Outperformance Is a System: Lessons from the Business of Baseball

How a small-market baseball team quietly built a system that outperformed Wall Street, and what it reveals about the future of value creation in private equity.

At A Glance: Stu Sternberg sold the Tampa Bay Rays for a 750% profit! Their success wasn’t built on analytics alone, but on the cultural design that connected front- and back-office management and quietly shaped today’s most disciplined clubs (including this year’s World Series contenders, LA Dodgers). The business of sport mirrors private equity, where execution, not capital, has become the defining constraint. As investors search for alpha, the real advantage lies in designing organizations where human and operational systems move in rhythm. Outperformance isn’t luck or leverage. It’s design.

The Tampa Bay Rays shouldn’t have been worth $1.7 billion. When Stu Sternberg bought the team in 2004 for $200 million, they were a perennial afterthought — a small-market club with a bare-bones payroll and a half-empty ballpark. Two decades later, he sold for nearly nine times that amount. As an investment, Sternberg beat the S&P 500’s returns by nearly 2 percent a year, a version of ‘Wins Above Replacement,’ measured not in runs, but in returns.

For twenty years, the Rays ran baseball’s equivalent of a high-performing carve-out. They ranked near the bottom of the league in payroll yet kept producing postseason runs: nine in all, including two World Series appearances. Their front office became a farm system for executives across the sport, exporting the very playbook that kept them competitive.

When Sternberg sold the team this fall, he closed the loop with an unorthodox move: sharing tens of millions in bonuses with every employee, from scouts to clubhouse attendants. It wasn’t sentiment; it was recognition of the system that helped generate outsized performance.

In an environment where execution has become private equity’s defining challenge, Sternberg’s results remind us that sustained performance comes from design, not financial engineering.

Sidebar: Beyond Moneyball
If this sounds familiar, it should. Michael Lewis’s Moneyball chronicled how the Oakland A’s used data to out-think richer rivals. The Rays picked up that torch and added a new layer. Their edge wasn’t just analytics; it was the invisible design of how strategy, execution, talent, and infrastructure compounded through culture.

Sternberg’s buyers were private investors, part of a growing class that treats sports franchises much like portfolio companies. In that sense, baseball isn’t just a pastime but a business where investors measure success the same way they do anywhere else: return on capital.

Private-equity investors pride themselves on finding hidden value. In the PE world I grew up in (mergers and acquisitions), that was two companies, one strategy, a few synergies, and a spreadsheet equating 1+1=3. But the math rarely works. Most deals stumble not because the thesis is wrong, but because the operational and human system underneath wasn’t built to carry it. Incentives misalign. Authority bottlenecks. Execution slows to a crawl.

Inside those systems, people are reading cues: what gets funded, who gets promoted, how risk is treated. They calibrate their effort accordingly. When the signals conflict, energy cancels out. That’s when most deals end up leaving value on the table: 1+1=0.5.

The firms that outperform understand that advantage is less about capital and more about design of four critical elements: 1. Strategy sets the direction. 2. Execution converts it into motion. 3. Talent provides momentum. 4. Infrastructure, including the policies, processes, and tools, keeps the parts aligned.

Though rarely named, culture stitches these elements together and ensures they interact without friction. When those elements reinforce one another, effort compounds. Culture is the behavioral infrastructure of an organization: the shared cues people use to interpret what matters and how decisions get made. As MIT’s Culture 500 research found, it’s often the most durable differentiator in both innovation and financial performance because it shapes how consistently strategy, talent, and systems reinforce one another.

The Rays proved that cultural out-performance on the field. Investors can, too.

Designing for Outperformance

High performance is rarely the product of one brilliant strategy. It’s the result of multiple forces working in sync, each reinforcing the other. It’s the organizational equivalent of small-ball baseball, where getting on base consistently outperforms swinging for the fences. The magic happens when every player knows their role and the system compounds small advantages into big wins.

You can think of outperformance as chemistry among those four levers: strategy, execution, talent, and infrastructure. Each is essential on its own, but it’s their interaction — the way signals move through them — that determines whether the equation trends toward 1+1=3 or falls back to 0.5.

Strategy: The Signal of Purpose
Strategy gives people a narrative to align around. When it’s too rigid, it becomes dogma. When it’s too loose, it becomes noise. The best strategies act as shared understanding (rather than marching orders) anchoring judgment while leaving room for discretion. People don’t rally around a spreadsheet; they rally around meaning that feels tangible in their day-to-day work.

Execution: The Rhythm of Movement
The best systems push decision-making as close as possible to the work itself. Ownership breeds speed. When authority concentrates at the top, execution clogs; when it’s distributed through trusted operators, decisions flow. You could see that on the field with the Rays, a team trained to think independently, adjust quickly, and trust one another’s judgment.

*SpaceX is an example of executional excellence, which I’ve written about before, and is a deeper dive on this topic.

Talent: The Engine of Ownership
Talent supplies capability, but capability only turns into performance when people feel trusted to act on it. The difference between compliance and commitment isn’t skill, but ownership. When individuals believe their choices matter, they start solving problems before they reach management. That’s when execution becomes self-propelling rather than supervised.

Infrastructure: The Hidden Scaffolding
Infrastructure, including the tangible policies, processes, and tools of an organization, creates the guardrails that make scale possible. It’s the least glamorous of the four, yet it’s where many organizations stumble. When infrastructure is too tight, it smothers initiative; when it’s too loose, chaos sets in. The best systems provide just enough structure to align effort without constraining judgment. Think of it as the infield chalk: a visible boundary that defines play without dictating the moves inside it.

Each lever emits signals. Those signals tell people how risk and reward actually work, including what to prioritize, what to avoid, and what behaviors matters most. When those signals reinforce one another, performance amplifies. When they compete, friction grows.

According to AlixPartners’ latest PE Leadership Survey, 64 percent of PE leaders cite execution against value-creation targets as their top challenge, followed by growth and margin management. In other words, even strong strategies are failing at the point of delivery: an alignment problem, not a capital one. That’s the real reason execution has become the industry’s defining challenge.

Here’s how that might look inside a deal:

• A strategy that rewards experimentation dies quickly if execution metrics penalize mistakes.

• Talent that craves autonomy will disengage if infrastructure treats every deviation as risk.

• A company that celebrates efficiency but funds innovation only after success will quietly teach people not to innovate at all.

The challenge isn’t identifying which lever is weak; it’s designing how they interact. That’s where organizational and cultural design as a discipline come together as the missing link to designing for outperformance.

In the hands of a post-deal CHRO, Organizational Network Analysis (ONA) makes it possible to see what used to be invisible: how information, trust, and decision velocity move through a company. It shows where ideas stall, where influence clusters, and whether leadership signals are amplifying or canceling one another.

Many M&A and private equity firms now include cultural due diligence post-acquisition, but only a handful use ONA to quantify it and inform decision-making.

Placed alongside the COO or CEO, however, cultural due diligence becomes something else entirely. It stops being a back-office assessment and starts becoming a front-office advantage: a way to identify where trust lives, where decision speed is trapped, and how the operating model can be tuned to accelerate integration as well as value creation.

The academic evidence backs this up. Research in Harvard Business Review and Organization Science consistently shows that network coherence, how tightly influence and trust align with formal authority, predicts both speed and innovation outcomes far better than structure alone.

That’s the real opportunity for managers, whether it’s baseball or biotech. Financial models capture capital flows. ONA captures the social and cultural dynamics that hold a company’s four elements together. And those, more often than not, determine which side of the 1+1 equation you land on.

The work of culture isn’t about morale; it’s about monetizing coherence. When done well, it’s not a cost center. It’s identifying alpha.

Turning Culture into Leverage

Culture isn’t a measure of mood; it’s a fit-for-purpose system that determines how quickly information travels, how reliably decisions stick, and how much energy is lost to friction along the way.

When mapped with the same rigor as cash flow or process design, culture becomes measurable. Tools like ONA reveal the connective tissue investors are actually buying, including critical enablers such as the patterns of trust, influence, and collaboration that either accelerate performance or slow it down.

Seen through that lens, cultural design becomes a form of operational leverage. Working in partnership with the COO, it tunes the conditions that make execution faster, cleaner, and more resilient. Leadership alignment, decision velocity, and frontline ownership become variables that can be intentionally designed rather than left to chance.

Cultural design works the same way: when every part of the lineup plays its role, momentum builds. It’s not about chasing home runs, but about advancing the runner: each signal, decision, and act of trust setting up the next.

And that’s where the upside lives. Deals that once relied on cost cuts or integration playbooks can, instead, generate real alpha through execution speed. Cultural design doesn’t replace financial or operational diligence. It strengthens them. It turns the invisible dynamics of how a company works into a visible, investable asset.

Just as financial diligence shows where the money flows, cultural design shows how energy flows. And when those flows move in the same direction, the math starts to bend. 1+1 doesn’t just equal 2, it compounds to become exponential.

The Dividend of Design

The Rays never tried to buy advantage. They intentionally built it, leveraging culture and operational discipline throughout the club. Their success wasn’t a fluke of analytics or timing, but a product of design: how people, systems, and decisions fit together to amplify one another. The $1.7 billion sale was the market’s way of pricing that design.

When Stu Sternberg shared tens of millions in bonuses with employees, it wasn’t charity. It was acknowledgment that the value he realized came from the system they built together. In any language, whether its baseball or business, that’s what compounding looks like.

Across the industry, underperforming assets have risen to their highest share since 2009, according to AlixPartners. Against that backdrop, the Rays’ return is more than a baseball story — it’s a playbook for how coherence drives valuation.

For investors, the lesson is simple. Capital creates potential. Design converts it into performance. And culture, especially when treated not as a story but as a system, turns that performance into sustained value.

Outperformance, in the end, isn’t magic. It’s the cumulative effect of choices that align strategy, execution, talent, and infrastructure into something larger than their parts.

That’s the equation worth studying. When you design for coherence, the returns speak for themselves. In baseball terms, that’s the difference between swinging for the fences and playing a winning system.

About the Author: Jason is a behavioral economist and founder of 3Fold Collective, an organizational design firm helping leaders diagnose and reshape cultural dynamics. Visit 3FoldCollective.com to discover more.

References

AlixPartners. (2024). Ninth annual private equity leadership survey. https://features.alixpartners.com/private-equity-leadership-survey-2024/

AlixPartners. (2024, March 26). AlixPartners’ ninth annual private equity leadership survey. https://www.alixpartners.com/newsroom/alixpartners-ninth-annual-private-equity-leadership-survey/

Cross, R., Ernst, C., & Pasmore, B. (2017). The network secrets of great change agents. Harvard Business Review, 95(7/8), 74–81. https://hbr.org/2013/07/the-network-secrets-of-great-change-agents

Friedman named Dodgers’ president of baseball operations. (2014, October 14). MLB.com. https://www.mlb.com/news/andrew-friedman-named-dodgers-president-of-baseball-operations-colletti-becomes-

Gomes rises quickly to become Dodgers GM. (2022, January 23). MLB.com. https://www.mlb.com/news/brandon-gomes-promoted-to-dodgers-general-manager

MIT Sloan Management Review. (2020). MIT SMR / Glassdoor Culture 500. https://sloanreview.mit.edu/culture500/

Reagans, R., & Zuckerman, E. W. (2001). Networks, diversity, and productivity: The social capital of corporate R&D teams. Organization Science, 12(4), 502–517. https://doi.org/10.1287/orsc.12.4.502.10637

Seattle Mariners. (2018, November 21). Mariners hire Jared Sandberg for new staff role. MLB.com. https://www.mlb.com/news/jared-sandberg-joins-mariners-coaching-staff-c301022774

Sports Business Journal. (2025, October 12). Sternberg gives bonuses to Rays employees after club sale. https://www.sportsbusinessjournal.com/Articles/2025/10/12/sternberg-gives-bonuses-to-rays-employees-after-club-sale/

You’ve officially earned your spot in the lineup of readers who finish to the last pitch. Impressive stamina. Since you clearly like seeing how culture and performance collide, you might enjoy our story on Apple. It’s what happens when the system that once fueled creativity starts optimizing for control instead. Spoiler: even home-run hitters can get caught looking.