Pat Riley, current team president of the Miami Heat, has a sports résumé that’s packed with season after season of success. In addition to being inducted into the NBA Hall of Fame and coaching the Los Angeles Lakers and Miami Heat to five world championships, he is the only North American sports figure to win a championship as a player, coach and executive. What is the key to his success, and how does he maintain excellence?
IndexUniverse Editor-in-Chief Drew Voros recently spoke with Riley about his management philosophy. Riley will also discuss his formula for success as a keynote speaker at Inside ETFs on Monday, Jan. 27.
IndexUniverse: As financial professionals, we want to hear the way you operate your business, the Miami Heat. That’s what this interview is about. We’re looking to see how you manage the organization, how you select your key people, that sort of thing.
Pat Riley: I'm looking forward to it. You know, it’s always a challenge to go outside your world and understand that the Miami Heat and your organization simply have a platform in which you jump off to sell product. And basically, we all do it the same way. We just have different terminology.
IU: Risk management is a big part of the financial world. We’ve just seen Kobe Bryant of the Lakers get hurt and will be out for weeks. What happened to Kobe has to be an NBA executive’s worst nightmare. But you also have to prepare for it, don’t you?
Riley: When you lose an asset like that and your team is built around players like LeBron James, Kobe Bryant, Dwyane Wade, Chris Bosh, whoever it is, it doesn’t really make any difference what happens to you. It’s how you deal with it. And I think it comes down to the word “trust.”
The players trust us because they know we’re competent. We’re going to make them better players. We’re going to make sure they’re the best-fed and nutrition-oriented conditioned team in the league. They bank on that. Otherwise, they probably wouldn’t want to really play for us if they didn’t trust that we were competent.
Lastly is the reliability factor. They know we’re going to be there if something happens. It’s a real tragedy when you lose an asset, a product that all of a sudden you can’t sell to your customer anymore.
What happened to Kobe was a freak injury. It does hurt the organization. But he also knows that the organization has his best interests … I mean he’s a week away from signing a $57 million contract that’s fully guaranteed, whether he’s playing or not. He has 18 years invested in the Los Angeles Lakers. The team is going to take care of him.
IU: Speaking to competency on the management side, how do you achieve that? In the financial world, quantitative analysis is the backbone of competency in so many things. Where does quantitative analysis play a role in the Heat organization?
Riley: We have been doing analytics for years. We just called it “statistical analyses” back in the ’60s and ’70s. We’ve always used numbers that we feel define the difference between winning and losing, success and failure. We have a database of numbers, not only individually but as a team, in which we track every single movement that one of our players makes out on the court. And we will definitely quantify it into a number. And the player will have that number.
[Head Coach] Erik Spoelstra is one of the new state-of-the-art technological coaches. He believes in these numbers. He uses them to set up the offense and defense, especially offensively, and who are the best players to complement LeBron and Chris Bosh and Dwyane Wade, our best assets. Numbers and analytics play a big part in true field goal percentage, or how we can space the floor. The numbers tell us that Shane Battier and Rashard Lewis play better when LeBron and Chris and Udonis Haslem are on the court.
But there still is a gut instinct. The No. 1 thing you do in this league is to try to find the best talent. Then you need to get all of the players to sacrifice whatever they need to sacrifice for the team. Sacrifice has been a big part of our success. When we signed the “big three,” they gave up $51 million in total salary so we could bring in four or five other guys to help them win.
If you come to this culture from another culture, you have to understand exactly how we do things around here. And you have to understand how our coach plays his players. You may have to sacrifice minutes or shots or whatever it is, and grow into another role, and grow into another thought process of support.
IU: You’ve been able to manage stars and win championships dating back 30 years. What’s the key to maintaining that excellence? Is there something you constantly draw upon?
Riley: I was 20 years with the Lakers filling all different kinds of roles. When I showed up in Los Angeles, I was a role player, which I taught myself to be. And I was given the opportunity, because I did sacrifice. I wasn’t a starter. But I could do certain things to help the team win. And when I retired, I went back to the Laker organization and I was a traveling secretary. I worked as a broadcast analyst. I worked as a production assistant. I worked as an assistant coach. I was an interim head coach, and then I became the head coach.
I worked for an organization whose first owner was Jack Kent Cooke, who ran the team very corporately oriented. He would walk the halls to make sure you were in your offices with a shirt and tie on. He was that kind of an owner. And then Jerry Buss bought the team in 1979-80; he was a very successful real estate magnate. He was able to draft Magic Johnson. And the rest is history.
Riley (cont'd.): It was his management that allowed us to be who we are, but also with a tremendous amount of discipline. Over the 20 years that I was in Los Angeles, I learned that the No. 1 thing you need to do as an organization is develop talent, and allow that talent—be it in the office or on the court—to understand that there’s a purpose, and that what they do matters and counts, that there’s going to be meaningful advancement somewhere along the way.
In the end, what all people really want who work for a company is to be compensated in a good way. I've always tried to establish continuity, even when I went to New York, and now I’ve been here for 19 years.
Players see the continuity. And you can sell family. You can sell the fact that the culture is one of people who don’t want to leave. They get promoted. The two head coaches that I’ve had since I’ve been here were assistant coaches for me. They worked a long time just laboring away. Then one day I called their name, and they were the next in line to be the head coach. Continuity goes a long way in being successful as an organization.
IU: Let’s talk a little bit about your management relationship with Erik Spoelstra. Certainly he’s grown up under your wing and learned from you. But tell us a little bit about how you managed that relationship with a coach.
Riley: I believe in what’s called the “one-voice” management philosophy. There’s a single voice. And the single voice is a big circle. The middle of that circle has to do with your philosophy as an organization and your culture. So we have one voice. That voice is [team owner] Micky Arison. That is my voice. That is Erik Spoelstra’s voice. It’s the voice of the players. There’s a universal way that we do things. But it’s the same philosophy. We all want the same thing. But Erik becomes the spokesperson.
We don’t want a lot of people out there making statements to the media that can contradict one another. We sort of stay in our lanes that way. Erik is the face of the franchise now. He’s in front of the media four times a day. I don’t want to be in front of the media four times a day. Neither does Micky, because they’ll just pick us apart. So we’re very disciplined about that voice.
When I retired as a coach, I had been president and head coach. I had a lot of control over what was said and how we did things. I had to give up some of that control, which is hard at times. But it wasn’t that hard to let go of it, because the voice really never changed. The philosophy really never changed.
What I'm so impressed with about Erik is that I feel I made the right choice in selecting him because he’s a young coach. He’s achievement oriented. He’s ambitious. He’s analytic. He’s technological. He’s an X-and-O master. He’s not as loud a motivator as I was, but he motivates in a different way. And the team respects him for that.
Riley (cont'd): So I don’t get in his way. We meet every day. We talk every day. I will make X-and-O suggestions and things like that. But I trust that what he’s set up for this team is a winning formula. That’s on both ends of the court, and also in the locker room.
When it comes to the draft or free agency, or acquiring players via trade, anything that has to do with personnel, it’s myself and Erik and Andy Elisburg and Chet Kammerer and Micky Arison. If there isn’t a consensus, and there’s somebody that I really want, then I will probably get to make that decision. But I don’t think we’ve ever done anything here where we didn’t all agree it was the best move.
IU: Speaking of investing in talent, is there an area in which you tend to be more aggressive, such on the offense? Or does the end of the season require a different need every year?
Riley: It’s whatever your needs are. We spent four years planning the 2010 free agency [that brought Lebron James and Chris Bosh to the team, and re-signed Dwayne Wade]. All we wanted to do was make sure our team had enough money, to be able to go out and sign three marquee free agents, because we knew these free agents were going to become available in 2010. So we pointed toward 2010 as a goal, to be able to really build our team.
But prior to that, we wanted to stay competitive too, and we did. We were a playoff team for two of those seasons. Our fans understood that there was a long-term goal here. But we put the best team that we could out on the court. We gave them short-term contracts because we didn’t want any contracts to go into 2010. That was a definite organizational decision to move in that direction.
I wanted to be able to sit at the table with LeBron James and Chris Bosh and Dwyane Wade, and recruit them, and try to convince them that the three of them together could be pretty good, and that we could build a great team around them.
We don’t like to build through the draft. If you’re going to do that, then you’re probably going to have to lose for two or three or four years in a row, and get high lottery picks. In my 19 years here, we’ve been in the lottery three times. We ended up getting three good players out of that.
Riley (cont'd.):But it’s not much fun to go through. And so picking a late-round pick, somewhere between 22 and 30, wherever we are, you try to do the best homework you can on those kinds of draft choice. Norris Cole is a perfect example of a guy that we picked very late and is in our rotation. Mario Chalmers was a second-round pick.
But we really like the trade route or free agency to find the fourth- or fifth-year player, who’s been through the rookie or early-stage development, and now has become a veteran. He’s a talent. He’s experienced. He’s mature. And he will slot into that sixth-man role or a specific role. Or every now and then, go for a real star. That’s how I think about building a team. And that’s how I think about keeping the team relevant, to keep adding one piece.
Jerry West taught me this in Los Angeles We had a great, great team that was together for 12 years, nine trips to the finals in 12 years and five world championships. But every year he added a key player, like a Bob McAdoo. And then he added an A.C. Green. And then he added one of the best pickups that we ever had back then, a guy by the name of Mychal Thompson, who we got late in thes’80s.
And that’s what we try to do here. We ended up getting Shane Battier. We signed Ray Allen and Rashard Lewis. And then we brought in Chris Anderson and this year added Michael Beasley, who we brought back, and is probably the fourth-most-talented player we have on our team. He’s had a great start for us thus far this season. That’s how we’ve been able to add to our team.
IU: Thanks for your time, Pat; we look forward to seeing you in Florida.
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