The Turnaround Artist

Jim Pohlad inherited a failing team-the Minnesota Twins--on the verge of disappearing from baseball. What saved it? Thinking like a small business.
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This story appears in the August 2010 issue of Entrepreneur. Subscribe »

The Turnaround Artist

There's a buzz in the air in downtown Minneapolis on an overcast April afternoon. Baseball's Minnesota Twins are poised to play the Red Sox at Target Field in only the second regular-season game at the new ballpark. As fans file in, nearly all for the first time, their sense of anticipation is palpable. What they encounter is a strikingly original facility that features limestone-topped dugouts, a four-story, glass office tower with a roof deck where fans can watch the game from bar stools, even a shimmering wind-activated sculpture by artist Ned Kahn. "This is the best of the new ballparks in all of baseball," someone says, and he doesn't get an argument.

Look around, and it's hard to believe that just 10 years ago, the Twins were a financial failure, all but deserted by their fans and on the brink of disappearing from baseball. How they have become one of baseball's strongest franchises ranks among the more remarkable turnaround stories in recent business history. And it only happened because the owners were determined to run their big league sports team like a smart small business.

A small business worth hundreds of millions of dollars? Well, yes. In the world of Major League Baseball, the Twins are small, indeed. At their nadir, in 2000, their player payroll was just a tenth of the New York Yankees', and the small-fry Twins were one of baseball's weakest franchises. They played in a corner of a football stadium, the antiseptic Metrodome. Their attendance had dwindled from a league-leading 3 million in the '80s to just over a million, or barely more than 10,000 a game. Fans were alienated, the team was anchored at the bottom of its division, and its few desirable players were counting the years until their contracts expired and they could leave.

That winter, baseball commissioner Bud Selig proposed contracting the sport from 30 teams to 28 as part of labor negotiations. The Twins' owner at the time, the late Carl Pohlad, tentatively agreed to a $150 million buyout to dissolve his team. Pohlad immediately became a villain: a billionaire ready to sacrifice four decades of local history for a cash payment. Around the country, fans started wearing Twins caps in solidarity with the beleaguered team's struggle against the Lords of Baseball--including its own owner.

Contraction didn't happen. And today, Pohlad's earnest and unpretentious son Jim, who owns the franchise with his two brothers, is being feted as a hero. His Twins are in first place, the defending American League Central champions. They have reached the postseason playoffs five of the past eight years. Their payroll is a respectable 11th in the league, with revenues to match.

Earlier this year, Pohlad signed catcher Joe Mauer, the American League's top hitter and Most Valuable Player and a St. Paul native who was coveted by major-market teams from New York to Los Angeles, to an eight-year contract extension. And Target Field finally became a reality, after years of civic debate and dithering, cementing the team's presence in Minneapolis.

The Twins' transformation began when the Pohlads--who also own banks, radio stations and car dealerships--embraced the same kinds of strategies that enable scrappy small businesses of all sorts to take on the big boys. "Can we compete with the Yankees and Dodgers in terms of revenue?" Jim Pohlad says. "No, we can't. But we can compete in every other way."

These days, they do. Their journey from peril to prosperity offers significant lessons for any small-business owner.

1. Identify Your Strengths
Large-market teams can lure established stars with huge contracts, then sign new ones if those don't work out. "They can spend their way out of their mistakes," says Bill Smith, the Twins' general manager, who has been with the organization for 23 years. For much of that time, the Twins tried to build their team by signing established players as free agents. But because they couldn't afford the stars, they ended up overpaying for mediocre talent. Unlike the big-city clubs, which consider paying players they've benched (or even released) a cost of doing business, the Twins were stuck with these bad acquisitions in the same way a small company might be stuck with an ill-conceived expansion strategy or a misguided line extension. As a result, the team didn't have a winning season from 1993 through 2000.

What followed was a hard look in the mirror. The Twins were never going to compete dollar for dollar against the biggest teams, that was clear. But Jim Pohlad realized that they could be as efficient as anyone at recognizing and nurturing young talent. That meant skipping the big free-agent contracts and spending that money on scouting and additional minor league staff and instructors. And it meant instituting a philosophy of promoting players from their own farm system. "If you do it right," Pohlad says, "the impact can be even greater than signing free agents." Not just one star, but a steady flow.

Developing a young baseball team--as in developing anything with strong potential in a business--doesn't pay immediate dividends. And a team filled with players nobody had heard of wasn't likely to solve attendance problems. Still, the Pohlads didn't waver. "If it's the right way," Pohlad told then-GM Terry Ryan, who'd advocated the youth movement, "we'll have patience."

The 2000 team had 17 rookies. It lost 93 of 162 games. "We had a payroll of $15 million," says Laura Day, the team's senior vice president for business development. "We were scuffling, trying to get fans to the Metrodome. But ownership was committed to a plan." By 2001, many of those rookies had developed into strong major-leaguers. And in 2002, the franchise emerged from the ashes to win 94 games and the division. The Twins were a baseball version of the Little Engine That Could, and Minnesota started to fall in love all over again.

2. Offer a Unique Experience
It's a sports truism that winning draws fans. But small crowds were only part of the Twins' problems. Sharing the Metrodome with the NFL's Vikings and University of Minnesota's Gophers, they had few opportunities to generate income. They couldn't sell premium seating or make money from suites. They received a share of concessions but didn't have full control of the product.

"We were probably the worst team in baseball in terms of revenue sources available," Pohlad says.

At the same time, the game-day experience in the Metrodome was not what the Twins wanted. They couldn't choose the brand of hot dog or ice cream, couldn't hawk souvenirs from a team store, couldn't tie the current Twins to the past with displays and signage, couldn't provide sun-hungry Minnesotans with a day of outdoor baseball. One by one, new ballparks were opening ... in Houston, Seattle, Cincinnati, Milwaukee, Pittsburgh, St. Louis ... 13 in the new millennium alone. The Twins, arguably, needed one more than any other team.

"The day the [state] Legislature finally passed the approval for a new ballpark in 2006 was one of the most important in the history of our franchise," says Jerry Bell, the team president at the time.

A stroll around Target Field reveals why. Concession stands sell local county fair favorites, from turkey legs to walleye-on-a-stick, and iconic Schweigert hot dogs, the original brand sold at Bloomington's Metropolitan Stadium in the 1960s during the dawn of the Twins' franchise. A ring of luxury suites extends from right field around home plate to left field. Instead of portable kiosks selling Twins merchandise, six permanent shops are spread among every level. Rentable conference space enables the franchise to make money during the off-season and when the team is on the road.

Most important, the open-air setting offers casual fans a reason to go to the ballpark during the summer, when the last thing Minnesotans want to do is sit indoors. When rain started to fall during that Boston game, fans gave the weather--and the fact that they were sitting outside in it--a rousing ovation.

3. Connect With Your Customers
For years, the team had run a "winter caravan," a road show spread over a few days in the dead of January that brought players, coaches and executives to small-town high school gyms, meeting halls and hotel ballrooms in the five-state area that defines Twins Territory. Rather than cut back when attendance dwindled, the owners expanded the caravan to 90 stops and to two weeks. In groups of 100 to 1,000, Twins fans in Minnesota, northern Iowa, North Dakota, South Dakota and part of Wisconsin were able to make personal contact with players. That dovetailed with the catchy ad campaigns--"Get to Know 'Em," then "Get to Know 'Em Better"--that introduced fans to these new faces.

Since they didn't have summer sunshine or their latest free-agent acquisitions to sell, the Twins made their players as accessible as possible. Emerging stars were asked to continue to participate in the caravan and other promotions. And the team did its best to keep the roster stable, letting fans develop favorites. "When players come and go every year, it just becomes kind of a revolving door," Pohlad says. "We didn't want that."

The Twins also needed to keep tickets affordable, coupled with special discount nights, Kids' Days and other promotions that lured fans back to the Metrodome. That has continued at Target Field, where family season-ticket plans start at $10 a game, as cheap as any in baseball.

The ownership transition from father to son also helped revamp the team's image. As it happens, Jim Pohlad is as regular a guy as it's possible for a scion of a billionaire family to be. His forthrightness not only helped to persuade the state Legislature to fund $350 million of Target Field's construction after years of dickering, it also offset the fans' perception of Carl Pohlad as penurious and uncaring.

Despite the turnaround, Jim Pohlad cautions against assuming that the Twins' struggles are over. It's a humility that small companies in every field might profitably emulate. "Don't assume omnipotence," he says. "Don't take anything for granted. Nothing is so successful that it can't be mismanaged. If you lose sight of what you're doing, it could be here today and gone tomorrow."

4. Remain Loyal to Your Employees
Baseball is a transient business, but the number of Twins employees who have 20-plus years with the club is startling. In the years since winning the World Series in 1987, the team has had just two presidents, three general managers and two field managers. "The relationships that the Pohlads have with the people they'd hired, and their willingness to let the people do their jobs, was as important as anything else in what the Twins have been able to accomplish," says team president Dave St. Peter, who has worked nowhere else since graduating from college in 1989.

Such loyalty served them well. Before the 2002 season, with the threat of contraction lingering, Toronto asked Ryan to interview for its GM position. Though he faced the possibility of imminent unemployment, Ryan declined. "That sent everyone a message," Smith, the general manager, says. "That whole off-season, when we didn't know if there would even be a team the next year, we lost one person, a woman in sales." That fall, Ryan was named baseball's Executive of the Year by Sporting News.

Off-the-field stability also helps the Twins maintain good relations with past stars including Harmon Killebrew, Tony Oliva, Rod Carew and Kent Hrbek. "When they walk into our office," says Kevin Smith, the team's executive director of public affairs, "they still stop at every desk because it's the same faces they always knew." When the Twins need those stars for a promotion or as part of a marketing campaign, the connection is still there.

5. Know When It's Time to Act Like a Big Business
Sports franchises typically break even annually but grow prodigiously in value. An owner who can hang on eventually will reap an immense profit. (One example: The group fronted by George W. Bush that bought the Texas Rangers for

$86 million in 1989 sold the team for $250 million nine years later.) But because the Pohlads don't plan on selling, they're looking for the team to pay its way. "Just enough of a return to keep us going," Pohlad says.

Following the 2007 season, that need to stay in the black meant that the Twins couldn't afford to retain their best player, outfielder Torii Hunter. It also meant they wouldn't be able to re-sign their best pitcher, Johan Santana, the following winter. So Hunter left for the Los Angeles Angels of Anaheim, and Santana was traded to the New York Mets. "Decisions we chose to make," Pohlad says.

But knowing that Mauer's contract was up for renewal after this season, Pohlad made a different decision. Mauer is a true local icon--a three-sport star at St. Paul's Cretin-Derham Hall high school. As a pro, he is a repeat batting champion, the best fielding catcher in baseball and the reigning American League MVP. He's the kind of player a franchise gets once every generation or two. And he wanted to stay in Minnesota.

If Mauer was allowed to leave for a bigger market, "it would have been a big black eye," Bell says. "It wasn't just important for the Twins, it was important for baseball to show that a middle-market team can keep a player like that."

The eight-year, $184 million deal that Mauer signed in March might seem exorbitant for a team determined to act like a smart small business, but the timing was right: The Twins were moving into Target Field and expected to double their revenues in the process. The signing resonated around baseball, giving hope to smaller franchises from Pittsburgh to San Diego.

"Joe Mauer represents a unique opportunity that every team would love to have," says Jeff Moorad, the vice chairman and CEO of the San Diego Padres. "The team has a state-of-the-art facility, the support of a community that has rallied behind them, and the one player that other major leaguers overwhelmingly choose as the one they'd build a team around. It's a great time to be a fan of the Minnesota Twins."

That rainy April afternoon at Target Field ended in a loss to Boston, but the fan excitement was in the air as they filed out of the stadium. Up in the owners' box, Pohlad admits that he's finally able to take a breath.

"We've built a good brand," he says. "We got a stadium. We have a foundation of talent in place."

Below him, the concourse is a sea of blue Twins caps bobbing toward the exits. They're not being worn in sympathy anymore but in proud identification with a small business that's competing with the heavyweights from coast to coast--and more than holding its own.

Bruce Schoenfeld has been writing about the business of baseball since 1982.


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