In case you missed it, please see part one of this series on P.E. portfolio company hiring, highlighting portfolio company executive core credentials and diving into hiring assessment essentials in terms of hard skills.
Parts three and four will explore openness and justification for a rationale of compromise on credentials and how this impacts a timely and successful conclusion of senior executive hiring. Consideration will explore a balance between needs with compromises, tangential opportunities to expand horizons, and correspondingly extricate from myopia on that elusive ‘pink giraffe’ management candidate.
Again, the bar is set high as the investor leader, and private equity firms’ dynamics are fast, aggressive, and all-conquering. You are tasked with tackling senior leadership management issues at a newly acquired portfolio firm. In this four-part series, a realization of the challenging factors surrounding the search for ideal candidates will be recognized. The focus is on meeting unique private equity performance demands but will often square the circle for many senior executive traits.
You’re not happy with your current CxO level management team. You feel the executive is hindering progress, having crafted their experience 20 years ago. Your investment is a tangled web of interrelated human wheels and cogs. The most complex of all to manage is people, which entails heavy lifting from a soft skill standpoint. Adding a new CxO will potentially create instability in a firm that has perhaps relied on generations of insiders or even a contemporary start-up mercurial leader in harnessing the company. Your confidence in management rejuvenation may be waning after all the politics, personalities, and history rears their ugly heads. Having determined that new talent is essential, there are significant calls to make to locate and secure them.
First and foremost, you must have the core characteristics of the ideal profile nailed down. It is not simple to transcribe that the CEO ‘must be a leader.’ It is potentially complex to transpose ideas into a bullet list of soft skills. While deriving a non-compromise competence checklist, take a look at the basics for your private equity sector. This instance focuses on a handful of core demands specific to portfolio companies, aligned to soft skill talents.
We covered hygienic and hard-skill credentials in the first part of this series; soft skills are arguably the most critical focus area. Jeffrey Cohn, and J.P Flaum, surveyed and interviewed the managing partners of 32 private equity firms (including Blackstone, Carlyle, KKR, and Silver Lake) about their CEO search process and how it has changed over time. “Among the surprises: Executives said they’ve learned to pay less attention to attributes such as track record and experience (the criteria typically most prized by recruiters), and gave more weight to softer skills.” HBR June 2016
“Executives said they’ve learned to pay less attention to attributes such as track record and experience and gave more weight to softer skills.” Harvard Business Review, June 2016
There are essential soft skill-sets more pertinent to managing a portfolio company. A number may only surface through deep dive executive assessments that will require intuition and personality evaluations supported by your executive search partner.
The prospective CxO will have a leadership presence, which is hard to quantify. For example, when you speak with a candidate, they seem to have that special sparkle and intensity that sets them apart, with charisma and thought leadership. You might feel humbled in their presence, with their persona and verbal skills. You may even find it challenging to keep up with their conversation; they’re so quick and lucid,’ I don’t even know what they’re talking about.’ The profile does not require a defacto overconfident extrovert, many candidate personalities can accommodate identifiable presence, but it is necessary to harness a portfolio organization and inspire confidence. ‘Presence’ will support other talents to transform an existing workforce largely through communication. Finding this is a style and culture assessment. Your executive search consultant’s instinct and evaluations will help.
Investors are tremendously experienced in their respective business sectors. Influential executives will be able to work with an active owner. Candidates will need to show an aptitude to work with an investor lead and possibly many overseers. If not, their advisors will be with strong customer and business contacts and financial expertise to get the best out of the company. Having led a multibillion-dollar division in a large structured conglomerate may not provide a rich experience for a candidate who will work with a highly active and knowledgeable ‘in your face’ owner.
Equally, prospective chemistry between the CxO and a deal owner requires exploration. This probing on respect, communications style, vocabulary, language, and shared values relies heavily on your consultant’s instinct to mitigate bias. To do this, the search partner will also require an assessment of the deal owner’s personality. Both are likely to be opinionated and not lacking in ego. Indeed, both are out in the top right corner.
People assessment sits near the top of requisite skill set priorities for a new executive. Assessment skills are required in abundance while moving a company through anticipated transformation and growth. Senior leaders have likely experienced many regular global re-organizations within a multinational. But did they tackle change in a small or medium-sized enterprise, possibly where staff has 20 or 30 years tenure, and one or two key individuals carry its weight? Imagine a private equity company investor commenting, for example, “are you sure Joe is up to the task? He seems to me to be very quiet”? Surety in evaluation is a must.
A mental aptitude to multi-task competing priorities is essential, and to make decisions rapidly; the 80:20 leader will thrive rather than a big business planner. Similarly, the candidate will possess clarity in the face of multiple demands and correspondingly toughness to recover from inevitable setbacks. Ultimately, the candidate will be a decision-maker and have proven most decisions were correct. What happened when the candidate was up to their neck in a swamp? How have they behaved in the past while extracting their business from downturns?
With a tightly supervised portfolio firm, the CxO will be able to provide and be comfortable with a more open-book approach with the board and, incidentally, expertise and confidence in sharing both good and bad news. When the CxO feels tasks are their responsibility and would opinion “let me get on with my job,” they will demonstrate an equanimity to handle investor involvement. This will include temperament to field calls frequently and not take criticism or negativity personally.
In a similar vein, ideal prospects will show resilience to handle contention, knowing how to balance a fulcrum between taking orders and operating in a vacuum. All leaders appreciate the challenge, but private equity company investors are savvy and will see through smoke and mirrors. Bluster and big generalities won’t pass muster. Underpinning much of this is an underlying sense of urgency, which can be observed in the manner of the candidate. Those who are slow on the uptake will likely be eliminated.
Well-placed questions on soft skills will quickly surface vulnerability pointers. CEO-level managers usually don’t hide their personality, preferring to be clear about their views and how they work. Evaluations take time to surface compatible candidates, and assessment will go beyond typical competency match interviews.
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