635: Rich Gotham (President of The Boston Celtics) - How To Build a Championship Organization

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0:45Visit insightglobal.com slash learningleader today to learn more. That's insightglobal.com slash learningleader. Welcome to the Learning Leader Show. I am your host, Ryan Hawk. Thank you so much for being here. Go to learningleader.com for full show notes of this and all episodes of the Learning Leader show. Go to learningleader.com. Now on to tonight's featured leader. Rich Gotham is the president of the Boston Celtics. He is responsible for all aspects of the Celtics business operations. In addition to that, he works closely with Celtics ownership, basketball operations staff, and the NBA on basketball-related matters, as well as team and league initiatives.

1:42He succeeds the legendary Red Auerbach as Celtics team president and serves on the NBA Board of Governors. Since joining the Celtics in 2003, Rich has helped grow team revenues by over 300%. They've also won a couple NBA championships. During our conversation, we discussed Rich's non-negotiables when hiring for a leadership role. Really good. And then how he balances running the Celtics business and working with the basketball leaders to win championships. And then what it was like going through the recent sale of the team for a record-breaking$6.1 billion in his role in making that happen. Talk about that and so much more.

2:35Ladies and gentlemen, please enjoy my conversation with Boston Celtics president, Rich Gotham. So I want to start with Celtic pride. You're the president of the Boston Celtics. Like, what a cool job. But at one point you said, I want the Celtics to be an organization of people who care. Whatever it is you're doing for the organization, I really want you to care about it. That is what Celtic pride is about. And I can't, as a leader, I can't expect that of other people if they can't see it for me. What does it mean to you to have Celtic pride and to care? I grew up here with the Celtics, and Celtics always meant something to me.

3:19I was coming up in the 80s with the Bird. Big three teams, won a couple championships. The Celtics were something that made you proud to be from Boston. And the Celtics always represented something bigger than just a sports team, starting with Bill Russell and Red Auerbach, all the way through to Jason Tatum and Jalen Brown today and Brad Stevens and Joe Mazur. And I've always felt a certain, like, I've been a proud, I've been proud to be from Boston and sort of where the Celtics from, if that makes any sense. I can remember when I was younger, I'd travel anywhere in the Boston and I was Celtics, you know, and I always felt like that was part of the civic pride here.

4:01And I always had that feeling. And I, you know, my biggest goal is to have all our fans sort of share that feeling, right? That they're proud of their team. And in order for that to happen, we've got to instill that pride in the people who work here. And you've got to hire people who sort of have that in to begin with and who do really care. And it's important to them to be part of something that's bigger than themselves and kind of give themselves to that. And I think that's such a cool part of our culture. It's really our marketing timeline last couple of years in the playoffs has been different here, but it is what makes it different.

4:39If you're working for the 18-time world champion Boston Celtics, that's different than working for any other team in sports. And it's not to diminish any other team in sports. It's just something that we feel really proud of. We want our fans to be proud of. We want every person who steps into the organization to feel that they're a part of that, and that's something special. What is it about Boston that's different? Different here, you mentioned, is the marketing tagline. I assume a lot of meetings and smart, creative people went into coming up with different here. What is it about Boston that's different?

5:15It's in your blood here. It's sort of like you're born into it. It's not a choice. You're born in the Boston area, New England, and the Celtics, the Bruins, the Red Sox, the Patriots, they're just like a big part of the culture of the city. And it means so much to the people who live here. And it's pretty much all walks of life. You know, it's not just people who would identify themselves primarily as sports fans. And it is part of the civic pride of the city. And people do care more about it. And that brings a lot with it. Good and sometimes not so good, right? Because it's passion. And you don't win 100 % of the time.

5:56It's not easy to be sort of the one of 30 that's standing at the end of every season. But it's great. It's what fuels you. It gives you that energy. And when you step into the garden on a playoff game night, like we'll be doing for game two tomorrow night, you can just walk in and you can feel the energy. And it's not like some arenas where it builds throughout the game. It's like, no, our fans, they show up and they're chanting before they're in their seats. And it just builds from there. And it's such a cool thing to experience and be a part of. And I think if you've done that, you say, oh, yeah, this is, it is different here because I've been to every arena in the NBA and I've yet to find one that feels like ours.

6:36So there's good and bad that comes with that. I know this as, as a guy who lives in Ohio, because Ohio state football fans probably have some similarities to Boston fans, you know, Kirk Herbstreit, a fellow Ohio guy, him and I went to the same high school, him and the Ohio state fans got into some, some fights this year. He called him the lunatic fringe at one point because of some of the craziness that went on. So I do, like, I see some of this. How is that both on the good end and the bad end? Now, you've had a lot of the good end, right? Because you guys win a bunch. But how has it been for you over the course of your career with all the pressure and the winning and losing that comes with being at a place like Boston?

7:17I mean, I think the big thing is that it beats indifference. Yes. You know, and so you accept it. and I think you're feeling the same pain that the fans are feeling. If I wasn't a fan, I wouldn't be in this job. And I tell people this when they're up through the door. Everyone says, well, once you work in sports, you stop being a fan. And I'm like, God, that can't happen. You have to invite the fans. You have to feel, you know, don't make your decisions. You have to understand the fan perspective. You have to feel to accept it. Doing it bad. Now, in between the fans, if you knew it was the media, and the media doesn't always represent.

7:53what the fans think. They've got their own sort of take on things that they're trying to feed to the fans. So you have to concern between what the media is saying and what the fans think and how they feel. But you've got to be tuned into it, and you've got to be okay with that. And I think where you run into trouble in this city is where you're not accountable to it. You're not willing to sort of stand up to it and take the heat when it's coming. Whether you feel justified or not, you can't be defensive about it. It's really people care. That's really what you're dealing with. It's like people are passionate, people care about this, and therefore, you have to take it back.

8:35I want to dig into your personal career because it's really cool as I was reading up on the fact that you had a prior job, a role as a VP of sales and business development, and then you leave this high up job with a big company to then move over to work with the Boston Celtics. Can you go back to maybe tell a little bit of your career arc and that story from how you got some of those big jobs prior to the Celtics and then how you made the move over into sports? Yeah, it's not the usual path, that's for sure. I had a 15-year career in tech prior to joining the Celtics. And I was fortunate. I was coming up through the ranks when, before there was an internet, before there was a World Wide Web, before people even were emailing each other.

9:26And my first job out of college, I went to work for a company called NCR Corporation. They recruited me out of college. They put me into a high-tech sales training program with 80 kids from universities across the country out in Dayton, Ohio, as a matter of fact, and taught us high to be professional salespeople. I started college when I was 17. I graduated when I was 21. And I was out in the world selling like multi-million dollar computer solutions and networks to Fortune 500 companies, you know, to people twice my age who knew a lot about, a lot more about the product and the technology than I ever did or was interested to learn.

10:03But it was such a great foundation. Everything in my career sort of was easier after that, I was built off of that. And as my career evolved, I started to get a little bit closer and closer to what was more personally satisfying for me. That was more fulfilling. So I saw this Internet technology coming up. And I was on the business-to-business side. I was more interested in the business-to-consumer side. I was on the hardware side. I was more interested in the software side because software is a little bit more of an art than hardware. And then seeing how the internet was being deployed in business, I could see where it could be deployed commercially in the world and started to catch on to a couple of different companies who were ahead of the curve on that.

10:49And so I went to work for a small startup company. I was like the Ethernet employee. Did that for a bunch of years, learned every aspect of the business. And then I sort of stepped up from there. And the company I worked for before in the South, this was a company called Lightness, was a first generation search engine before there was a Google. You know, before Google was a verb. And I met the group of people who was, you know, who were running this company. I interviewed with them a couple of times and they would only interview me on weekends because they didn't have any time during the week.

11:21They were like that driven, not pushing it that hard. and it just appealed to me that the technology, the product, the consumer-facing nature of it, I could see how it was, you know, I'm not a visionary, but I could clearly see how this was going to change people's lives. And it was just a matter of time before kind of broadband internet penetration into households caught up with it. And when it did it, it just all went boom, you know. And so it was a first-generation internet company. It's a big success. It just still happened that the guy, the lead investor for the Celtics, the guy in Wick Grospeck, who's still our team owner and CEO, and he put together an investor group to buy the team.

12:03But prior to owning the Celtics, he was a partner at a firm called Highland Capital that was a venture seed company, seed capital company, into Lycus, where I had worked. So I didn't know WIC and we had sold like us and I took a self-imposed year off, said, I'm not going to work. I'm just going to reacquaint myself with my family, stop traveling, you know, sort of decompress a little bit. I was about seven months into it. Then phone ran one day and it was WIC. And he said, hey, Rich, I don't know if you've been following the Celtics, but I just put together an investor team, you know, an investor group to buy the team.

12:38I said, oh, yeah, I'm following closely. I'm a huge Celtics fan. He's like, well, I've been in three meetings this week, and your name came up three times. And on the third time, I figured I'd just pick up the phone. I'd ask your number, pick up the phone, and give you a call and see if you'd be interested in taking a look at what we've got going on at the Celtics. And this was probably two months after we bought the team. And I said, well, geez, I think I can find the time for that. It was such a unique opportunity that I needed to take a look at it. But, you know, I was kind of a made guy in another industry, right?

13:10So there was an opportunity cost kind of walking away from that. But he said, why don't you come down and take a look, meet the team down here. Tell me what you think of them, you know, best case, decide you want to get involved, worst case, maybe do a little consulting for me and I'll put you some playoff tickets. And yeah, away from there, it was pretty easy when I got invited before I said yes to the opera i got invited into a game that was michael jordan's last game in the garden and after the ever got invited to present to him with a gift a piece of the parquet floor you know and i'm like hmm i could probably get used to this wow but it but it was a leap because it was a it was a mom and pop shop at that point in time it wasn't nearly the business that it is now but it was too unique an opportunity for a you know a boston kid not to want to go do it you know wait how would the Boston Celtics be a mom and pop shop?

14:07Well, it was interesting in that I would say there's about 40 people. Everything was on paper, nothing. There was no customer database. Back in the early 2000s? Yeah. Wow. Okay. There was no notion of proactive, outbound demand creation, sales and marketing. There was no notion of sort of invest to grow. and actually that was part of what made it really attractive because you could see the opportunity and there were good people by the way you know but what had happened was the the team was really run through the cfo's office and you know the owner would take money out every year it was a profitable business it wasn't a bad business but it wasn't a business as i want to say the well the business itself has to be raising bears that's that's what it is and we're pretty far away from that and you can say well you wait until the team gets good you gotta get lucky in the draft lottery but that's that's not a strategy so you could take a look at it and you could say well they're this is one of the greatest brands in sports they haven't won anything since 86 so it had atrophied the 90s where it's up decade for the celtics the sort of the the premium that the brand once had invaded a bit and the mentality kind of set in that you know i remember talking to people saying well it's not you know it's it's not a celtics now it's a red sox now i'd say well wait a minute last time i checked they played baseball from april through october and we played the huskett ball from november through april read that monopoly on professional basketball in our region like and it's the celtics this is there's something this this can be a bigger better smarter business that it is and that's not to discredit anyone it came before it was just sort of the way it was and uh you know so we sort of instilled a little different way of thinking about the opportunity invested in in the product which is you know step one you're not investing you're not going to grow what do you think it was that made three different people bring up your name to wick yeah it's interesting i think about that's when i talk to younger people about kind of career because I helicoptered in.

16:20It's not the usual path. Start as an intern and work your way up. I think a couple of things. One, I love basketball. I was a basketball junkie. They know I love the Celtics. But two, and I think it's the most valuable advice, I sort of try to give people about the great dispatcher of advice. But most of your opportunities in business and in life are the result of someone saying something good about you. And they're only going to say good things about you They like you. They respect you. You treat other people well. You can be really good at your job. You can be really smart. You can have a lot of the success attributes.

16:57But if you don't have those things, people aren't going to go to bat for you. So I think, you know, I don't know who the people were who, you know, had given me a reference. And I was like, well, that made me feel great because those were the people who built like us, you know, who hired me to come on and I helped them grow that. And, you know, so it came around in a way that I wouldn't have expected, you know, because you're really lucky if your passion and your career can come together. Most people don't get that opportunity. And people always say to me, you got your dream job. And I'm like, I never dreamed of it.

17:31I never thought it was possible. It just never occurred to me. I wasn't on the track. But it was a good sort of lesson, you know, like, yeah, some fortunately some people said some nice things about me. And, yeah, 22 years later, here I sit. Wow. So now let's get into some of the details of your role. So you're president of the Celtics. So how much of that, and I know this is different, probably team by team, sport by sport. How much of your job is let's make a bunch of money and how much of your job is let's work with Brad Stevens and the coaches and the players and help be a part of building a great team?

18:11I'm curious about what your day-to-day looks like and how much of both of those elements you're working on. It's mostly the business side. I mean, it starts with revenue, right? So I think where do you want to be in sports if you're doing things the right way and you have a little luck? Where you're running a strong business, which allows you to generate a strong top line, that allows you to invest in your product. your product is your team and your players and all the supporting resources around that team and those players. And if you do that well, generally speaking, player payroll correlates with success.

18:52So you've got to be able to run a strong enough business to fund a strong player payroll, at least in the NBA, that's certainly true. And that correlates with success on the court. And if the team wins, and if you're able to accomplish that, the team wins, then that drives the business. And it's kind of a virtuous cycle. So while I spend the bulk of my time managing a couple hundred people who are really good at their jobs on the business side, a good example is tomorrow, I'm going out to meet with a couple of our owners and Brad Stevens to go through sort of a longer, bigger picture view, long-term view of, you know, a basketball, a bunch of, you know, things we're thinking about and decisions we're going to need to make in the offseason, things that, you know, I can't get into.

19:36But generally, my role with Brad is to help him think through this, right? Because he's a coach. He was a coach. He's a smart person. He's a thought person in all these success attributes. But, you know, these are, you sort of look at a lot of these decisions and they're all balancing short-term with long-term. They're balancing opportunity cost to do this, and that cuts off your ability to do this, this, and this, so you've got to be right about this. How do you make this decision, but still leave yourself some optionality and some flexibility so that you can keep getting better and you're not stuck?

20:10And that's all problem solving. And I kind of think business and sports, a lot of it is problem solving. So I'm not involved in Joe Mazzula's game planning, but I'm involved in understanding what he thinks he really needs, you know, to have a championship caliber team and trying to make sure he has that around him, you know, and more of my involvement is at sort of the higher level when we're making big decisions, whether it's, you know, trades or free agent signings, transactions, and sort of thinking, I've got opinions on buyers and talent, I can't resist that, you know, that's why I'm in the business, but that's not the expertise, you know, that is needed from me?

20:52How do we build something that's sustainable and good? And how do we sort of, how do we, what are we valuing when we're making these decisions? Right. And I think that's a big part of the culture and who you are. It's not just sort of what you're doing is why, you know? And, and so I'd like to think, I help us think through that a little bit and really, you know, it's interesting because the sports side of it has grown so much. I mean, our team photo used to be, 12 players, four coaches, the owners, me and the general manager. Now it's like 60 people in it. And it's an army of coaches and strength and conditioning people and rest and recovery people, nutrition, mind wellness, everything it takes to sort of like optimize performance.

21:39And that's building an organization and building an org structure. So I spent a good amount of time with basketball side and sort of how to do that. Not telling you how to do it, but sort of being a sounding board for it, bouncing things around. And then there's obviously the budget cost because everything, you know, always, you know, inevitably ties back to money. And we've got to think through all of that together, you know, again, short-term, long-term. So that's, you know, that's sort of the area of overlap there. And so I keep an office in both places, but most of my time is spent with the business group for sure.

22:11Sure. So I'm also curious about your relationship with ownership. And we can get into the recent sale in a second, but prior to the sale, right, you mentioned the ownership group recruited you, they wanted you. How much freedom do they give you with the budget? Because it's ultimately their money, right, that you're going to spend more of to invest in extra coaches or support or players or luxury tax. I mean, there's a million different things. How do you guys manage a budget in a multi-billion dollar business where it's not just about the money because you want to win, right? You want to win games.

22:50I think the Warriors and others have gone deep into the luxury tax in order to get the players they needed to win. I mean, that's part of basketball at times. So how do you guys have, what's that relationship like when it comes to money and trying to win, but also trying to make money for your owners? I mean, that's really the crux of it all. It It really is. The Celtics, you know, the business of the Celtics is to win NBA championships or raise banners. Right. So that's a pretty clear North Star. Now, you're not going to do that every single year. You don't want to delude yourself into thinking that you want to be very realistic.

23:27And when you're in a window, when you're able to, for us, it's not about profitability. It's never been about profitability. It's a bit about winning. And the good news about the NBA, if you're running a team, they're a well run team. you can win and make money. But there are certain years where you're guaranteed to lose money by winning because in order to win at the highest level, as you referenced Golden State, our team currently is way, way into the luxury tax and the repeater tax is coming in the first and second apron. But what we've done is we've run a business that allows us to do that because you run a financially successful enough business, then you can fund losses for a period of time.

24:11You can't do it in perpetuity, but you can decide to do it for a period of time. And the great thing about our ownership is, when I tell you I've been here 22 years, I've never had a conversation with anyone in our ownership group, particularly my boss, Wick, and Steve Paliuca, who's been involved for years, about how do you make more money for me? How does this team make more money? It's got nothing to do with that. It's like, how do we, you know ideally it's how do we win and not lose money but if winning means losing money then we'll lose money and my job is to sort of help fund that and then also say well at a certain point you know we've got to make some decisions because it's not always going to be sustainable and it's not because the owners are saying well we're cheap we don't want to pay it it's because you run into So not just financial penalties, you run into basketball penalties now with the new CBA.

25:07So you lose draft picks, you get assets that are frozen, you really can't continue to improve your team. So what you do is you sort of limit your ability to get better and that'll cost you in the long term. It's been a good situation for me personally, because I've been given the freedom to just do my job and try to build this thing. And you get that when the results are there. but the ownership group has been really good it's a very you know supportive group a supportive board not questioning you know why are you spending it on this place more okay how do we how do we win and what's it going to take and if that means spending a ton of money then we spend a ton of money and there are some years when you could just say listen we're we're not there now we've got to reload we've got to rebuild and you sort of duck under a little bit so you can then move forward again.

26:00And also the asset grows really well. And it's specifically for this ownership group, right? I think you correct me if these are wrong, but I believe they bought the team in 2002 for 360 million and just sold the team for 6.1 billion recently. Not bad, not bad, not a bad investment in growth over, over 20 years. Well, yeah. And particularly when And they didn't buy it for that reason. I think they're all smart investors. A lot of the investors in the group are private equity people, venture capitalists. They sort of understand sort of the kind of under-managed assets, plug in the right people and invest in it and watch it grow.

26:46But, yeah, I mean, professional sports franchises, NBA sports franchises have beat just about any market index you could imagine over the last 20 years. And the good news, IQ, and I think this is our ownership group, they've been paid back in love of the game and joy, being a part of it, winning a couple championships, having it become such a civic asset, such an important part of the city, so important to so many people, and being a part of that, having restored that, and all the enjoyment of it along the way. And then at the end, you poke your head and be like, oh, yeah, by the way, we can sell this thing for a lot, too.

27:25But I can tell you, that's not what drove the sale. And I'd tell you right now, most of the people in the investor group would say, oh, yeah, I'd leave the$6 billion on the table and keep enjoying the team. I'd make that trade. At some point, whenever it gets traded later, it'll trade for more. It's turned out to be a really good investor for some people who really enjoyed it along the way and got their payback in championship parades. Well, I mean, as a sports guy, I don't know if there's a cooler rich guy thing to do to own a team. I mean, like that would be the ultimate is that you get to have one of those franchises.

28:10And that's why I'm sure a big part of the reason that they cost so much, right, is because the supply is so low. A team rarely, rarely comes for sale because it's such a coveted thing to have. And then the Boston Celtics go for sale and you're like, wow. And that's why it breaks records in all franchises. What was your role throughout that process after they announced you win a championship and then they announced, hey, we're open to potentially selling this thing. And, you know, a year later or less, what's your life been like through that process? Yeah, it's been busy. It's been like having two full-time jobs.

28:48I'm not complaining, but it's been a lot. You know, what we had to do, you know, it's one of the things that has made me think. You know, we rarely look backwards. Like, you don't look backwards at the previous 21 years. You look at the next year. Like, we're always like, how do we get better? How do we win? How do we win? You know, how do we build a better business so that we can sustain winning? And the job, you know, with the sale of the team has kind of been, I guess, for lack of a better term, packaging it up. And that meant going back to 22 years of financials and presenting those out, you know, and there's the way we run the business operationally.