The Failed Succession “Plan” of Bill Gross

The Failed Succession “Plan” of Bill Gross

We have been engaged in succession planning at Bell Investment Advisors for the past
14 years. We also offer workshops and write about succession planning to help other business owners with the process. Naturally, we enjoy learning about other succession plans—the ones that work and the ones that fail.

Take Pacific Investment Management Co. (PIMCO) as an example. Bill Gross founded the company 40 years ago and built it up to a $2 trillion investment management giant. Bill is such a superstar among bond managers that he is often referred to as the “Bond King.” Superstars have special challenges when it comes to succession. The most successful successions occur when an organization has achieved institutional independence, its strength and reputation established beyond its identification with a superstar. This requires founders to develop and delegate power and recognition to their younger teammates, and Bill Gross tried to do this by bringing in Mohamed El-Erian, another titan in the investment management world. Soon El-Erian was appearing on television more than Bill Gross. This was a smart move—sharing the power and press with someone else.

Earlier this year, however, El-Erian left under sudden and strained circumstances. Bill Gross is apparently not very good at relationship management. In addition, because of the trouble he was having getting along with people, Gross, himself, suddenly also left the firm he founded—before he was pushed out by the management team. (Mr. Gross promptly hitched his wagon to Janus, a smaller fund manager where he can focus more on investment and less on management.) Founders and superstars are rarely good at succession planning. They stay in place too long. Letting go and building relationships
are crucial skills.

We believe that the team remaining at PIMCO without a superstar is deep and strong. We believe PIMCO will prevail with greater sustainability now that it can more easily achieve institutional independence. On October 4, The Economist commented: “Analyzing the global bond markets, with their many different countries, currencies, maturities and credit ratings is not a one man job.”

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