Trend by Mary Kier, Chief Executive Officer, Executive Search
Following a career path with C-level and other executive roles at portfolio companies of private equity firms can be an exceptional route to success for leaders who possess such characteristics as:
Intrinsic leadership and decision-making skills
Impeccable ethics
Financial acumen
High tolerance for risk
Bias for action
We detailed a comprehensive list of 20 of these characteristics in the first article of our "Do You Have Private Equity In Your DNA?" series. Our view is that some mix of most all of them are required for leadership success in the PE world.
Executive-level opportunities in PE portfolio companies can be highly alluring. They offer the elite status of working in an entrepreneurial and non-traditional business environment, as well as the opportunity to participate in greater wealth generation. This can indeed be a rewarding career path in many respects.
If you happen to be the CEO of a company that gets acquired by a PE firm, however, be prepared to roll up your sleeves even higher than before. It is a life-changing event but one that can be extremely lucrative.
Still, you must be willing to be a true partner with the PE firm – it is no longer "your" company. Understand what motivates you and plan to rethink and rework the way everything gets done. This will be an entirely new world for you.
Then, if you do well in one portfolio company – making the parent PE firm lots of money – that firm may very well reward you with opportunities as an executive at subsequent portfolio companies. You never know where the path might lead.
While we began at the top, portfolio company leadership careers do not always begin there. Portfolio companies require driven, talented management teams, so qualified CFOs, HR executives, and leaders in Marketing & Sales and other operations can find success in the PE world as well. Here is a look at what to expect in these roles.
CFOs
For portfolio company CFOs it goes without saying that you must "own" all the numbers. The stakes are higher and you should anticipate a much higher level of scrutiny in this particular environment. The role typically combines elements of a traditional COO role as well, so you will find general business skills – beyond finance – to be useful. Nothing is narrowly defined.
You must be adept at balancing your many priorities in order to meet the needs of both your CEO and of the private equity firm. A solid grasp of the PE firm’s investment thesis – and your company’s place in it – is required.
Earning a high level of trust, especially with the board of directors, is critical and time consuming. In fact you may feel as if the board meeting never ends. You also will be expected to serve as the conduit to the bankers, providing thorough, accurate data. Surprises are not welcome!
Communicating frequently – with great detail and sophistication – to all of these stakeholders will serve you well. Also, be creative to use money wisely with fewer resources.
One last point: even though you are the CFO, rest assured that the PE group members probably have more financial acumen than you do. Remain humble and take this opportunity to learn from them. How you deal with this is vital to your success.
HR Executives
For any organization, becoming a portfolio company is akin to a sea of change, and change is hard. Thus, HR executives – bolstered by their range of experience with personnel, compensation and training issues – must be at the helm to help steer the ship with the CEO.
Especially in this time of great transformation, the strength of the management team is most important. The team must be decisive and quick to act, particularly in hiring and firing decisions. This is central to the HR role, of course.
Other key duties for you at a portfolio company likely will be:
Establishing a special management compensation program for key managers
Helping the organization learn new ways of doing things – and unlearning the old
Serving as a guide in times of stress, confusion and misdirection
Leaders in Marketing, Sales and/or Operations
As leaders in Marketing, Sales and/or Operations, you will need to step up your game within the portfolio company, learning how to operate as more of a general manager than as a functional leader.
Constantly changing priorities will frustrate whatever staff you have remaining if, indeed, there is any staff left at all. You will need to be self-motivated and resourceful and possess the ability to deal with ambiguity.
Above all, transparency as you "manage up" is critical. The CEO and management team need accurate reports and honest feedback, based on the connections you make from disparate data sources coupled with your sound judgment and intuition. Get ready, because this all will be happening much quicker than you would prefer.
Wherever your portfolio company career path takes you – regardless of your leadership role – know that these companies require innovative and entrepreneurial management teams to support the CEO and dramatically grow the company in a fast-paced environment. We are talking about a unique breed of executives here.
This is the third of three articles in our "Do You Have Private Equity In Your DNA?" series. Be sure to check out the other articles at www.cookassociates.com/executive-search/thought-leadership.