Astros' Luhnow Isn't Afraid To Be Unconventional

HOUSTON—Once in a while it will come out in public, but that's fine. Jeff Luhnow doesn't really make any attempt to hide it.

His business background, which can seem somewhat buried on a resume that includes a seven-year stint running the Cardinals' drafts and now the leadership of an Astros front office in great upheaval, will bubble up.

He'll be wondering aloud about whether a draft pick will sign and instead of addressing his college commitment, he'll bring up his BATNA. That's his "best alternative to a negotiated agreement," a term straight out of business school, which makes sense because the Astros general manager is an alumnus of one of the most prestigious. That Kellogg business education and subsequent career path have helped shape the philosophy with which he molds baseball's worst team with plenty of freedom to do so his way.

Hired by owner Jim Crane at the Winter Meetings of December 2011—about three weeks after Crane's purchase of the team went through—Luhnow has had the freedom in the last year to take a blowtorch to Union Station, the converted railway terminal that the baseball operations department calls home in Houston.

In the last 11 months, he has turned over every employee one level down on the organizational tree.

Amateur scouting turned over from Bobby Heck to Mike Elias, a 29-year-old front office meteor who came over from the Cardinals' scouting ranks. Pro scouting went from Ricky Bennett to Baseball America and Baseball Prospectus vet Kevin Goldstein, who had never before worked for a team in any capacity. International scouting from Felix Francisco to Oz Ocampo, who like Luhnow has a business background.

Then there's his most visible hire, which came in late September as he and Crane selected Bo Porter to manage the Astros' first seasons in the American League and start what is expected to be a long road back from 107 losses.

A Different Background

Putting people in places is the part of the job that Luhnow takes the most pride in, and not coincidentally, it's the part of his education at Northwestern's Kellogg School of Management that he carries with him the most. More than the accounting or finance that tends to be associated with business school.

"That is human resource management, organizational behavior, building a culture inside an organization," Luhnow said. "Really that can be a big differentiator in a front office—understanding how to get the most out of your people."

If that sounds like a consultant's language, it's because it is.

After graduating from Kellogg in 1994, Luhnow took a much more traditional path out of business school, making it a much less traditional path into the GM's office.

With no real inkling of working in baseball ever since a shot in the dark out of undergraduate education at Penn failed, he went to work at the consulting firm McKinsey & Company before peeling off to launch two companies of his own.

He started the technology firm Archetype Solutions and got in on the dot-com boom with in his entrepreneurial phase. A simple search of the United States Patent and Trademark Office database will turn up his name as well.

Elias, who took the much more traditional route to his job as scouting director, pitching in college and then serving as an area scout, can see through the amateur scouting conversations in the office how Luhnow's mind works a little differently from that of most GMs.

"If you sign the typical high school player for $800,000, what is that asset typically worth in the trade market, what is it worth eventually in the free-agent market," is how Elias describes Luhnow's approach. "How much can you expect that asset to appreciate and how can it later be monetized?

"He's able to take the intuition of our experienced baseball guys and through the disciplined study that's necessary in the business world, track very precisely how we might expect to see that return later on."

And he requires that intuition from elsewhere, because despite some quick learning in the past decade, his heritage is not as a baseball guy; his playing career went nowhere past his youth in Mexico City. Through a former colleague at McKinsey who had married into the DeWitt family, Luhnow met Cardinals owner Bill DeWitt and went to work for St. Louis at a position that demanded an outsider.

Luhnow came in as if a hired hand from McKinsey—the consummate outsider—evaluating the whole operation before he got involved in player procurement (amateurs) and development.

"It was talking to people there, doing some comparisons with other organizations, doing some comparisons with best practices in other sports and really come up with a recommendation for improving each functional area, where we needed to invest more, where we might be overinvested, etc.," Luhnow said.

Emphasis on analytics went up, and despite the often overblown descriptions of the scouts vs. stats "war," this did earn him a poor reputation in some circles of the baseball world. There has been some incredulity as well about the number of outsiders entrusted with high positions in the new Houston regime.

Outside Influences As Insiders

In addition to Goldstein and Ocampo, the latter called by Luhnow a hybrid insider-outsider, the GM has entrusted much of his ear to Sig Mejdal, a Cardinals import charged with running the four-person decision sciences team. A former NASA engineer and mathematical modeler, Mejdal spent much of his early tenure replicating and improving on their system from St. Louis of statistically evaluating players for the draft.

Typified by Allen Craig, a college senior sign, many of the complementary pieces of the Albert Pujols era who have come to the forefront of the Cardinals have been statistically motivated draftees, and the Astros are hoping to build the same legacy—albeit with a need for more star power now.

Luhnow doesn't shy away from the influence from outside the typical paths to the front office and in a way embraces them.

"I was certainly an outsider that came in at a fairly senior level, and having been through it, certainly know the perils of it but also know the advantages of being able to come in and have a different perspective," Luhnow said. "I think there's a certain amount of baseball experience and expertise that's absolutely necessary in any leadership role, but I think having an outside, fresh perspective is absolutely critical as well. The balance is what we're trying to strike."

Luhnow's first six months in office were aimed at building toward the No. 1 overall draft pick, something that the Astros are blessed/cursed with again in 2013. Having executed the draft—and placing four 2012 draft picks among the system's Top 10 Prospects (click here)—the next six were about evaluating farm talent concurrent with the active trade deadline and evaluating the major and minor league staffs.

Using the business school concept of sunk costs, Luhnow and Crane were willing to eat huge chunks of salary to move Carlos Lee, Wandy Rodriguez and Brett Myers at last year's deadline.

Every long-term contract has now been scrubbed from the major league roster, giving the Astros a roster of five arbitration-eligible players and dozens of minimum salaried 0-to-3s that provide flexibility but few assurances, especially moving to a more difficult American League West.

And now the attention at last can turn to the major league product and Porter's team, which was given twice as long the odds as the 29th-best team to win the World Series. In other words, hang tight a few years.

Luhnow's first managerial hire is hardly controversial or deviant from the norm. Porter has been a regular on the interview circuit and was considered on the cusp of getting a job for a few years now.

His philosophy when it comes to that relationship is interesting, though, as a partner with the front office when it comes to decision-making. That works both ways, with the front office having some influence on managing to a significant degree.

After a game at the end of 2012, interim manager Tony DeFrancesco noted that Luhnow had come to his office after the game and discussed the win probability added—in this case negative—of a bunt play in that night's game. Luhnow spends the first 10 minutes after every game with his manager as a means of debriefing.

To that end, Luhnow has even sought an office on the executive floor of Union Station for Porter so he can feel more a part of the leadership team.

Consider it a logistical improvement, with a little bit of management consulting flavor.