Private Equity Partner with a proven track record in executive search. Partner & COO at Renovata.
Private Equity (PE) firms play an important role in identifying top-tier leadership talent for their portfolio companies. Traditionally, boards of directors and CEOs have relied on a narrow set of tried and true qualifications for key roles in the C-suite. While this offers a level of predictability and risk mitigation for executive talent, it also limits the potential for innovation and fresh perspectives.
Given the technological disruption the business world is experiencing, we can no longer rely purely on past performance indicators to predict future success. It behooves PE firms and CEOs to open the aperture through which they view talent and shake up the status quo. Otherwise, we run the risk of overlooking qualified candidates who can lead portfolio companies in the future.
To Widen The Perspective On Talent
So, what does opening the aperture look like? I believe it looks like PE firms embracing first-time executives and nurturing a pipeline of CEOs for their active (and future) portfolio companies. While resumes provide a glimpse into a candidate’s past experiences and achievements, they don’t capture the full breadth of a candidate’s inherent potential to drive success in a rapidly evolving PE-backed business. I have seen how driven first-timers approaching the business challenge with a new angle or “playbook” can outperform the more experienced CEOs who may be relying on their past experience set.
Rather than focusing solely on industry or domain expertise, consider how you can prioritize the intrinsic qualities that drive performance and success in leadership roles. Depending on the challenges your firm faces now and in the future, qualities such as agility, strategic and contextual thinking, bias and speed toward action, self-awareness and emotional intelligence, resilience and a growth mindset can be more valuable to your portfolio company. With an emphasis on these characteristics, you can identify qualified and diverse candidates who may not fit the so-called conventional mold yet possess the potential to be a strong “fit” in CEO and leadership positions.
Understandably, first-time executives are a risk because they don’t yet have a proven track record in private equity. PE firms have the opportunity to make a calculated bet on first-time executives who demonstrate these qualities. Consider committing to providing guidance and coaching by pairing up “silverback” advisors and independent board members with the executive in order to pave the way for their development and therefore gain a return-on-talent investment.
It’s also important to consistently seek out and develop the next potential executive hires, thereby creating a steady pipeline and network of talent for C-suite leaders. This can allow future leaders to gain real-world leadership muscles and prove their capabilities before taking on the top position. By investing in a pipeline of talented up-and-comers and preparing them for their respective roles, PE firms can cultivate a strong ecosystem of capable CEOs and functional leaders.
By broadening perspectives and placing an emphasis on intrinsic characteristics, PE firms can identify exceptional executives who will lead in the future. If we don’t, we cannot expect that yesterday’s skill sets will continue to drive tomorrow’s returns.
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