John Connaughton (3:30)

It's terrific to be here, Clark.

Clark Murphy (3:31)

Thank you. Listen, we'd love to maybe go back to the very beginning. You and I are rare beasts. I spent 35 years and was CEO of Russell Reynolds. You spent 35 years at Bain and Bain Capital. You know, what kept you there? What keeps you rolling? How do you think about a career for when it's a rare beast that someone would spend three decades at one.

John Connaughton (3:55)

Company, it's hard to reflect back so long ago to think about what I thought I was getting into. But at the time, you know, having been pretty unknowledgeable about investing and finance, investment banking, consulting, you know, I somewhat just serendipitously ended up in Boston and at Bain. And the idea behind Bain Consulting was unique because they sort of felt like they had a unique model of partnering with management teams and making an impact through their advice. And so when I started in consulting, actually it was 1987, it was right after the stock market crash. I started to advise one of our clients at Bain Capital through a turnaround in the oil patch business. And so I loved consulting and I loved the team energy. And that environment was really a great culture. This idea of not just providing advice, but actually making an impact, being accountable for that impact, putting your money where your mouth is and then, you know, being able to live from the beginning of the deal all the way through the operation and strategic change and, and ultimately the exit, that was something that, you know, from an advisor standpoint, I thought was interesting. But to be able to jump across the hall and join Bank Capital, which was a separate firm, was really exciting, really exciting. So I had no Idea there was 11 people at Bank Capital at the time, and their fund size was, first of all, was $37 million. So to say that anybody could have foreseen 36 years later that any of this could happen is, is, would be, would be a lie.

Marla Oates (5:36)

I mean, it's so hard to imagine. And think back to those days, you know, 11 people, when you started talent, as you mentioned, right. Is the not so secret sauce that makes a company successful in almost every industry. But it's hard to find top talent. And I say that as an executive search consultant, retaining that talent can be more challenging. How do you find the best talent at Bain? And how do you keep those people engaged, challenged, and continuously learning and growing throughout their career?

John Connaughton (6:04)

Yeah. Well, it probably starts with, you know, one of the very first experiences I had when I joined the firm. After I'd gotten the offer, I, I went to one of the senior partners, Josh Bekenstein, and I asked him, I said, this seems like a really large firm, you know, very top heavy, lots of partners. I think there were five partners and six non partners, and I was the 11th. And I said, how is this firm going to be big enough? And how am I going to get to the point of being able to be a leader like you of this firm? And without a beat, he basically said, look, we can't grow unless you are going to be my partner at a point in time when you developed your capabilities. And so my goal is, is that I need to develop you in order to have the size of this pie be large enough to create the opportunities for you and, and your peers. And, you know, fast forward to today, $200 billion and, and, you know, 200 partners, you know, he, he lived up to that. And, and certainly it's something that I live every day. And so when I have my dialogue with, with people who might be interested in the firm, I try to test their own capacity for growth, their own ability to grow with the firm, and also their ability to develop others to grow. And so it's a people engine. And that engine is only fueled by the opportunities to provide people and then the development to make them succeed in those roles.

Clark Murphy (7:34)

It's interesting because you're in the deal business, but you can't grow the pie unless the investors internally want to grow others. Our industry, the search business, is largely eat what you kill. It's about the individual performance. And our firm, to, to thump our chest for a second is about Growing the pie and growing the people we love to promote internally all the way to partner. But we're constantly reminding anyone who didn't grow up here, we're here to grow and we're here to grow the pie and we're here to retain people. And it's hard, it's very, very hard in a performance driven world where people look at their own performance on an annual basis. So I share both your joy and your pain at the same time. Speaking of joy and pain, you alluded already you've been through a few cycles in your career of a couple of decades. So the overused word of uncertainty, the overused word volatility. How do you look at this cycle or this period we're in? It's probably not yet a cycle this period we're in compared to some other things that you and Bain Capital have been through.

John Connaughton (8:44)

Yeah, no, I think my own thinking on these matters has evolved over many cycles in the beginning of the industry and certainly still true today. I think one of our true norths that makes us successful as leaders, as firms is we have an eye towards the long term. Right. There's a saying one of my former co managing partner used to always say, it's never as good as it looks and never as bad as it feels. And so I think over these cycles you need to look beyond that volatility and have a view of what the long term looks like. And so as we think about each of these cycles, know, separating the cyclical elements of what you know, might get better over time and be less bad than it feels needs to be balanced with the idea that there are structural changes always going on. And certainly a lot of those structural changes arise in the context of, you know, crisis or cycles. I mean GFC was a great example of that. But if you can go back to every one of the cycles over the last 40 years, you know, know there has been change that has persisted, technology disruption in traditional advertising. You know, I think all of the elements that we see each cycle has that element. So from our standpoint, you know, I think you got to use that to your advantage and try to be more agile and adaptable to that change. And so, you know, after Covid and certainly what's happening today, this notion of the uncertainty of the long term has never been higher. So while we had that true north of looking long term, I think there's a much wider fan of outcomes in that long term than we've ever seen before, both on AI plus globalization. And so what one needs to do in These cycles is just be really adaptable, be agile to take advantage of those things that you have conviction around. Not be overly paralyzed by fear, but ultimately be agile to exploit what's going on in the environment. So we learned a lot about that. We had 200 companies, some of which had to hibernate in their businesses during COVID But we learned how to deal with it and be resilient to get through what I think was a time of great uncertainty.

Clark Murphy (11:06)

You talk about structural change as longer term vehicles are in your industry. The power and learning, the power of AI culturally around company performance, just creating value through operational improvement. It's so much more complicated and your industry is more complicated. How do you define these structural changes now? And how do you look at the ones you probably will move on most quickly? Talking about the firm's agility?

John Connaughton (11:38)

You know, it's a great question. I mean, I think that I'll give you the best example coming out of COVID and then we could shift to technology and AI, but even out of COVID you know, you know, I think we had this notion of, you know, after the first round of tariffs in 16, 20, 16, 17, and you know, after the sort of what I saw is the, you know, the beginnings of a decline in some of the globalization around supply chains. We thought we were pretty smart, you know, we were going to reposition our supply chains from, you know, from China to Vietnam. And we did so with a real agile, you know, very well researched and rigorously analyzed view, you know, that that would protect us from tariffs. Now Fast forward to 2025. You know, Vietnam has these high tariffs. And so I think what we've learned is that, you know, know you have to risk manage with greater fans of outcomes. So our ability to be able to shift our supply chains more quickly becomes far more important than being able to just be thoughtful about the moment that we're in about what's happening. So we're very mindful when we're underwriting around the risk of such a change or when we're thinking about how quickly we could change elements of our structures in our companies. Those things are pretty important. Like AI is a great example of that right now. I mean, in order for us to be successful, probably the greatest learning ground for our success will be the fact that we have 200 companies we control, we have 400 investments. The amount of trial experimentation, learning models for extrapolation inside our enterprise and also inside other companies that we own. It's an amazingly important time. But it's hard to do that. Centrally, completely. You have to have a centralized way of leveraging that. But we're trying to take that experimentation and then be fast adopters and fast exploiters of things that work, all the while realizing that that could be a tool that changes very much in the next three months. So the good news about what we've built, I think is that we're, we are very seamless across our portfolio and deal teams, across our different geographies, across our different business units, across our different verticals. So tech and consumer and tech and healthcare. And so the way that we've tried to exploit that is to really break down the walls that sit between some of that learning. And you know, we have, you know, AI summits with all of our healthcare CEOs. We have the ability to do chro summits where we're trying to learn what's the changing labor force context that we're all living through. And so we're trying to break down those barriers of learnings because you have to be far more adaptable and agile about what's going on in the moment.

Marla Oates (14:30)

That's great, John. And if we just step back for a minute, I just want to simplify, right, so Bain's bottle of private equity focuses on buying these companies 200 and then you take a hands on role to improve that performance before ultimately selling, ideally for a profit. Through the deals you've been involved in, I'm sure you've learned a lot about how leadership can impact a company. What are the top traits you're looking for in the portfolio company leaders of tomorrow?

John Connaughton (14:56)

Well, it starts first of all, I think, with what are you trying to accomplish? One of the things that I think is a hallmark of our industry, but I think it's amplified in our own business model, is this idea of, of trying to tackle an opportunity for inflection. And so inflection, it's easy. When you have a great management team and you have a linear path and you buy a high quality asset, that level of stewardship is a lot easier than this whole notion of investing behind change. And so in order for us to find leaders who can do that, they not only have to take on the capacity to make that change, but they have to have a team that is fit for purpose. And so oftentimes when we look for leaders, I think the first thing they need to do is try to still synthesis around that complexity, around the things that matter, what are the two or three things that matter most and then they need to, on top of that, just have the ability to build high performing organizations to create the capacity for change. You can have great ideas, but if you don't have that capacity and you don't have that organization, nothing's going to happen. So synthesis two or three things that matter. Have a high performing organization plan and then build that capacity for that change. I think those are the most important elements and I think those are the things that we need to get right from the beginning.

Marla Oates (16:18)

We'll be right back with John Conison. But first let's hear from Chris Davis, a leadership advisor specializing in executive search Search for financial services Chris will discuss the critical leadership traits financial services CEOs need to master AI transformation the financial.

D (16:34)

Services industry stands at an inflection point. For the first time since digital banking emerged, leaders face a transformation that fundamentally redefines how they operate, compete and create value. The catalyst Artificial intelligence Yet leadership teams are unprepared. Our Global Leadership Monitor research found that only 44% of leaders in the financial services industry agree that they have forward thinking leadership who align on resources to harness the power of generative AI. What separates successful organizations? Through extensive research, we've identified four critical leadership traits that distinguish the financial services CEOs who are effectively navigating AI transformation. To learn more about the four critical leadership traits for mastering AI transformation in financial services, you can find our full insights in the show Notes or by visiting russellreynolds.com.

Marla Oates (17:35)

And now back to our conversation with John.

Clark Murphy (17:41)

John, one of the core tenets of Bain is lasting impact and creating this concept of the ongoing. How do you frame that? How do you discuss that from, from the Bain's point of view?

John Connaughton (17:55)

You know, it starts with building great businesses. And you know, it's kind of an interesting thing because it's become so politicized. But if you go back to the core of what we've been doing, it's building great businesses. And I think the only way you can build a great business is have a highly engaged employee base. You have to have a real idea of what the purpose that might drive the motivation for your team. You need to think about the communities that you operate in. Oftentimes they coexist with customers and you need to build for the long term. We don't make money on the operating success of our businesses alone. We make money based on if we've built a good business, somebody really wants to buy it. And so if you think about impact, you cannot have broader impact unless you think about all those constituencies on your way to building a great business and developing a great return. So we don't, nor have we ever thought those are mutually exclusive. We think they're highly aligning.

Marla Oates (19:00)

You've been highly involved in Bain's healthcare and technology business investments. Two, two industries have experienced immense innovation and change. Technology has clearly had an impact in these areas and especially now with AI transformation. How do you look at technology like AI when it comes to both your investment strategy and the power to help your portfolio companies improve and grow?

John Connaughton (19:24)

Well, healthcare, it's an interesting story because, you know, when I was first investing, you know, healthcare, you know, was in the dark ages. The great hope was going to be that, you know, they would be the latest, perhaps, but perhaps ultimately the most successful adopters of technology because of the need for addressing some of the inefficiencies and the power of what could be from technology and just population health management and a lot of things that, you know, we're now seeing, by the way, for 20 years none of that happened. Doctors hated technology. You know, they hated technology. They all wanted their own, you know, physician practice management software. Hospitals, you know, were so complex. But, but you know, about 15 years ago, a little thing that came along called digital EHR technology, which was adopted by everybody, really enabled a backbone of information and content to be standardized. And as a result of that, you know, our most successful investments in the last five or six years, certainly in healthcare, but broadly speaking, have been in the intersection of healthcare and technology. Payment processing, value based healthcare, you know, the ability to be more productive inside hospitals and doctor's offices. And so I think the lesson in all of this is that, you know, this intersection that we're seeing now between all of these traditional verticals and now technology really creates an opportunity not just for productivity improvement, but reinvestment of that productivity into the next generation of products, the next generation of expansion, consolidation of share gain, maybe even through M and a replication of that to help those companies that you acquire. And so there's all these amplifying effects that I think is really fascinating. And for a firm that's really prided itself on being deep in technology, but also deep across, across each of those verticals, it really presents a huge opportunity for us and for anybody who is understanding this technology that they can really apply it across all verticals. So I think it's great. And if you think about right now discovery being able to bend the curve on healthcare costs, to be able to manage outcomes and quality in a much more efficient way, I think we're in a renaissance right now. And I think it's all unlocked by technology.

Clark Murphy (21:52)

You Talk about again cycles where healthcare was 20 years ago, the renaissance. You've seen a great deal in your career, which is the question we always want to ask and people always want to hear. Did you have a redefining or defining moment for you, either in your leadership career or your investing career? The, to find the next steps.

John Connaughton (22:16)

Bain Capital, you know, is an interesting place in that we, we pride ourselves on team and partnership and collaboration. I think we probably took it to an extreme that even, even 15 years ago we were, we were operating the business, you know, from a leadership standpoint in private equity and at the firm level as a committee. And when you get to be our scale, 15 years ago, probably not a great idea. So about 20 years ago, one of my partners, Paul Edgerly, you know, gave me this great advice. He said, Look, J.C. i think, you know, if you're frustrated that we're not getting anything done, you know, the way to really drive success is to be at cause, to identify, you know, the unmet need to use your persuasive powers and your logic and your ability to do some work on the issue to persuade your partners and, and you'll get it done. You have credibility. You've been at this firm for a long time. And so instead of being part of, you know, the critic, the critical group, be part of the solution. I think that was great advice because it allowed me, and I was younger than some of my, my peer partners on these committees, but I, but allowed me to really engage with the organization to do some fun stuff that made an impact that wasn't in my lane per se, but, but was in my opportunity set to make an impact on. And so, you know, Fast forward to 2010. You know, after the GFC, we realized we needed a single leader in private equity. And they said, well, that guy's done a few things well, maybe put him in charge of private equity. And then five years later, you know, me and my co managing partner, they say, well, they've done a few things. You know, why don't, why don't we put those two guys in charge? So to me, it starts off with this idea that leadership is earned. It's not given, you know, positional leadership is not real leadership. Leadership is basically using your capabilities to energize and catalyze action. And oftentimes people mistake that when they get positions of authority because they feel like, wow, now I have this kind of nature of a role that gives me the right to do something when that's really not something that's given. It's something that's earned and I think particularly in a partnership, that's really an important lesson for me.

Marla Oates (24:43)

Incredibly wise words. Look, John, I gotta ask. You've got this incredibly busy day job and then you're also a member of HBS's Dean's Advisors and you're on the board of the McIntyre School at the University of Virginia. That's just a pretty full day given your work on with the universities. Studies are showing that business leaders are concerned that recent graduates aren't going to have the skills necessary for today's workforce. We've discussed this before in redefiners, but I'd like to get your views on this. How do you think educational institutions need to redefine what skills will be needed in a rapidly changing world? And perhaps as important, how do young people gain them? Is university education still path to success?

John Connaughton (25:28)

The real judgment is and the real application of, of, of experience and skills is, is the uncertainties. And how does one deal with the uncertainties? What questions do you ask? You know, we, we're big believers at Bank Apple and the Socratic method. And by the way, that's going to be really hap. Really, really helpful in AI, right, because it will be less about what you know and the skills that you necessarily you develop in a narrow sense, it'll be about how you apply judgment and ask the right questions. So I think universities have a huge opportunity in how they re pivot towards how to get people better at making judgment, better at making mistakes, better at having discourse with each other around points of difference and frankly utilizing AI in a way to ask the right questions become that much more productive in the inquiry of the things that are hard, harder to answer. And so I think, you know, business schools are really good at this. You know, I would say HBS, you know, McIntyre Wahoo, you know, was really good at this because you were forced into teams. You didn't get to select the teams. You had to, you know, pretend you were somebody you were not, which is a leader of a company or you know, dealing with complex unknowns and, and practicing how to make mistakes and then how to make judgments and hopefully make more, you know, good judgments and right decisions than bad ones. And I think that unfortunately doesn't get practiced as much as it should right now in the universities.

Clark Murphy (26:55)

You're literally in the quote, private capital business. There are largely more privately owned companies than publicly listed companies in the world today. Some you take public or your management teams take public, some you sell. How do you look at the private flexibility versus the public listing world. And where do you think this goes?

John Connaughton (27:19)

If you're referencing the alternative asset industry, I think there are, like many industries, ways that people can be successful by pursuing different strategies. I mean, I think our business is largely about performance at scale. And so we think the alternative asset industry, by the way, which is only 15% of all assets globally, is in alternatives, has a big opportunity inside it, and it has a big opportunity in those that want to have strategies that are focused on distinctive performance. And there are those that can scale up assets at a very high rate of growth and can also be successful. In our view, we've chosen the former because at its best, the private capital markets, if you perform well, will attract capital, that capital will be stickier. You can amplify that model and be aligned with your investors by having a single focus, which is performance, not just scaling. And as such, you know, from our standpoint, you know, remaining in a, in a private capital form is an advantage for us, a people advantage. It's a strategic capital where we, where we raise money from our customers advantage. And you know, I think that that sort of has a path of growth that I think will continue for some time.

Clark Murphy (28:46)

So if you extrapolate that, I have a 23 year old son who's looking for a job, just graduated from Dartmouth and he's trying to look down the different paths. You went into consulting, you've become an investor, you've now become a company leader. Not every investor is a leader in their, in their firm. What, what do you think the path is for the first five years of someone's career? As you've seen all these different cycles?

John Connaughton (29:14)

I think you, I mean, the thing that I find that one needs to discover and I, you know, I'd like to believe that remains even at our scale today, is the ability to have somebody that will mentor you and develop you. The ability for someone that's going to empower you, for you to not just do the work, but actually have the point of view and provide room for that point of view to be heard. And you know, so as I think about younger people that come into our firm or any firm, you know, will that mentorship, will that accessibility to the room to then articulate your point of view, does that exist? Because you're going to make mistakes, you're not going to know everything, but if people allow you that opportunity empower you to give you a voice in that room, you're going to learn a lot. You're going to learn a lot. And so what I don't love about industry, service industries especially, is if you're there to create a factory of people who are just going to do work, you've sub optimized your talent pool. You want people to do work but have a point of view and be able to impact others by. By that point of view. And so the thing I love most about our investment committees is we go around the room and every single person, and particularly those closest to the work, the day to day, they have to articulate what they like and what they did not like.

Marla Oates (30:39)

Great. Well, we've come to the part of our conversation we like to call rapid fire questions, where we ask you a series of questions designed to help our listeners get to know you even better. All you have to do is respond as quickly as possible. Are you ready?

John Connaughton (30:56)

What happens if I say no?

Clark Murphy (30:59)

That'll be a first. That'll be. You're agile. Remember, you're agile.

John Connaughton (31:02)

Oh, right, Sorry, sorry.

Clark Murphy (31:04)

So who was the mentor that had the biggest impact on you and why?

John Connaughton (31:08)

You know, that's a very dangerous question. You know, because I have had the luxury of having many of my partners who are four to five to four to seven years, actually one's 11 years older than me, and each one of them I've drawn mentorship from. So not to cop out, but I have had the luxury of people who are very different in their passive success. But I've tried to borrow from each of them.

Clark Murphy (31:31)

Well, I think that's the answer then. If you can get diversity of mentors to give you different experiences, that's that you'll be the head of Bain. I mean, it's very simple.

John Connaughton (31:39)

And each one of them, by the way, I've told them, I'm not trying to be you, but I'm going to try to take a piece of you and take a piece of me and put it together.

Clark Murphy (31:46)

There you go.

Marla Oates (31:46)

John, what's your favorite way to decompress after a long day at work?

John Connaughton (31:50)

I have dogs. I've had two to three dogs. And so the ability. I still think coming home to pets and enjoying their company and taking them around the yard on a walk with my wife or just with me and the dogs, you know, that that's pretty. That's pretty special. It grounds you.

Marla Oates (32:07)

People underestimate the power of getting outside with your dog just for a walk, first thing in the morning and at the end of night.

John Connaughton (32:12)

I love that.

Clark Murphy (32:13)

So you just joined the Baltimore Orioles advisory board, and as a Bostonian, we won't. We won't ask anything deeper than that, but what's your favorite baseball stadium?

John Connaughton (32:23)

Well, I have to go back to Memorial Stadium in Baltimore. You know, section 33.

Marla Oates (32:32)

You're also on the board of the Boston Celtics. Now, we're truly not trying to get you in trouble with the fans in Boston, but who's the greatest Celtics player of all time?

John Connaughton (32:39)

I sort of have to say Bill Russell. He was a transformational player in a. In a league, and he created a transformational impact on the league. There's a lot of greats, but that would be my choice vacations, if you.

Clark Murphy (32:53)

Were able to actually have one. What's your favorite vacation kind of location? Is it a beach, a mountain, a desert, water?

John Connaughton (33:02)

Well, right now I'm taking a lot of comfort in the ability to get into the mountains or the hills. They're not really quite mountains in Central Coast California. I have a home out there. And so being able to do hikes with my dogs and my wife, Stephanie, that's a great way to get away. And if I can get my kids out there, which I do from time to time, it's really a great family place as well.

Marla Oates (33:29)

From vacations to superpowers, if you could wake up tomorrow having gained one new skill or ability, what would it be?

John Connaughton (33:36)

If I could be really capable, not just somewhat passable as a musician, that would be an amazing quality to have.

Clark Murphy (33:46)

Given where you are now. Time has passed. What do you wish you had known sooner in your career that you do know now?

John Connaughton (33:53)

You know, I've often said to people who are, you know, beginning their career and then inflecting into leadership that, you know, you should think about every relationship that you have as one that you're going to look back on, and are they going to be a personal reference that you're proud of? You should look at every investment and you should think about it. Is this something you want to be permanently part of your track record that you're proud of? And so to me, I think this notion of you're assembling a legacy. And so I think when you get out of college or when you're starting your career, you don't think of every single thing that has those kinds of stakes. But if you start putting a different perspective on those, and I don't want to overstate the bar you should have on relationships and all these things I discussed, but if you think about them that way, it puts you into a little different, a bit of a mindset, and become much less transactional in the way you. You behave.

Clark Murphy (34:45)

You ended where it was. A great starting point is. Is that Bain Capital, as you talk about assembling a legacy, Bain is different because Bain focuses on collaboration. It focuses on developing people to grow other people. And they make great investments. It's not just we're going to go invest and outperform others. It's about creating that kind of culture and also constant learning that talking about the tariffs in 2016 and 17 and moving supply chains partially China to Vietnam. So then in 2025, because of constant learning, you're like, whoa, we're back. We've got to do this again. But we're going to be faster. We've got to be more agile from what we learned before. And that gives an ability to invest behind change. And I love that phrase, to invest behind change in the world we live in today. So if you're building capacity, back to this, mentoring and developing people, building capacity for high performing teams, either at Bain or in the portfolio companies that are constantly learning, that are agile. And I like the idea that you don't pretend to have all the answers, which many of your competitors do. You like to think that you have really good questions. And with 200 companies, the trial and error makes you all fast adopters. So AI is this perfect moment of asking great questions, literally to help the AI agent or agentic AI to perform better over time. And ultimately, as you think about leadership, that leadership is earned, that you want to be part of the solution, don't be the critic, be part of the solution, don't be the critic. It's helped your career, certainly. And if you can be part of the solution, then you're going to catalyze action. And catalyzing action is making sure that everybody's got a point of view which comes back to this Bain collaborative way to invest and outperform. So a lot of interesting learnings both about the firm and the way you look at technology, healthcare, AI. Really fascinating discussion. We cannot thank you enough, John, for joining us today. Thanks a great deal for being here.

John Connaughton (36:50)

Thank you, Clark. Thank you, Marla.