He turned to managing in the Yankee farm system in 1974, and he was highly successful in his five-year career (through 1978), winning pennants at Class A, Double-A and Triple-A levels. In 1979, he became the Yankees' third-base coach. Ferraro was involved in a controversial play during Game 2 of the 1980 American League Championship Series. Willie Randolph was on second base in the top of the eighth with two outs and the Yankees down by a run. Bob Watson hit a ball to the left field corner of Royals Stadium. The ball bounced right to Willie Wilson, but Wilson was not known for having a great arm, and Ferraro waved Randolph home. Wilson overthrew U L Washington, the cut-off man, but George Brett was in position behind him to catch the ball, then throw to Darrell Porter, who tagged out Randolph in a slide. TV cameras captured a furious George Steinbrenner fuming immediately after the play. The Yankees lost the game 3–2, then lost the series in three games. After the game, Steinbrenner publicly criticized Ferraro for the call. Steinbrenner wanted Ferraro fired immediately, but manager Dick Howser stuck up for him and refused to do so. Tommy John said that, "By refusing to fire Ferraro, Howser sealed his fate as Yankee manager."