When you make an investment, it is natural to wonder whether the top management of your portfolio company is competent enough to materialize expected returns. Having a wise understanding of your leadership capacity is of high priority to achieve appropriate results and regulate your investment vision. The management team of a portfolio company is supposed to provide strong transitional leadership to build capable teams and drive growth in order to deliver sustained financial performance.
Though the global private equity industry is showing growth, some Private equity firms struggle to achieve the results their investors expect. This is due to the fact that they choose the wrong CEO to run the portfolio company and furthermore half of the times they fail to replace them on time. Such delays are responsible for eroding a private equity company’s return on a portfolio company. A study by Bain & Co. concluded that “A delay in replacing an underperforming or ill-equipped CEO can significantly undermine even the best formulated value-creation plan.”
Employing a potent private equity leadership solution is one of the wisest steps to be taken by top private equity firms to possess better performing executives and teams that reduce performance-related problems, escalate results and help them meet investment time horizon. These solutions are optimal for helping in various ways such as assessing and coaching individual executives, managing newly formed or underperforming teams, acquiring fresh talent for the company and identifying and retaining leaders with high potential.
For your investment to be successful, giving due importance to the strength and capacity of management team is advisable and that is where a leadership solution comes into the picture as it does a diagnosis of the portfolio company’s culture and executive leadership team which provides a productive feedback of the strengths & weaknesses from a leadership point of view. Useful propositions are given to the board to move the organization ahead with a new and improved purpose. It also focuses on ensuring a fast start by encouraging individual executive and team on-boarding and early development.
A strong leadership solution for top private equity firms also provides expert assistance at the time of selection, assessing as well as developing executives who will optimize the long-term value of your investments. It establishes a formal assessment selection process to provide detailed insights into what makes a candidate suitable to execute on the current business strategy. The selection assessment process is helpful in anticipating the impact of a leader within the organization.
Furthermore, a solution displays deficiencies and challenges in leadership that limits the achievement of full potential. When there is a requirement for senior management team members to get accustomed to the new requirements and expectations of the organization, it directs the company’s attention to providing executive coaching promoting new behavior and working towards goals and performance expectations. Also, it implements relevant practices to improve the operating effectiveness of the team to maximize results.