Final article from Steve Manning, Head of Financial Services at Cornerstone Singapore, on finding PE company leaders.
The bar is set high. Dynamics at Private Equity firms is fast, aggressive, all conquering, and as the investor leader you’re thrust into that all too familiar position of tackling senior leadership management issues at a newly acquired portfolio firm.
This four-part series recognizes the challenging factors surrounding a search for the ideal candidate. The focus is squarely on meeting unique demands of private equity performance, but will often square the circle for many senior executive traits.
- Hiring Private Equity Leaders – Part I: Ideals and Compromise
- Hiring Private Equity Leaders – Part II: Core Soft Credential Constituents
- Hiring Private Equity Leaders – Part III: Then the Challenge
This fourth and final installment will balance needs with compromises; float tangential opportunities to expand horizons; and ward off the myopia clouding your view of that elusive, ‘pink giraffe,’ PE leadership candidate.
1. Where to expand the search for tangential talent
Beyond relaxing specific credential requirements, success may hinge on the ability to think laterally, and seek out candidates with tangential experience. A simple illustration perhaps is a CEO of a large injection moulding 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 was addressed in part two — is the importance of direct industry sector knowledge and experience. The new CxO will be tasked to define and craft strategy, make investment proposals, defend them (so they had better have depth in the related sector), and have 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 such as manufacturing, finance, or technology.
From experience, keeping an eye on a candidate’s knowledge of how a specific business model works is essential and non-negotiable. On a macro basis, producing versus services for example are hard lines to cross. It is imperative to probe candidates deeply on the fine subtleties of your business, such as how return on capital is impacted by elements deep down in the producing stage. A search partner with industry knowledge is critical to this evaluation.
Sales and marketing positions appear to provide broader sector hunting grounds, but reality can be different, and there are still many constraints. A typical conversation with your search firm might underline that the role requires a sales professional with strategic thought; an ability to distill your firm’s value proposition; knowledge of the customer base and be able to bring new key accounts to the table immediately; familiarity with your product; a finger on the competition; and has led a large regional team’.
Right away this locks the search into an ever narrowing set of industry credentials.
That said, a candidate with a good technical background will be able to learn a product or service potentially in less time than it takes to find a perfect insider who comes from a competitor. Make an honest assessment of the complexity of your portfolio company business model and value proposition, size of business, size of organisation, sales process, before you lock into tight parameters for the role. Don’t be guilty of over inflating the uniqueness of a business and discarding how quickly outsiders may be able to adapt.
- Think Tangentially:
The ideal candidate may not materialise from a traditional CEO profile, meaning the resume might look different from what you expected. Compromises can include: not being business school all-stars, or even graduates; perhaps they started careers in a very different environment (a photojournalist, for example, will have travelled and understand different cultures well); or perhaps you have a failed technology entrepreneur in the mix.
Realise that hiring for a portfolio company firm is not just competing against others, but competing against all industry to attract excellent talent.
You will subconsciously know when a candidate is CEO material. It is not the tick in the boxes of 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. This does not mean they are extroverted, bull-nosed, or shy, they simply exude ‘presence’.
Whatever credential strong candidates hold, they are likely to 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.
At a functional pinnacle, although tangential compromises are available, recognise 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 a candidate between functional management roles. To put it simply, if the role is operational then hire an operations manager, financial then hire 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 school.
What is becoming more prevalent today is ensuring that whoever a candidate is they are fully digitally conversant. They don’t need to know how to code, they do need to know how coding can change their business, how to evaluate solutions, and to be well versed in what’s happening in information and technology. Facebook and LinkedIn proficiency does not qualify. Move beyond lower age barriers to capture this ability.
2. Private Equity Series Summary and Move Ahead
The above discussion, taken with the messages in parts one and two, endeavour 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 from another portfolio company will plug a gap with a competent leader, but simply recycling known candidates may also recycle the same lacklustre performance that made the candidate available.
On the other hand, the time line 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.
Realise that hiring for a portfolio company firm is not just competing against others, but competing against all industry to attract excellent talent. While detailing the motivators on offer, also be forthright about the challenges, stake holders, and expectations. The right candidate is likely to be a risk taker, they won’t be successful if they’re not, so don’t hold back on laying out all the cards positively.
Building a relationship with an executive search partner who understands your portfolio business model; has uncanny assessment nouse; who knows where niche talent resides; and who can call upon a global network of partners with deep sectoral, geographical and technological areas of expertise, will make the difference. But most crucial are those people who think tangentially and can help find a way forward through comprise
Importantly, 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 running of the business inside your portfolio company.
The more you can share on where you want to be, the more your new hire can align and drive towards the same goals. The position is for a mature and professional leader who will drive 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 are invaluable to bring out not only significant personality traits, but indications of how the candidate might perform under pressure, and whether personal goals align with the role on hand.
Search and on-boarding the best possible CxO leader is critical to achieving the growth you’ve projected, and so is your ability to enable their success. It’s likely your organisation has access to mature development and talent tools to support your new best friend. Your search consultants also can further reinforce development, so engage them to follow up actively with leadership development.