A 2023 report by AlixPartners suggests leadership effectiveness is the top priority of 70% of Private Equity executives to create value, whilst in their portfolio companies, just 52% of leadership state this is a priority. There may be many reasons for a change at the top, we believe it is often caused by a mismatch in expectations between position holder and owner(s).
An area where perspectives often differ is in the formulation of strategic direction. Typically, the PE house has acquired the company on the back of a rigorously researched investment thesis. This carefully drafted document details target markets, preferred product/service proposition(s), go-to-market plans and the back-office infrastructure required to support the business engine. All the PE house needs then is a CEO with the necessary skills to execute brilliantly, often with limited resources and to tight timescales.
The CEO meanwhile may have different aspirations. They are likely to have a clear vision of where they want to get to, underpinned by a set of values, behaviours and tactics that have consistently yielded them business success.
Of course, if the incumbent CEO remains in position post-deal this can complicate matters somewhat. Mis-aligned strategies and priorities can be a disconnect. Armed with additional funds the invigorated CEO may want to try new ideas they have only previously dreamed of.
So, what is the solution? How can these disconnects be avoided? A carefully designed and sensitively managed human capital due diligence process will discover these differences, enabling them to be explored and resolved. As well as identifying where fresh talent is needed, a human capital partner who truly understands the sector(s), and crucially can find you the type of leader you need, is invaluable.
You can learn more about our leadership effectiveness and human capital due diligence or if you’d like to speak to one of our consultants, please contact us.