Executive Hiring For a P.E. Portfolio Company – Tangential Opportunity

Part Four –Tangential Opportunity; a Balancing Act in P.E. Hiring

In the previous three parts of this series, we realized the challenging factors around searching for and placing an ideal candidate to lead a private equity portfolio company.

This series’s final part will balance needs with compromises, float tangential opportunities to expand horizons, and extricate from myopia on that elusive ‘unicorn’ management candidate. Let’s get back into the scene again, and the bar is still set high. Dynamics at Private Equity firms are fast, aggressive, and all-conquering. As the investor leader, you are becoming more familiar with tackling senior leadership management issues at a newly acquired portfolio firm.  

Where to Expand the Search for Tangential Talent:

Beyond relaxing specific credential requirements, success may hinge on the ability to think laterally and search for candidates with tangential experience. A simple illustration perhaps is a CEO of a large injection molding firm, who might be well suited to a brewing and bottling company. Both are high-volume capital intense process industries. 

Direct Industry Experience:

Running in a close second place to past portfolio company experience, which I addressed in part two, is the importance of direct industry sector knowledge and expertise. The new CxO will be tasked to define and craft strategy, make investment proposals, and defend them, so they have depth in the related sector and a brain the size of an elephant. Certain functional leadership positions, and industry sectors, can be less strident on this question. The CFO candidate might get by with only a broad sector experience in manufacturing, finance, or technology.

From experience keeping an eye on a candidate’s knowledge of how a specific business model works are essential and non-negotiable. It is imperative to probe candidates into the delicate subtleties of your business, for instance, how return on capital is impacted by elements deep down in the production stage. A search partner with industry knowledge is critical.

Sales and marketing positions appear to provide broader sector hunting grounds, but reality can be different, and there are still many constraints. A consultative conversation with your search firm might underline that the role requires experience such as:

• A sales professional with strategic thought
• An ability to distillate your firm’s value proposition
• Knowledge of the customer base
• The ability to bring new key accounts to the table immediately
• Familiarity with your product with a finger on the competition
• Experience leading a large regional team

Establishing clarity around these requirements instantly locks the search into an ever-narrowing set of industry credentials.

Make an honest assessment of the complexity of your portfolio company business model and value proposition, size of business, size of an organization, and sales process before you lock into tight parameters for the role. Don’t be guilty of overinflating a business’s uniqueness, and discard how outsiders may be able to adapt. That said, a candidate, for example, with an excellent technical background, will be able to learn a product or service and, as a reality check, potentially in less time than finding a perfect insider who comes from a competitor.

P.E. Hiring, Think Tangentially:

The ideal candidate may not materialize from a traditional CEO profile, meaning their resume might look different from expected. Compromises can include not being business school all-stars or even graduates. Perhaps they started careers in a very different environment, for example, a well-traveled photojournalist or even a failed technology entrepreneur. 

You will subconsciously know when a candidate is CEO material. It is not the tick boxes on their experience competence list or past successes, in so much as how right out of the box they radiate confidence and a sense of charisma – which does not mean they are extroverts, bull-nosed, or quiet; they simply exude ‘presence.’

Whatever credential candidates hold, they will likely be trench fighters with soft skills and charisma to lead and dilute egos. They may have faced numerous setbacks, and have stories of mistakes, although they probably have a fast-moving resume and quick ascension once they found their calling. These are healthy ingredients for success in a portfolio company.

Although tangential compromises are available at a functional pinnacle, recognize that a senior executive candidate with the requisite years of experience will have broad traits baked in hard. You will find it difficult to move between functional management roles. If the position is operational, hire an operations manager and a finance head.  

Tangentially other roles that have required strong leadership but might not have been a CEO in your specific sector can be trawled; a ship’s captain, a military leader, a dean of the school.

What is becoming more prevalent today is ensuring that a candidate is entirely digitally conversant. They don’t need to know to code, but they need to understand how coding can change their business, evaluate solutions, and be well versed in what’s happening in information and technology. Facebook proficiency does not qualify. Move beyond lower age barriers.

Series Summary and Move Ahead:

The above discussion, and parts one, two, and three, endeavor to underline that in many instances, a search for candidates can be moved tangentially and compromises made to the ideal. Hiring from a close competitor or another portfolio company will plug a gap with a competent leader, but simply recycling known candidates may give at best similar lackluster performance to competitors. Meanwhile, the timeline to find an ideal portfolio company candidate could be unacceptable. It may be better to focus on someone less tied up in the constraints of an industry and more motivated to apply new thought leadership to create – excuse the cliché – breakthrough performance.

Realize that P.E. hiring for a portfolio company is not just competing against others but competing against all sectors to attract exceptional talent. The right candidate will likely be a risk-taker; they won’t be successful if they’re not successful.

Build a relationship with an executive search partner who understands your portfolio business model and has uncanny assessment nouse. They know where niche talent resides and can call upon a global network of partners with deep sectoral, geographical, and technological areas of expertise. A reputable firm like N2Growth will make all the difference. Those who can navigate through compromise and think tangentially are crucial.

Lastly, don’t have your ‘ace’ candidate guessing motives, objectives, and exit plans. And similarly, once on board, don’t set goals in a vacuum. Fantasy land won’t help your new hire in the development, communication, transformation, and run of the business inside your portfolio company. The more you can share where you want to be, the more they can align and drive towards the same goals. The position is for a mature and professional leader who will move towards your aspirations and find that right fulcrum in the balance to meet achievable goals.

Evaluations take time to surface compatible candidates, and comprehensive assessment tools would be invaluable to reveal significant personality traits, how the candidate might perform under pressure, and whether their goals overlap nicely with the role.

Search and onboarding the best possible CxO leader is critical to achieving your projected growth but don’t forget to enable their success. It’s likely your organization has access to mature development and talent tools to support your new best friend. Equally, your search consultant can further reinforce development, so engage them to follow up actively with leadership development.