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“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 whispererexecutive 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.

Like this post? Want to see more? Connect with me on LinkedIn.

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