ship, that’s what. And with no early round draft picks, the pool of young, talented players will dry up.

Do you remember when Southern Methodist University’s 1987 football team received the “death penalty”? Once their sanctions for paying players were lifted, they had no recruiting pool, no leverage, no players, and their brand and reputation were ruined. They still feel the effects today, 33 years later. It’s another example of poor leadership and poor organizational culture.

So what is the biggest takeaway from this story, and how does it affect you and your business?

Simply put, it’s about company culture … and culture is established by leadership. Peter Drucker once said, “Culture eats strategy for breakfast.” Drucker got it right long before most of us.

When a leader of a company creates a toxic culture that cuts corners, chases shiny objects at any cost, and doesn’t value honesty and integrity, they are on a path that may get them short-term wins, but will lead to a precipitous downfall.

If you are a business owner, let me give you some advice — the world has changed. A company can no longer run when leadership’s words and actions don’t align, especially for the up-and-coming Gen Z and Millennial workforce. The generation that society “loves to hate” clearly knows that a workplace culture is what you put out into the world — good or bad. If you don’t deliver on it or create a toxic culture, they will leave you.

I understand this because I created a toxic culture for years in my company. I cut corners, treated people poorly and waited for the get-rich-quick pill to work. Spoiler alert — the exact opposite happened.

Employees left, our success stalled. Worse? I blamed everyone but myself. It wasn’t until I started hiring this newer workforce that I realized my poor decisions — and only because they told me to my face! These interactions taught me that I had to change.

Let’s loop all of this back to the Astros. Now that the penalties have come down:

• Organization leaders have lost their jobs.
• The financial future of the franchise is in peril.
• The reputation of the organization is tarnished … forever.

Whether it’s a mid-market business or professional baseball, these results are universal. The only positive?

You can look at these lessons now and fix your culture.

The Astros have already blown it. Think they want to go back now and have a “do-over”?

I do.

Phillip

P.S. — When he’s not sharing strategies and networking advice for angel investors, Chris Graebe is delivering advice from entrepreneurs, thought leaders and influencers in his StartUp Camp podcast. We had an amazing conversation about political marketing strategies that have been proven to work in the corporate world. If you are struggling to make conversions, you don’t want to miss it. Listen here.

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