Team captain Featured

7:27am EDT October 21, 2004
Gordon Gund is an entrepreneur at heart.

His commitment to business partly comes from an early job where he was exposed to the passion entrepreneurs profess for their business and partly from the business acumen that seems to run in the family.

"I had been in the Navy for four years as an officer, then went to work at Chase Manhattan Bank in 1965 in the special development program," says Gund. "I became a lending officer and spent a lot of time in the middle part of the country calling on people. I met a lot of entrepreneurs from just cold calling. These were entrepreneurs that had built their own business and they were very exciting people to talk to and hear about. I wanted to be involved with people that had the entrepreneurial spirit.

"I wanted to feel I could add value and have a lot to do with implementing positive change."

Adding value is a major theme in everything Gordon Gund does. But he's not talking about money; he's talking about making positive contributions to people's lives and ventures.

"In a major organization like Chase, I wasn't going to be able to do that. It was like the military in that everything had to go up a chain of command. I wanted to take charge of what I liked in business."

Adding value was one of the things Gund wanted to focus on.

"In those early years (in the Navy and at Chase), I learned that people really want to feel they are adding value to an organization, and they want to feel like they are valued," says Gund. "Even within a chain of command or within a large bureaucracy, in order to optimize efforts in an area someone is responsible for, there has to be a mutual trust and respect. The person has to agree with it and be given the tools to do it."

In 1968, Gund started his venture capital firm, Gund Investment Corp., of Princeton, N.J., to give people the tools they need to succeed and to add value to their efforts.

Adding value is something the Gund family has been doing in Cleveland for much of the family's history.

While everyone may know that Gund owns the Cavaliers and that the arena downtown bears the family name, what many may not realize is that the Gund family has a long history of successful business ventures here and that innovation runs in the family.

George Gund, Gordon's grandfather, made his mark in the brewing industry at the turn of the century. He was one of the first brewers to put beer in disposable cardboard cases rather than in the then-standard wood cases that were expensive and unsanitary. George Gund II, Gordon's father, ran the brewery business for awhile, then parlayed a $130,000 investment in a new product known as decaffeinated coffee into $10 million when he sold the process to Kellogg Corp. The product today is known as Sanka.

Gund II then turned his attention to banking, and grew the Cleveland Trust Co. into a major power in the industry. Many years and several mergers later, it is now part of Key Bank.

Gordon Gund, who besides serving as chairman of the Cavaliers, also is co-founder of the Foundation Fighting Blindness and chairs his venture cap firm.

With so much entrepreneurial spirit in the family, it's little wonder that Gordon Gund was attracted to the venture capital world, where working with entrepreneurs who are passionate about business is the order of the day.

Leadership is everything

The difference between success and failure is often determined by the person who is ultimately in charge of a company, regardless of whether that company is big or small.

How effective a leader is also determines whether Gund invests in that company.

"It doesn't matter how good of a product or service the business consists of," says Gund. "You've got to have a strong leader or leadership. If it's not there, you can't go any further."

A strong, passionate leader who has a business with a so-so product is more likely to get interest from Gund than a so-so leader with a great product.

"We wouldn't invest in a so-so person," says Gund. "Try to get a sense of how passionate they are about what they are doing. What are their people skills, and how do they think about the future?"

Gund will present the entrepreneur with several scenarios and ask how he or she would respond in each case to test how much preparation the person has done regarding the business before making an investment decision. He also assesses the people the entrepreneur has chosen for the team and evaluates his or her people skills.

"Spend time with them and listen," says Gund. "We do a lot of listening. To the extent that you know people who know the entrepreneur, all the better."

Developing a sense of trust with the person is important. The ability to delegate and work within a team requires mutual respect and trust, and that can take time to build.

"It's very important for long-term success," says Gund. "Some people say it's a shortcoming of mine, but my inclination is to start out by giving people the benefit of the doubt and trust them. I would rather err in the direction of trusting them than not. It gives people a chance to demonstrate that trust, and also shows that they can trust me.

"The person has to have consistent and complete integrity. If I don't feel that, I won't work with them."

Gund, who is on the board of directors of both Kellogg Corp. and Corning Glass, says that the entrepreneurial traits of success also apply to leaders of larger companies.

"There are certainly fewer leaders (with the necessary skills) to select from," says Gund. "A lot of people feel a real passion for a business and start something in their garage and may do all right in the garage as a mom and pop business, and that's great. But if you are talking about growing a big business, there are not a lot of people that have the skills and flexibility to grow with a business that is growing.

"The requirements of a large business are vastly different than one run out of a garage. Instead of maybe one employee, they might have hundreds, thousands or tens of thousands of employees. The whole equation is different. There are not as many people that possess those skills and have the passion to run a very large business. So the pool isn't as great, and good ones are hard to find."

One way a company can avoid having to search for talented leaders is to develop them in-house. This means identifying potential candidates early and continually developing them so they don't leave.

"A smart big business will move people along that demonstrate the skills needed so they don't get frustrated and can be constantly challenged," says Gund. "That's what they want and what they get their satisfaction from."

They want to feel valued and that they are adding value to the company.

"A good business will have career paths for its top performers," says Gund. "You have to be very conscious of the need to constantly drill down into the organization and find those that have the potential to go much higher."

Being a successful leader of a large company also requires outstanding communication skills.

"How you communicate with people is critical," says Gund. "One of the things I learned in those early years with Chase and the Navy was the importance of listening. I mean truly listening and really hearing them. I think that's very important. People need to understand what your organization is requiring of them and what do they need to meet those requirements. So often people don't take the time to do that."

Constructive imagining and the NBA

Adding value to a business means being proactive in spotting problems. Just as an NBA player might picture in his head certain game situations before ever taking the floor, Gund says it's a good idea to do the same thing in business. He calls this process "constructive imagining."

"It's a term for something we all do sometimes," says Gund. "Take Gund Arena, for example. When we built it, and every year since then, we'll step back and think about the fans and guest experiences, not only when they are in the building, but getting to it. What are their difficulties? Are they getting to parking? Does the signage help? Does it make a more enjoyable experience?

"We want to have excellence at every turn. We want to look at what their experience will be every step of the way. Is it the best it can be? Are there ways we can improve? We try to think about problems that might come up unexpectedly. These are not just crisis plans, but plans for if a fan loses his way, his ticket or his wallet. A number of things can happen when someone comes to an event. How do we help? How do we make it as enjoyable as we can?"

Constructive imagining is not just about solving problems. It's also about finding ways to expand the experience.

"This is something we do regularly," says Gund. "We do it with all the things I'm involved with. We can always improve the way we do things."

Improving the product off the court is one challenge; improving it on the court is another. You can't always hit the lottery and acquire a franchise player like LeBron James. But it's the entrepreneurial spirit that Gund relies on to keep the franchise moving forward.

"It's not different than any other business in that you need to have entrepreneurial people heading it," says Gund. "We do that on both the business and basketball sides."

Gund is quick to credit those around him for the organization's success, saying the current and former executives have all made big contributions to a business in which 18- and 19-year-old kids are a major part of the product.

"There are very few kinds of businesses where your main product can break down," says Gund. "You never know what might happen. You can have injuries to key people, and we've had our share. Many of the key components are 18- to 20-year-olds who are being paid huge amounts of money. You have to deal with them growing up, and growing up with a lot of different things coming at them. There are a lot of dynamics of bringing them together as a team when they have all been starters in their previous arena, whether it was high school, college or Europe."

A sort of regulated market exists for league members, in which everyone abides by a set of rules for both on-the-court and off-the-court actions. Even though some of the top businesspeople in America own NBA franchises, they sometimes don't apply that business experience to their team.

"They tend to be more competitive on the court," says Gund. "Sometimes they throw money at players and think they know more about basketball on the court than the pros they hire that have years of experience in the sport."

Gund says the biggest difference between owning a regular business and owning an NBA franchise is the public and media scrutiny.

"Every day people are writing about your business and are passionately interested in it," says Gund. "You read about bad decisions I make or bad decisions my employees make. But you have to be thoughtfully decisive. We sometimes have to make decisions that will not just have an immediate impact, but will have a longer-term impact. We have to make decisions and stick with them.

"We look at all the possibilities and think about the future when we acquire or draft a player. We are usually not dealing with fully formed or finished individuals. We are talking about potential, and the team's potential needs beyond the immediate future."

The team may lose games in the short-term, but the goal is always long-term success, which comes about by relying on the expertise of the people he hired to run the team. But that doesn't make losing any easier.

"Four years ago, (Cavs General Manager) Jim Paxson had a plan for the team, but the first thing was to dismantle the team," says Gund. "That was OK, but we were not going to go anywhere. It meant trading away players and making the team worse before it could get better. The only way to get better was to get worse. We needed to get draft choices that would allow us to get better.

"It was painful. We knew it would be. But it was painful to read about how terrible we were and what needed to be done. I feel now that it is starting to pay off. The plan is proving itself out. It takes time. You can't build a competitive team overnight."

Blindness, philanthropy and the strength of family

Gordon Gund has been blind since 1971 when, at the age of 30, retinitis pigmentosa, a hereditary disease in which the retina slowly dies, took the last of his vision.

"I certainly think, at the beginning, it taught me what I really care about is people and adding value to the people around me and being valuable to them," says Gund. "When you lose a sense, I think the tendency is to think, 'Gosh, now I'm not going to be able to be useful, helpful or valuable to those I care about.' But indeed you can be, you just have to do things in different ways. Everyone wants to feel valued and that they are adding value.

"One thing I learned is that we have more capacity with the other senses than I ever could have imagined. We underutilize the capacity we have with the other senses. Vision is the one we use the most, and we live in a very visual world and society. When you don't have that, you are forced, out of necessity, to use others.

"The same thing is true with memory and with the way you organized things in your mind and think about things and decide what's important. I certainly found that there are ways for me to be effective and productive and to add value."

Gund says the first challenge was to simply break away from his own stereotype of what a blind person is capable of achieving. He stereotyped a blind person as someone who couldn't be effective, but soon discovered that the stereotype was all wrong.

Gund still skis and fly fishes, two activities he did before losing his sight, and now he also sculpts.

"I keep stretching the envelope of the stereotype," he says. "I loved both skiing and fly fishing when I lost my sight. Now I do them differently. I'm much more balanced on my skis, and I actually ski better. With fly fishing, I feel when I do hook into a fish, I handle it a whole lot better than I used to."

Gund utilizes a guide for both sports. In skiing, the guide warns him of potential obstacles as he makes his way down the mountain. In fishing, the guide tells him where to cast the line.

Sculpting was something he always wanted to do, but he never got around to it until he lost his sight. Now he says that while working with other artists, he sometimes picks up on things they don't because he is working by feel rather than sight.

To spur research into blindness, Gund and his wife, Lulie, co-founded the Foundation Fighting Blindness, which he says is really no different than a venture capital firm.

"There was an important need that wasn't being met," says Gund. "All good businesses are started because of a need or problem. We started with a goal of putting together funding for equipment and people to run a multidisciplinary lab. It grew as companies grow.

"We knew we couldn't keep funding them as the research grew and was published; we had to find new sources of funding just like a business. First there was angel investing, then early and mid-state capital, then the private equity folk, then public funding or banks or insurance companies. At every step and level of risk, you have to bring in new financing, or the original source can't do anymore."

Early research focused on learning how vision works in the human brain before any research on therapies could commence. Gund says there are some promising therapies in the pipeline.

While Gund has a special interest in this particular foundation, philanthropy is a family tradition. His father left much of his $600 million estate to the Gund Foundation, which continues to be a major contributor to Northeast Ohio causes. In the first quarter of 2004, the foundation issued more than $6 million in grants.

"Philanthropy is something we grew up with," says Gund. "It adds value to the things that people are doing and makes them feel valuable. We are not just throwing money at things, but are looking at ways to help people help themselves. Ultimately, that's the way it has to work.

"The way we look at it, the Foundation Fighting Blindness is a source of philanthropic seed capital that can help to fund and bring along new ways of meeting and solving problems."

Gordon Gund has achieved much in his life, but ask him what his proudest achievement is and he quickly responds with, "I have a great and wonderful family."

Numerous business accomplishments follow, but his personal triumph over blindness stands out. He says that for him, his proudest achievement is, "To be able to be effective and productive despite my blindness, and to have the relationships with people who have added value to my life and to be able to add value to theirs."

How to reach: The Cleveland Cavaliers, (216) 420-2000