At SkyWater Search Partners, our Private Equity experts understand the unique challenges faced by investor teams looking to fill key leadership positions within their portfolio companies. While every investor – and every company – is different, we have identified 5 critical success factors of PE portfolio company leaders. When it’s time to bring in new leaders, make sure your recruiting strategy focuses on these 5 non-negotiables.
Your goal is to drive up the value of your portfolio company within the shortest possible time period. In other words, you can’t devote the next 6-12 months of a new hire’s tenure to “learning the ropes.” While you don’t necessarily need someone with prior PE backed portfolio company experience, you do need someone who has an insider’s understanding how things really work in your sector and a solid track record of growing and guiding successful organizations within it.
This person needs to come on board with the operational expertise and proven P&L experience that allows them to identify and implement the highest leverage operational changes. While executives from large, public companies may rely on success metrics such as market share, wallet share or stock price, PE-backed leadership teams look to EBITA to gauge how well they’re driving value and profitability. That’s impossible without serious P&L skills and a demonstrated ability to make the necessary operation changes to increase revenue and decrease costs.
The successes of private equity investments are largely determined by speed. Deadlines are tight and unforgiving. Fast thinking and a genetic predisposition to delivering results and exceeding expectations are critical characteristics in a PE backed company executive. You may find yourself talking to seasoned, highly regarded senior executives of non-PE organizations. They may know the industry. They may have an impeccable grasp of the operation. They’ve already proven themselves as leaders. But if their claim to fame wasn’t as a change agent, they may not be right for your company.
You didn’t buy the company to keep it the same. So you’re hiring leaders who are willing and able to change it, substantially. That reality, by its very nature, carries with it plenty of potential drama and angst for the organization’s employees, customers and other stakeholders. Yes, you need leaders who will rapidly and relentlessly drive necessary changes. But you also need those individuals to maintain a sense of calm and steady leadership. Drama kings and queens need not apply.
Your new hire will have many bosses and, often, a fairly hazy set of rules regarding to whom they report. In reality, they will be tasked with reporting to multiple stakeholders through widely varying channels. You need someone who is nimble and quick, comfortable making formal presentations to you or potential buyers, picking up unscheduled calls and answering impromptu questions, and, in general, sending accurate, appropriately crafted and powerfully delivered messages to the right people at the right time.