“Private equity firms have historically paid little attention to the art and science of leadership.”
That line introduces this article, which outlines the case for #PrivateEquity firms and their portfolio companies to invest more time and attention in #LeadershipDevelopment, for which they’ll reap greater #ValueCreation .
In case this is behind a paywall for you, here are some key points:
- PE firms have largely ignored leadership beyond the CEO/CFO in the interest of quickly creating value.
- Financial engineering alone is no longer a viable approach due to a variety of factors.
- The pressure is higher for portfolio companies to outperform, and that requires strong leadership.
- Of the PE execs surveyed, they cite leadership effectiveness as most important for value creation–citing it 70% more often than operational effectiveness.
So what’s getting in the way?
- Time, both the pace in portfolio companies and resistance to spending time on leadership development
- Differing views on what great leadership looks like
- A lack of management infrastructure
- Tension between the PE firm and the portfolio operators
- Focus on enterprise value (= cost cutting)
While the article outlines steps PE firms can take to right the ship, it also emphasizes that portfolio companies need to step up their leadership game as well:
- Invest time and resources in strategic talent management that will get you to the finish line..
- Include people metrics and milestones into your financial reporting. People, after all, are what will fuel your goal achievement.
- Select, build and enable HR teams that are strategic vs tactical.
In full transparency, the author of the article has a vested interest in the recommendations–his firm provides transformation services to #HighGrowth companies. (I.e. It’s not a research-based article.)
I have a vested interest too:
- I work with executive teams in high-growth, privately funded companies to build leadership capability, relationships, collaboration, and alignment.
- My approach enables these teams to grow faster, together in a healthy, sustainable way while increasing their value creation.
I’ve said it before: When it comes to landing the value creation plane, if you don’t invest in individual and collective leadership effectiveness, one of two things will happen:
- You’ll crash and burn.
- You’ll land the plane but you’ll land it ugly, taking out your passengers (team) and bystanders on the tarmac (other employees, customers, and partners).
If you’re a leader in a PE-backed firm, you have a decision to make. What will it be?
Hey there, I’m Cynthia. I’m a leadership team whisperer, executive coach, and speaker. I guide leadership teams in high-growth companies to achieve rapid growth in a healthy, sustainable way. I coach senior leaders to discover the path to lead with ease.