Trend by Mary Kier, Chief Executive Officer, Executive Search
In the most straightforward terms, as executive search consultants we match backgrounds to position descriptions. Yet those who know the industry know this to be an oversimplification – executive search is much more complex than simple matching. Experience clearly shows that cultural fit is a top critical factor for a successful hire in any organization – whether it’s public, private, family held or private equity owned. Cultural fit adds a layer of complexity to any search because of the varying nuances involved.
That said, with searches in the private equity arena there are a number of additional factors that make the recruitment of those executives unique. Here is a look at why.
For many executives, leadership opportunities in private equity are highly alluring. They dream of finding the perfect private equity firm portfolio company to join in order to pave their future with the elite status of working in a more entrepreneurial, non-traditional model and, along with that, to participate in greater wealth generation.
The private equity mindset is clear: the portfolio company CEO has the imperative of focusing the organization maniacally, relentlessly and zealously on results. Yet while private equity firms are unbending in their insistence on performance, they are not cold-hearted. Still, the three- to five-year time horizon for meaningful results does not allow for many misfires, and PE firms do not turn a blind eye to missed performance goals.
They expect speed to execution, constant communication and, quite often, big bold moves. There is a premium on executives who are hard working, intense and smart – those who are prepared to "fly with their own wings." Frankly, PE firms act quickly to replace senior managers who fail to deliver or who are judged as inadequate for the challenges.
Portfolio company executives are not expected to serve as ambassadors, as is common among many Fortune 100 leaders. And they are much less likely to focus on "soft" issues such as team harmony (note: this is a different issue than team building) or solving trivial organizational conflicts. They simply do not have the time.
As noted, within private equity there is a premium on short-term results – as opposed to longer-term incremental growth, the sort of model for which Warren Buffet is known.
Long ramp-up times have no place in private equity, so executives are expected to bring specific experience related to their portfolio companies. Success in one portfolio company does not necessarily translate into success with one in a different industry or with different business problems. Typically, leadership generalists need not apply.
So knowing all this, do you think you have private equity in your DNA? Based on our experience we have identified 20 specific characteristics required to be a successful candidate in the private equity world. While some may be more heavily weighted than others, each of the 20 is important just the same.
To be considered for leadership roles in private equity portfolio companies, candidates must have:
1. Intrinsic leadership skills – Are you a proven team builder who inspires others? Can you develop the blueprint and then harness the talent to achieve results?
2. The highest level of ethics – Your integrity and honesty must be unimpeachable.
3. Financial acumen – Quantifiable results are the name of the game. You must demonstrate financial rigor and accountability in all you do.
4. High tolerance for risk – Can you juggle multiple responsibilities in a tight timeframe? Can you put your own financial upside at risk?
5. Bias for action – In the PE world there is a "do it now" mentality coupled with immediate accountability. You will need the ability to push that accountability down to its most effective level in order to get things done.
6. Sound decision-making skills – You will be expected to question the status quo, form an opinion and make the necessary changes.
7. A fast-paced mindset and work ethic – With a premium on short-term results, you and your team must act at warp speed.
8. Laser-focused concentration on metrics – Knowing the best metrics to follow – and the milestones against which to measure them – you must be able to make changes, quickly, when those metrics are out of line. Everything is scrutinized and scrubbed.
9. Ability to manage toward a vision – Based on a keen understanding of the specific business model, how would you step up to the challenge of transforming the company?
10. Mental agility – Both mentally and strategically you must assess situations quickly, even if not all the facts are available.
11. A will to win – Are you hungry for success?
12. Commitment to the job at hand – They say, "To whom much is given, much is expected," and so you will need to be fully committed each and every day.
13. Professional demeanor – Your oral, written and presentation skills must be both clear and concise.
14. Self assurance and self awareness – At your core, who are you? Where do you excel? Conversely, understand your weaknesses and admit them.
15. Industry experience – The specific expertise you bring makes you invaluable to portfolio companies doing business in that space.
16. Capacity to function as both an executive and executor – Even as you serve as the leader, you will have to know how to do what is best to achieve your financial targets, to enhance the business – whatever the end goal may be – and to increase shareholder value.
17. Roll-up-the-sleeves attitude as well as aptitude – This is no job for those who delegate everything. Delegate when you must but expect to get your hands dirty making decisions at every level and in every functional area.
18. Ability to deal with ambiguity – This is not a static world. Expect lots of changes and even a few curveballs from time to time.
19. Tolerance for dealing with lots of highs and lows – You are sure to experience both.
20. Impatience – This is not a "business as usual" world so you will need to drive quick results, and expect them from your team.
A recent Cook Associates study reaffirms much of what you see on this list. We asked a select group of PE professionals to choose the top professional and personal characteristics of successful CEOs/Presidents.
An overwhelming majority of survey respondents – more than 75% – chose leadership as the single most important professional characteristic. Approximately one-third of them chose change agent, results oriented, strategic, and team builder as top professional characteristics. Integrity garnered the most votes for the top personal characteristic, followed by will to win, decisive, effective communicator, and mental agility.
If you can identify most all of these characteristics in yourself then you may indeed have private equity in your DNA. Knowing this is an essential first step. In future articles in this series, we will dive deeper into the private equity world and provide thoughts on what other items leadership candidates need to know to be effective. We will examine interview strategies, what you need to know once you’re on board, potential career paths, plus specialized thoughts for such functional areas as the CFO/Finance, HR, and Marketing & Sales.
This is the first 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/media-center/executive-search-thought-leadership.