Part Three – The Challenge of Finding the Unicorn Executive
The third part of this four-part private equity executive hiring series acknowledges the challenge of finding and identifying a ‘unicorn executive’ to lead your portfolio-invested company.
In case you missed it, part one looked at the essential and unique constituents of an ideal candidate’s profile in terms of hard credentials, and soft credentials in part two. Part four will explore a balance between needs with compromises, float tangential opportunities to expand horizons, and correspondingly extricate from myopia on that elusive ‘unicorn’ management candidate. This will be the final chapter of this series.
The dynamics at private equity firms are fast, aggressive, and all-conquering. Without a doubt, this is a difficult search, and surface compromise is essential. You will explore the ideals of openness and justification for a compromise; and how these impact the successful conclusion of senior executive hiring.
Then, There Is the Challenge – Look Into the Fight Ring.
Part one examined necessary hard and soft credentials, particularly unique requirements demanded from a portfolio company executive. There are two big fences subsequently to jump and to secure that ‘unicorn’, the pure credentials fit, and the interest and motivation of a candidate to join your portfolio company.
The depth of talent in a newly acquired portfolio company often tends to be far from what was agreed upon during deal negotiations. Key functional areas might have no leader, resources are limited, and perhaps there are too many non-performers who had ridden on the previous owner’s shirt tails. CEOs have to plug gaps and deal with the impact of change quickly. But who has had this change experience – other than a CEO with portfolio company experience.
CxO candidates might possess extensive credentials in managing a multibillion-dollar division. Still, when faced with running a few hundred million dollar firm, they may not fare well when required to ‘hands-on’ manage most aspects of a business. A large MNC divisional CxO could well have been surfing long-term curves and delivered only small incremental change, part of a bigger universe of decision making. On the other hand, private equity requires that they make decisions that will have a material impact on their business.
Coincidentally these are good reasons why candidates might turn down what they’d see as a risky step in the first place. Equally at the other end of the scale, a small enterprise leader’s depth of experience, even a tech founder, likely won’t measure up to the expectations of a private equity company with significant growth designs.
Does the old asset strip style and reputation still permeate people’s thinking of private equity? It’s uncertain, but the industry’s reputation still points toward a higher-risk environment. The right candidate will be interested in taking on challenges and rewards through different motivators.
Interest and motivation can be tested early in the search phase, matching agendas or otherwise highlighted. The hiring team has to square with a candidate on their expectations, but a trusted search firm can go deeper and evaluate responses to various scenario plays. Consultants can test a candidate’s response to how the role may play out, the personalities of the hirer, and how green the grass really is. Naturally, throughout the process, this assessment is concurrent to maintaining a candidate’s interest level high.
Making Concessions Without Compromise
While working on your portfolio company executive search, start with a proper assessment of the challenge ahead. With that in mind, you must make an honest evaluation of search parameters that will be out of bounds and those that can be adjusted or compromised. This is not simply about eliminating the ‘like to have’ or ‘preferred’; it’s about how to open the search field and compensate with other talent credentials to guarantee a timely, successful search and onboarding.
First, Agree on Where to Compromise
Too often, sticking obstinately to a wants to list with your search partner wastes time and effort, a scenario that plays out frequently. An overly assertive hiring manager lays down the profile, culture, and must-haves; a job description is shared and honed, and the search firm charges ahead, having understood all the written and spoken nuances of the role. The search consultant may realize there will be a challenge, but they head into the process confidently, or at worst, to give it a go, without disclosing real concerns or red flags from the onset. Sometimes, a fear is that exhibiting anything less than affirmative may lose the deal.
After two or three rounds, months have dragged by, and the unicorn has not been found. There’s then typically a discussion about compromises, which might be ‘does a candidate need to come from the same type of competitor,’ or ‘do they have to have a certain level of seniority.’ The answer is usually along the line of ‘well, let’s open up the field to….’ But now, your search consultant will have to revisit the potential list or start again with a few new or eliminated parameters.
It is productive to short circuit this painful scenario and have an honest discussion at kickoff to explore in detail what might be viewed as overly inflated credentials, those that requirements can be relaxed, or maybe elements that don’t matter at all but were cut and pasted in without thought.
The portfolio company head is a complex, difficult search that has been established; it’s not a process that necessarily has to happen for regular hiring. In the private equity company world, to make these concessions might require moving aside certain egos and bravado but significantly filtering the wishlist and giving reality plenty of air time.
Portfolio Company Experience
The quintessential first question on a compromise will be whether or not to have past private equity portfolio company experience; is it essential, or what compensating factors might there be? We have looked at some core tenants for the role; a candidate must demonstrate a massive capacity for building, transformation, adaptability, communication, and resilience. Ultimately faced with a long and challenging search, square away with your search partner on the need for experience from the outset, and avoid being obstinate to trawl vainly for the elusive catch.
If a candidate doesn’t have a past portfolio company ‘feather in their cap,’ look for personality ingredients that will allow them to learn fast and accept a whole new world of private equity-owned business. Incidentally, having portfolio company experience in any position might not be a panacea in your own company’s situation. For instance, a unique business may prioritize specific product/service knowledge rather than a portfolio company background – think tech firms playing a new game.
With or without portfolio company experience, a candidate must demonstrate clear cognizance of private equity company investment and divestment decision-making, the dynamics of turning a strategy into practice, and how to interface between employees, private equity company management, and boards. They must understand how this clock ticks and how a private equity company looks at business.
In a high-stakes, high expectations, and fast-moving portfolio company environment, is it realistic to settle for a humble consensus leader whose character likely doesn’t match your stereotype? As with any tangential candidate, your assessment must place all traits on the scales. The final decision will be heavily influenced by personality compatibility with you and your private equity company management team.
In part four, the last chapter of this series, I will identify means to disengage from a fixed mindset, explore ways to think tangentially and bring a search to a successful conclusion.
