By day, Paul Purcell thrives in the dry world of wealth management and public and private-sector finance. As the chairman, president and chief executive officer of Milwaukee-based Robert W. Baird & Co. Inc., he tries to read one business-related book each time he embarks on a 16-hour flight to and from China, where Baird is rapidly building a significant market presence.
Yet, when asked which book has provided him with the most poignant advice about managing his company, Purcell does not hesitate with his answer. “Absolutely. ‘The Little Engine That Could.’ That’s what life is all about. You will it to happen. Tells you all you need to know about life. You just keep truckin’. Just keep going.”
That kind of focus on the mission at hand has served Purcell well as he has guided Baird through an ongoing series of changes and expansions in recent years. Purcell says Baird is now uniquely positioned as a privately held, employee-owned company to become the “best middle market financial services firm in the world.”
In many ways, Baird is an important Milwaukee company that is at a turning point, with substantial growth opportunities in Europe and Asia, in addition to expanding its services in the Chicago market. Purcell expects 2007 to be a record year for Baird, generating revenues of about $700 million and annual operating profit of $95 million to $100 million.
As Baird approaches its 90th anniversary in 2009, Purcell, age 60, plans to work four or five more years as CEO of the firm. Looking out the window from the Baird offices on the 28th floor of the U.S. Bank Center in downtown Milwaukee, Purcell recently discussed the future of Baird with SBT executive editor Steve Jagler. The following are excerpts from that interview.
SBT: Before we account about where Baird is going, let’s first talk about where it’s been the last couple of years. Becoming an employee-owned company in 2004 – what kind of impact has that had on Baird?
Purcell: “Well, when we look at Baird historically, employees have always had a large ownership stake in Baird. The lowest point was 20 percent. We bought the last half back from Northwestern Mutual (Life Insurance Co.) in 2004. We bought back complete control, which was a very good thing. We had an absolutely fabulous 22-year relationship with Northwestern Mutual. We still have a very good relationship with them. What happened is that relationship became really non-strategic and became financial. So, we convinced them it was a financial investment that would be good for them to exit.
“It was important to us, because as we looked at our business going forward, we thought, a) being privately held, and b) being employee-owned, made us a fairly unique entity in the financial services industry. There just aren’t many privately held, employee-owned companies (in the industry). Clearly, we control our own destiny. We come in every day, and we get to decide what we’re going to do, where we’re going to allocate our resources. And that’s very exciting.”
SBT: And is it an advantage for recruiting top talent?
Purcell: “For recruiting and attracting people, it is a huge benefit that we own our own firm and we’re privately held. That was a part of the driving strategy.”
SBT: So, in many ways, it allows you to act much like an entrepreneur?
Purcell: “We are an entrepreneur. We are very entrepreneurial. And that’s one of the issues. In financial services, it’s been scale, scale, scale. Big, big, big. We don’t think that big, big, big means quality. We’re very focused on quality. We’re very focused on integrity. We’re very focused on getting better. We think being very entrepreneurial in spirit and much more flexible and quick on our feet are huge strategic advantages for us, long-term.”
SBT: In the past year, there was a nasty court dispute involving Baird and Red Granite Advisors LLC, which was formed by some former Baird people. Is there anything more to be said about that?
Purcell: “No. It’s closed, it’s done. We’ve agreed, as part of the settlement, not to discuss it. It’s a closed chapter and one that’s way in the rear-view mirror.”
SBT: OK. You talked about recruiting. What are the advantages and disadvantages for you about being based in Milwaukee, rather than in New York, on Wall Street?
Purcell: “There’s both. Clearly, the advantages are many. Milwaukee is a great city to live in. It is a wonderful city to raise a family in. The lakefront is terrific. There’s lots of arts. It is a very, very good place for people to raise a family. We have 1,000 people in the U.S. Bank building, about 1,200 in all of Wisconsin. So, half of our people are either in this building or in Wisconsin, so Wisconsin is very, very important to us.
“Some of the disadvantages are we have to compete for talent, not only with New York and San Francisco, but clearly, places like Chicago and Minneapolis, Atlanta and Dallas, that are larger cities that have more to do. That’s a disadvantage, especially for younger people. So, the Milwaukee 7, the Third Ward, all the things along the river – all of those things are helpful for attracting younger people. I don’t care what business you are in, you need young, energetic people to drive your business. So, it is really important for Milwaukee to be more entrepreneurial in the way they think and more open to change and more flexible to attract more young people.
“And we need to create more entrepreneurial companies that have above-average growth. That’s a mindset that we need to encourage people to be more risk-oriented in starting businesses and growing businesses.”
SBT: Absolutely, but they just don’t seem to teach much of that in college. They teach business administration and finance, but they don’t teach people how to be entrepreneurs.
Purcell: “Yeah. There are a few schools that actually have some courses in entrepreneurship. But it is a way of thinking. And there is no question that one of Milwaukee’s challenges is we’ve got this huge reformulation from manufacturing-based to more services-based. How Milwaukee adapts and Madison adapts … we need to create new companies out of the research that’s done in the (laboratories at the universities) in Madison and Milwaukee.”
SBT: Are there any future plans for the Milwaukee operations of Baird – to grow it, maintain it or reduce it?
Purcell: “Well, we certainly are going to maintain it. We just signed a new long-term lease in this building, so if anyone’s got a question, we’re staying in Milwaukee. We think Milwaukee is a great place for us. In two years will be our 90th year.”
SBT: Are you going to be doing anything special to celebrate that?
Purcell: “We’ll do something. We’re trying to figure out what that will be.”
SBT: You going to bring Elton John back? (Laughs)
Purcell: (Laughs) “We will do something special. I would be stunned if it would be Elton John. So, we’re certainly going to maintain, and we’ll grow certain parts of this as we grow on a global basis. I think the largest part of our growth will probably be outside of Milwaukee, because much of our growth has been in Chicago and in San Francisco. For instance, we opened up three new trading floors on the institutional equities side – one in Boston, one in San Francisco and one in Connecticut.
“And we’ve had significant growth in Europe, with our offices in London, Hamburg, Frankfort, and in China. We’ve got three offices in China, in Hong Kong, Beijing and Shanghai. And we most recently just opened an office in Bangalore, India, as well. So, we’re expanding our business on a global basis, but this is our home footprint, and we’re going to have a significant interest here.”
SBT: What’s your core strategy for growth in Asia?
Purcell: “Our China strategy and our India strategy were very much for our private equity business. We set up operations in China as we made investments in U.S.-based manufacturing that needed strategically to move some of their manufacturing and distribution capabilities to China. We wanted to build out a skill set there that could help them do that. We did that seven years ago, and it was a semi-brilliant strategy for us to be on the ground in China, and we’ve got seven or eight portfolio companies that we’ve invested in and done very well with. We have established a significant presence in China.”
SBT: When you come back on the plane from China, what are you thinking about? What are your impressions about what’s happening over there?
Purcell: “What’s happening over there is similar to what happened in the U.S. 70 or 80 years ago. They have a very good work ethic. They have a huge focus on education. They are very entrepreneurial. And they are creating a middle class. That’s all of the things that made America a great economic model. All of that is going on in China. And even though it is Communist-ruled, make no mistake, it is very capitalistic. I tell people all the time, you need to go to China to see what’s going on. We need to be there, both in the private equity business and in the investment banking business, and I think eventually, we’ll be there in the institutional equity business, as well.”
SBT: You mentioned China building a middle class. Do you worry at all about the American middle class and how it is being squeezed?
Purcell: “I’m a capitalist at heart.
Globalization is capitalization at its ultimate. Both labor and capital are rationed rationally. I think that does squeeze some people, but I think it ultimately makes everyone a better competitor. If you look at what’s going on worldwide, the global economy is probably the best it’s been since World War II. My view of that is because the world is probably the most capitalistic it’s been since World War II. But capitalism has winners and losers. What it does is it causes people to be much more efficient. I think it’s a good thing.”
SBT: In a recent Republican presidential candidate debate, there was considerable discussion about the organized labor movement. Several of them predicted that because the middle class was being squeezed so badly, that ultimately, it is going to revive the labor unions. The gap between CEO salaries and the working class has never been greater. Granted, the debate was in a union state (Michigan), but I thought their statements were remarkable, nonetheless. What do you make of that?
Purcell: “I’m not sure which way that will go. I think ultimately that competition does make people better and more efficient. And I think that’s a good thing.”
SBT: Your Private Equity & Venture Capital business is thriving. Within that business, is there some opportunity for investments in Wisconsin?
Purcell: “Yes. We have invested significantly, especially in the venture area, and two recent wins – one of the companies, Tomo Therapy went public earlier this year and is a great win for Wisconsin. A company called Nimblegen, we invested in. So, we’re very active, and we do have the largest venture investment fund (Baird Venture Partners) in Wisconsin.”
SBT: As for the overall economy, how’s 2008 looking? Are you thinking a soft landing or a recession?
Purcell: “So far, so good. I’ve been concerned about a potential downturn. We had a couple tough months in the summer, but the market seems to be moving along. I think we’re going to have a downtick in the economy in 2008, but hopefully not a recession. Hopefully, business will hold up reasonably well.”
SBT: Our readers are primarily the owners and managers of privately held companies in southeastern Wisconsin. As you look ahead, what do you think they have going for them and what’s going against them?
Purcell: “What they have going for them is a great labor force. Terrific people with a wonderful work ethic. Loyal, great employees. And a great place to live and raise a family. The challenges? There are three, and they’re pretty straightforward. One is health care is very expensive in the state of Wisconsin. Two, the tax structure is tough in Wisconsin. It is a high-tax area. So, you’ve got to fight through that. And the third thing, and it’s not unique to Wisconsin, but it’s real important, and it’s that we need to make progress on the educational front. We need to educate our young people better, especially in the city of Milwaukee. It’s borderline acute here for creating a great workforce in the future.”
SBT: You became CEO of Baird in 2000. In that time, what are you most proud of?
Purcell: “I think what I’m most proud of is that Baird has been recognized (by Fortune magazine) as a Great Place to Work for four years in a row. I think that’s helped create an environment where people are really proud to work here. Proud of who we are and proud of how we do it. I think you can do almost anything, it’s almost boundless, if people really believe in what you’re doing and believe that it’s fair, and it’s just and everyone has an opportunity to make a contribution. If it’s a great place to work, I think you can build a great firm that is fair, honest and a high performer for the clients and for the people who work there.”
SBT: Has the company given any thought at all to a succession plan, about what will happen when you retire?
Purcell: “We have given a lot of thought to a succession plan. The great news is we have a very strong, deep team here – a group of people in their late forties or early fifties. I’m very confident it will come from within.”
SBT: Are Baird’s best years ahead of it?
Purcell: “Oh, absolutely. There’s no question. We’re just getting started.”
Paul Purcell
Age: 60
Title: President and chief executive officer of Robert W. Baird & Co. Inc.
Previous experience: Prior to joining Baird in 1994, he spent 22 years with Kidder, Peabody & Co., where he was a managing director and head of the Midwest Investment Banking Group.
Family: Wife, Patti, for 37 years; and children Carolann, 32; Paul Jr., 30; Emily, 22; and Mark, 20.
Hometown: Hinsdale, Ill.
