This is Scott Becker with the Becker Business and the Becker Private Equity podcast. We're going to talk today to David Pivnik, and we're going to discuss turning around teams, whether they be business teams or sports teams, and get some of their perspective on this. David, I'll tee us right up. We'll get right into it. When you look at a struggling team, whether it's in business or in sports, what are the first two or three things that you think about immediately when you see a struggling team? You know, and you've seen it. I've seen it. You and I've seen it at different times throughout our professional careers in business. You and I are partners at the same law firm. We've gone through periods of time where we've seen poorly functioning teams or subteams within groups. We've also obviously, we're both big sports fans, and have had a lifetime of watching our teams struggle and need to be turned around. What are the first two or things that you think about when you see a team that's struggling? I mean, the first thing I think about, and I appreciate you having me on, is that you're talking about our team struggling when we've got the alumni in the far and the farthest weekend. We're not struggling at all, Scott. It's a good time. But on your actual question, the first thing I look at is personnel and resources, and those things are sometimes related, but not always. And I would look at them separately. So with a team from a business standpoint or sports, the first thing I'm looking at is personnel and looking at that on two levels. Leadership personnel, that might be the C-suite, it might be the manager or the coach, general manager, but trying to figure out if there are folks who have been in their roles for a long enough time who have had a chance of success, whether they have the ability to drive that success, what their track record is, whether there's reasons to think a change of one or multiple folks there is necessary. And then the second is looking at personnel on the field, if it's a sports team or running the day-to-day operations. Could be the actual, the practicing attorneys on a matter, practicing attorneys on a team or business folks running a transaction or running a company. I think that personnel assessment is critical because you can have the right product, the right idea, the right concept, but if you don't have the right people driving it, either through some of the grounds or from a leadership perspective, those are going to be places where it can sometimes be tricky to make changes, but it can be very important. The second thing is resources, your personnel is part of the resources, but I think it particularly in sports, there's clearly a very wide golf between the sort of haves and have-nots in all of the professionals for it. Even those that have salary tasks, it's pretty clear some of the teams spend a lot less than others and some teams have a variety of things, whether it's their market, people prefer to play in LA than in, I won't knock any cities, but people prefer to play in LA than many other cities. I think figuring out the resources, whether you have the right facility, whether you have the right equipment, staff, leaders, everything goes into it and then putting the money behind it because I think that's critical. You need to invest appropriately. I'm looking at those items and then the third is, are they even playing the right game? I think that applies to sports and to business. Trying to figure out if you're competing in a playing field, in an environment where you can compete and you can win, I think is an important part of the analysis. There are lots of teams, we building teams, are the easy example, whereas very clear to look at them and part of the reason they're not successful is frankly, they're simply not really trying to be successful. If a business is looking to just make ends meet, to pay the bills, or to make a little bit of money, it's not going to have the same success as a business that's looking to really identify needs, dominate a market. Looking at that sort of holistic assessment of, are they competing in the right game? Are they playing the right sport? Are they playing to win? That's a little bit more esoteric to evaluate, but I think that's an important part of the analysis. You're not likely, you can hit, strike lightning in a bottle, but you're not likely to succeed long term unless you're positioning yourself for that actual success you're aiming for. But I think that is so right on. You mentioned personnel, resources, partly money, and then are you playing the right game? In the business context, let's say you see a McKinsey and company or a Bainan company that's hiring consultants at one price point, and they're going to be playing a very different game than a very small consulting firm that can't afford to pay people at the same price range. Similarly, within private equity, if you're a multi-billion dollar fund, you're probably going to have a deeper bench to go after deals and impact deals than if you're running a 70 million dollar fund where it's very hard to step out in the right way. In sports, I love the Illinois example. Illinois may never be an elite football and basketball school, but back to the final four for the first time in 20 plus years, both of us have U of I degrees, we're huge fans, but they really started to turn it around when they hired a new athletic director, Josh Whitman, years and years ago, and he started to bring in the right coaches. Since then, we might not have the top five football or basketball program, but at least we're a top 20 in both again, where we were not for years and years, and it really started with the AD, then bringing in the right coaches, and then quite frankly, in terms of resources, I'm always shocked at the amount of money that the U of I has put into their basketball team, their rank really high in what they spent on basketball, and a lot of that's gone to international recruiting. Now, however you look at it, and then similarly in football, people always talk about the GM, the trifecta, the GM, the coach in the quarterback, having to get those pieces in line, but you also have to get the deeper team in line too. It's very hard over time to play above your weight if you don't really have the personnel and the resources and the leadership to really try and grow something great. If you're just trying to get by, it's very hard to be great because you got to get every sort of personnel decision exactly right, and it's hard to keep those people if other firms, other sports teams, other companies are going to pay them a lot more. So institutionally, out of the side, this is where you're going. I love that. A couple, two quick comments on that, because I think it covers some of the stuff we talk about a lot. And look, Josh Whitman, great example, and he is. I mean, we overlapped a bit in law school. I probably remember him better than he remembers me, but he is about as charismatic, likable, driven, smart guy as you could be, and using natural leader who doesn't surprise me at all to see him drive, and you and I both are partners in a law firm where John Harmon at the top of the firm is as charismatic and likable a guy as you could ever hope to be. And those guys are natural board leaders, but the Illinois example also lands where one of the folks we've had as a basketball coach prior to Brad Underwood who's just crushing it, but John Gross was a complete failure at Illinois. And I don't say that disrespectfully to him, but I think it's a great example of sometimes you have to be assessing the game you're playing because John Gross at mid majors is a truly incredible coach. He did great before he came to Illinois at a mid major and he's once again thriving at Akron, where his coaching, his recruiting, and his style is frankly just a better fit. And maybe he'll have another shot in the big ten or elsewhere down the road and thrive and all be pulling for him, but he wasn't the right fit for Illinois, even though he is exceptionally talented. His skills just didn't translate at that level, but they do translate very well and he's an excellent coach and an excellent college basketball coach elsewhere. So I think, you know, the fit which we talk about is always really important to make that work. And the only other thing I'll say, and I'll let you get back to your question is when you talk about Illinois maybe not being a top five program, I will just note we are exactly two wins away from being a top five basketball program over the last decade. Just say. 100%. No, but we've not been in the final four in 21 years. I remember greatly and we're not every year in that running to be a top five 10 team, though Brett Underwood has done a fantastic job of getting us to the lead eight twice in the last three years. So no, we've made great, great progress and loved that. We've won top five games in the last seven years since Underwood's taken over. We just got to get a pilot, but I digress. No, and I appreciate that. So let me ask you the next question, which is when you look at sort of what separates teams that actually turn things around in those that don't, and maybe it comes back to what you said a few minutes ago about putting the personnel resource and getting leadership right, but what separates teams that actually turn around from those that don't? And how much is about changing people versus changing systems and structure and expectations? Yes, is the answer. I mean, I think all of those things are part of it. I think what really separates the teams or the companies that are able to successfully accomplish a turnaround is, first of all, the recognition that it isn't any one thing that it is people, it is systems, it is resources, it may be a shifted focus of those resources. There's not, you know, one panacea or one size fits all. You have to really be able to think through the different issues. And so I think what really sets apart a successful organization is the ability to sit down and put together a good long term plan to focus and work towards that plan, but also frankly, to be repeatedly reassessing and reevaluating that plan and be willing to make changes and adjust and pivot. And I think there's a lot of teams, sports, it's easy to observe businesses. It's a little harder because it's not everything is as public, but I think there's a lot of teams and businesses that get stuck on a given path. They've invested time and resources in it, and they're just committed to it, but they're not doing the assessment, the self-reflection, the periodic adjustment, and recognizing just because you thought you had the right course that you were charting doesn't mean that you did, which makes it incredibly important, you know, to be continually adjusting and revisiting. So I think what separates a lot of the success stories is that ability to recognize and adapt. So the self-assessment, to repeat it, looking back and tracking progress to your goals, re-evaluating some of those goals doesn't mean wholesale changes, but that tweaking, I think that internal analysis and reflection is critical, and I think that's a step a lot of people miss, and it could be self-serving. You've got leaders who worry, you know, a general manager of a team who's worried, admitting he missed the mark is going to lead to him getting replaced, and some other person taking over those next steps, or just the organization's not seeing it. I think that failure to reflect, assess, and adjust is what really hinders a lot of entities as they're trying to progress. That 100%, and talk about the best examples of a turnaround, and when I think about turnaround, I don't think about a one-year turnaround, which you see when the Chicago Bears, it remains to be seen whether it's a long-term turnaround or not, but what does a sustainable turnaround look like? And any great examples that you've seen in business or that you've seen in sports that you think of as what really is a great turnaround, and then maybe some of the characteristics of it? Yeah, I think the best example, and to be a clear-cut number one with a bullet, is the Oklahoma City Thunder. That is a team that had, you know, they had put together a really good, seemingly promising championship contending core with Kevin Durant and Sergio Baca, Russell Westbrook, and James Hart. I mean, they had, we guys won MVP awards. Abaka is a great player, it is all right. Kendrick Perkins was on that team, like really a contending team. They got to the finals and they lost to the Brown James and the Heath, but they were right on the precipice, and they couldn't quite get across, and then Kevin Garnett chose to leave and get his titles in Golden State, and Oklahoma City, I think, was sort of a left in an awkward spot, and they made some adjustments that were slight tweaks. You know, some of it was things like bringing in Paul George, and they still were sort of on the precipice of being a meaningful competing team, but they were a step farther removed from where they were, and I think it really took a lot of internal reflection to look at that, and say, well, shoot, with KV we were on the cusp. We're not actually on the cusp now, with guys like James Hart and Russell Westbrook, and then even when they had Paul George, and they had MVP level Paul George, and so they brought in the right leaders at both coach and general manager to learn to turn around, and they did things the right way in the NBA. They tore it down to the studs. They traded Paul George to the Clippers, and that was a great example of asset management. They traded Paul George at an absolutely peak value to a team that was desperate to overpay to get them the Clippers, because Kawhi wanted Paul George, and the Clippers sent them, Shaquille, just Alexander, future MVP, likely multi-time MVP, and sixth first-round pick. It was like an unprecedented haul, but Oklahoma City still didn't put all their chips in. They continued to build methodically, and even now, as they're the defending champions and the favorites this year, there are a lot of rumors they were going to go after guys like Giannis in trade, and they've stayed the course. They've built an incredibly young corps. They've done a very good job keeping guys signed long-term. They've had consistency and cohesion in terms of ownership, general manager, president, coach. They've managed to do all of that. They kept the save roster, and they kept their stockpiles and pits using them to make incremental adjustments, making a small deal this year. They're bringing a guy like Jared McCain who bolsters their bench rather than rocking the ship by sending out a much bigger haul to bring in a bigger name, who may not fit as well with their existing corps. I think the assessment and recognition of when things didn't work and they need to pivot, the concept of building a long-term plan, and then sticking with that plan and making tweaks rather than overcorrecting, they've just done all of it unbelievably well. I think the number of titles they could win in the next several years is staggering. The only real thing in their way is San Antonio also has built an incredibly young corps. I think those two teams for the next decade are going to be dominating the NDA. In San Antonio, it depends a lot on the health of Victor W. Victor Wem, right? I mean, it depends on how well he stays healthy. That's really everything there, isn't it? Well, Wendy's health is certainly critical. San Antonio also just got some great luck. I mean, they got the lottery, fell in their favor for Wemby. They got a number two pick this year. Dylan Harper was going to be great. Steffan Castle won rookie of the year and fell to them. They've got an incredibly talented young corps too beyond just Wemby, but you're unequivocally right. Their championship hopes probably rise and fall on his shoulders, but they built a great young corps. They've also made good trades. They just had a lot more luck. Oklahoma City has done more of making their own luck. They haven't had, you know, Chad Holmgren was the number two pick, but they haven't had a bunch of top five graphics. They've just had a bunch of other picks that have worked out well like Jalen Williams and Shay Gilgis, Alexander, they acquired in trade when he was expected to be solid, not a superstar. So, you know, those teams have done it different ways, but are both in very promising positioning. Yeah. No, it's literally fascinating. And when a turnaround doesn't go well, any thoughts there on what you view is sort of like, is it not the right leadership? It's not putting the right pieces in place. It's not sticking to a strategy and any thoughts on when a turnaround doesn't go well? Why not? Yeah. I mean, I think it's those latter two items most typically, particularly in sports, but I think it applies to business. It's not sticking to things as often a problem and not having the right personnel. And in sports, not sticking to not fully committing, I think is what dooms teams more than any other mistake. And it's really tough, because, you know, a lot of these sports committing to a rebuild and just being bad for years, you know, like the white socks, it's painful. Your fans aren't going to want to come and watch a bad scene. You're making less money in revenue. You end up having the general manager and the manager get fired and turned over a few times during the process. But you really need to commit to it, to build a long-term winner. And particularly in a sport like baseball, where players aren't, you know, you don't draft guys, you come in on day one to contribute. It's a long-term project, no matter how you do it. And with the Dodgers in existence, you can't just go out and spend anyone else, because they're already outspending you. So I think figuring out that we're looking to sell a long-term vision, figuring out how to present that to stakeholders, could be a board of directors, could be two customers who have to deal with changes in products, could be vendors, who have to deal with some changes and push back on payment terms. But selling the long-term vision in the sports, it's selling it to the fans. I think it's critical, and I think we're teams consistently make mistakes across all of the major sports, is they commit to a rebuild, and then they get their first hint of success and coming out of it. And they immediately start shoving chips in the middle, making huge splashy trades or crazy free agent signings, and they're just not ready yet. And they didn't correctly assess where they stood, and they end up setting themselves back years, because they can't recoup those assets, and now they're slightly too good to get the further development prospects they need, but not good enough to meaningfully compete. So I think timing it and being careful and accurate in your assessments of the market and very importantly, of your place in that market or in a sport, in a league, is absolutely critical and is the place people get it wrong most frequently. Right. I mean, if you're the white socks or the brewers, or the brewers weren't really far a couple years ago, and Toronto has found so much money to spend to compete in a way that most smaller market teams cannot or mid-market teams cannot, but if you're the white socks and the owners of groups has a lot of equity in the team, but they didn't start off as maybe that rich in ownership group with the pairs of others today, they're not going to spend up to 300 million a year on payroll to try and compete. So what are they destined for? Are they destined to try and win 85 games, 90 games, and maybe once in a great while get lucky and slip through to do better? Is that all they can hope for? A lesson until they have ownership that's willing to meaningfully commit and spend the money, I think that's about right. And there are there are pivots and adjustments that you could make that are not necessarily going to lead to long-term consistent success, but to give you hope. And there are teams like the Tampa Bay Rays who are consistently very solid, not necessarily title contenders every year, but usually pretty solid without having a major market, without having huge ticket sales or revenues or a big payroll. But to do that, you have to invest a ton of money in international scouting, domestic scouting, spending a lot of money on places where it's cheaper to spend that money than on, you know, an all-star pitcher is going to cost you tens of millions of dollars. Those scouts are not costing tens of millions of dollars. And so figuring out ways to invest on other levels on the talent development side, on the scouting side, on coaching and leadership, and then hoarding assets, using your money intelligently to stockpile drafts, international prospects, etc. All of the things that are more cost effective than free agents. And then you've got to get a little bit of luck. And talk about this, because back in the day, you know, Billy Bean was the first guy in this hardcore analysis of how to spend money to get the right players in game. I don't know if he was the first, but then was famous at it, money ball and so forth. So like when Illinois goes overseas to Eastern Europe this year to basically put together a professional roster so they could compete at the highest level and they spent a lot of money to do so, does that become a short-lived win? Because very soon other teams commit to that too, or is there an ability to sustain that? Because some teams won't continue to go that route. Like when I think about the temple they raise and try to play above your grade, my mind immediately goes to buying two highly expensive pitchers and then you're going to be soft on offense, but at least you'll be competitive 50% of the games. But you're saying they want a different route, just like University of Illinois went to the Eastern European this route this year, basically put together an Eastern European pro team. But what you find an advantage is it's such an efficient market that other people can copy it very quickly or can you sustain some advantage because you just execute better on it and maintain better relationships on it, and it takes time to build that relationships overseas? Yeah, I think the latter, I mean certainly in the college basketball world and we'll see how this proves corrected over the next couple years when other people try and hit the European market a bit more aggressively. But Illinois has been in the running consistently on almost every major European recruit coming over and it's not that we're writing the biggest checks. We've lost a couple of guys we were highly expected to get, like Igor Demin went to BYU last year and Dame Sahr went to Duke this year. Illinois was considered a prohibitive favorite for both of those guys at different points of time, but they took bigger paycheck elsewhere. What Illinois has done really well is have scouts in Europe identify lots of talent that we can then go after. They've already brought in one guy, you know, a seven-footer for next year's class. We have a different guy who's on campus, you know, six-nine-four, which is not playing this year, but showed up on campus in the middle of the season and should contribute next year. So Illinois has invested not just the money, which is clearly part of it, but they've got more coaching, more staff, and a lot of connections that they've built at European clubs that are deeply seated. So I think other teams are going to try and do that and mimic that, but I don't think it's something where someone could just say, we're going to write a bigger check. That's going to work some of the time, right? But the connections in Illinois has made work, but some of it going to my point about sometimes you have to catch light to get a bottle. Illinois is led by a three-star recruit from Shawnee, Kansas, who doesn't have a big NIL contract and was expected to be a four-year guy in the program who took time to develop and didn't play. And Keegan Wogler is going to end up being a top six pick in the draft this year, when he was ranked 130th as a recruit coming in. So sometimes you've got to trust your development staff and your program to build guys up. And it's one of the places where Illinois does have an advantage is guys like our strength and conditioning coach, and he probably has a more formal title to that. But Adam Fletcher is the best in the business, period. Like if you look at the players coming in, the physical development of every Illinois basketball player is just absurd. And Coach Fletcher deserves all the credit in the world. We have the best guy at that. And I think players around the country who want to go pro, whether it's Europeans coming over or kids who are at mid majors and want that development, it's not just coaching. We'll help build them up. And so I think figuring out the little advantages, if you're not going to spend money like Michigan or Duke, and I think Illinois was 21st in NIL spend this year. So we're not a lightweight there, but we spent several million less than each of the other teams in the final four. You have to have those other advantages. But even though we always spent that on NIL, which is a lot, we spent a lot more on coaching in the other parts of the program that you're talking about than some of these other teams did. The stats show that in terms of coaches, the scouting network and so forth, we overspent compared to almost everybody else that was left in the sweet 16. So it's a fascinating mix of NIL money plus coaching and infrastructure money. I mean, it's both. 100%. It really is fascinating. And anyways, David, a fantastic pleasure to visit with you. Both of us, our audience could probably care less, but happen to be Illinois fans who are watching this and we'll see how it turns out. But overall, just fantastic. Our producer, who is one of my favorite people in the world, happens to be a University of Iowa person. A University of Iowa graduated and did far better this year in the sweet 16, gotten to the sweet 16 than expected and played really well. So congratulations to Iowa as well. In any event, I can tell you it's like there's this whole day at edge. If I can't be thin, don't let my friends be thin. If Illinois can't win, please don't let Michigan win. That's all I could say. Thank you for listening to the Becker Business and the Becker Private Equity podcast. Anybody but Michigan, please. Thank you. We'll go with Illinois this year. Thanks for having me, Scott. Thank you, David.
