Second in a series by Steve Manning – Head of Financial Services / PE and Family Office Search Practice – Asia, Cornerstone Singapore
You’re not happy with your current CxO level management team. You are finding out your investment is a tangled web of interrelated human wheels and cogs. Managing people is complex and hiring Private Equity leaders entails heavy lifting from a soft skill standpoint.
Adding a new CxO will potentially create instability in a firm that has relied on perhaps generations of insiders or, in the case of a newer start up, a mercurial leader to harness the company. Perhaps your confidence in management rejuvenation is even waning after all the politics, personalities, and history rear their ugly heads.
Having determined that new talent is essential there are significant calls to make in your endeavour to locate and secure them.
1. Confidence to Compromise on Ideals.
First and foremost do you have core characteristics of the ideal profile nailed down? It is complex to transpose ideals onto a bullet list. It is not sufficient to transcribe that the CEO ‘must be a leader’.
While drawing up a no-compromise competence check list, take a look at the basics for your private equity sector. Focus on a handful of core demands specific to portfolio companies and aligned to soft skill talents.
2. Soft Skills
Having dispensed with hygienic hard skill credentials in part one, arguably the most critical focus area is soft skills. 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 to give more weight to softer skills”. HBR June 2016
There are essential soft skill sets more pertinent to managing a portfolio company. A number may only surface through deep-dive personality assessments which will require intuition and evaluations supported by your search partner.
The prospective CxO will have leadership presence, which is admittedly hard to quantify, but immediately apparent. For example, when you talk with a candidate, do they have that special sparkle and intensity that sets them apart in charisma and thought leadership? You may even find it difficult keep up with their conversation, they’re so quick and lucid. The profile does not require a confident extrovert, but it is a trait required to harness a portfolio organisation and inspire confidence.
‘Presence’ in the leader will encourage and support other talents to transform an existing workforce. Finding this is a style and culture assessment where your search consultant’s instinct and evaluation processes will help greatly.
Manage active investors
Effective executives will be able to work with an active owner. You want candidates to show an aptitude to working with an investor lead, and quite possibly a multitude of overseers. Investors are tremendously experienced in their respective business sector with strong customer and business contacts and financial expertise on getting the best out of the company. Having led a multibillion dollar division in a large structured conglomerate may not provide the best 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. Both are out in the top right corner and likely to be opinionated and not lacking in ego,. This takes some probing on respect, communications style, vocabulary, language and shared values. It also relies heavily on your search consultant’s instinct to mitigate bias in the assessment of compatibility. To do this the search partner will also require a careful assessment of the deal owner’s own personality.
People assessment sits near the top of required skill set priorities for a new executive. Senior leaders have very likely experienced a number of regular global re-organisations within a multinational. But did they tackle change in a small- or medium-sized enterprise, possibly where staff have 20 or 30 years tenure, and one or two key individuals carry the weight of the company?
Assessment skills are required in abundance while moving a company through transformation and growth. Imagine a private equity company investor commenting “are you sure Joe is up to the task, he seems to me to be very quiet”? Confidence and surety in evaluation is a must.
Complex decision making
A mental aptitude to multi-task, competing priorities and the ability to make decisions rapidly are essential. The 80:20 leader will thrive rather than a big business planner. Similarly, the candidate must possess clarity in the face of multiple demands and toughness to recover from inevitable setbacks.
What happened when the candidate was up to his or her neck in a swamp? How have they behaved in the past while extricating their business from downturns? Ultimately, the candidate will be a decision maker, and have proven most decisions were correct.
With a tightly supervised portfolio firm, the CxO will have a capacity to provide and be comfortable with a more open-book approach with the board as well as having confidence in being able to share the bad news, as well as the good. This will include a temperament to field calls frequently, and not take criticism or negativity personally.
The CxO who feels tasks are his or her their own responsibility and is prepared to say “let me get on with my job”, will have demonstrated the equanimity to handle investor involvement.
In a similar vein, ideal prospects will show a resilience to handle contentious issues, knowing how to achieve balance between taking orders and operating in a vacuum. All leaders are prepared to be challenged, but private equity company investors are very shrewd and will see though smoke and mirrors. Bluster and generalities won’t pass muster.
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 the way they work. Evaluations take time to unearth compatible candidates, and assessment will likely go beyond typical competency match interviews.
In Part Three we will look at the motivation and interest level of the candidate to lead your portfolio company.
Steve Manning is a search director, and is Head of Asia Financial Services / PE and Family Office Practice at Cornerstone International Group based in Singapore. www.linkedin.com/in/jstevenmanning