Staying Competitive in Tough P.E. Market: Partner with Leadership Team


This is the fifth and last blog in the series “Staying Competitive in a Tough Private Equity Market.” The first post in the series provided recommendations of essential elements that private equity firms should implement to stay competitive. This blog will focus on the recommendation: Partnering with the Leadership Team.

Leadership teams are a critical element of the transaction when acquiring a business, considering these are the people that will manage every facet of execution from strategic to tactical.

Failure to form a solid working relationship with the leadership team has negative consequences. Those consequences range from differences in strategic direction to declining operational and financial execution, and in worst-case scenarios, to financial insolvency. You should evaluate whether you have a solid team, and once you do, build that partnering relationship.

To avoid the consequences above, you should look at the leadership team from the following perspectives:

    1. Leadership team members – Ensure you have a thorough understanding of how each individual member of the leadership team contributes. The two areas to evaluate for everyone are character, which represents the personality and behavioral traits that enable them to lead and work well with others; and competency, which represents the ability to complete a task or have a certain technical skill.
    2. Leadership Team Cohesiveness – Observe how the leadership team interacts and ask yourself whether this group of people trusts each other, has strategic alignment, holds each other accountable, engages in healthy conflict, and are committed to the business. See below a graph from Patrick Lencioni’s book: The 5 Dysfunctions of a Team.
    3. Business Culture Identity – Businesses have a culture that can form in several ways. Most commonly they develop by themselves if leaders are not vigilant; an alternative is when leaders deliberately put effort into creating a purpose driven culture that informs the staff of the type of leaders they want them to strive to be, and the environment that they want them to create.
    4. Business Culture Deployment – For a culture to take hold there needs to be a concerted effort to embed the message across the organization. Ask yourself the following: Are leaders taking their roles as stewards of the culture seriously. Do they lead by example, hold staff accountable, coach, and develop their respective teams? Is the business identity visible on all processes and are employees identifying with the identity?
    5. Strategy Deployment Process – Leaders fail to effectively communicate strategy to the rest of the team. Furthermore, many leaders struggle to translate strategy to execution. Look for a process that cascades the message down to everyone, clarifies their role, and establishes business and operational goals. The process should reflect the execution of the PDCA cycle. Read this blog for a description of the process. We recommend you get involved in this process to understand execution and better support the leadership team.

If you are concerned with the leadership at your portfolio company, schedule a call to discuss how we can help.

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