The hiring team of a traditional corporation might hire a CEO on average once every 10 years, but private equity (PE) firms often hire multiple CEOs and other executives every year, since they typically lead the hiring of CEOs and/or other chief executives when they invest in a new company.
Furthermore, PE firms typically have a limited amount of time in which to turn around the companies in which they invest, usually about five years. Because of the compressed time frame, PE executive hires need to have different skills and abilities than the typical executive. Here are some factors private equity firms weigh when they perform executive searches.
1. Being too successful can be a negative.
Candidates that have had one success after another may not actually know how to overcome the obstacles and challenges that come with being a PE firm executive. Most of the companies PE firms invest in have significant problems that must be addressed in order to turn around quickly, so if an executive has not learned how to move past failures and overcome challenges in previous positions, he or she may not have the skills needed to be a successful PE firm executive.
2. Being successful in one situation may not translate to another.
Traditional executive interviews focus on previous experience and demonstrated success, but every PE executive position is different and requires different skills. Rather than relying on education and prior experience as a way to predict future success, PE executive searches should focus on the ability to hit the ground running and quickly learn a new position.
3. Being a team-builder outranks just about everything else.
PE executives typically lead smaller companies than other C-suite members, so they need to be able to build a high-performing team and work in the trenches alongside subordinates in order to accomplish their goals of making a company successful. In interview situations, a candidate who uses “I” too much or comes across as arrogant is a red flag for someone who might have trouble building and motivating the kind of teams PE firms need to succeed.
4. Pride definitely goes before the fall.
When pride becomes unhealthy, it keeps people (and sometimes entire companies) from being able to make the changes that will turn an organization around and ratchet up its success level so that it can make money for the PE firm. PE firms need executives that can take responsibility for decisions and actions that did not work out too well so that they can move on to better choices.
5. Urgency comes before empathy.
The time limitations of most PE investments require that C-suite hires have a sense of urgency about making changes and decisions to turn the company around. There is nothing wrong with empathy, but most PE executives do not have the luxury of making decisions out of empathy and must instead urgently press forward in order to meet the company’s goals.
6. Moving forward requires candor.
Part of the sense of urgency needed in PE executives is a sense of candor about how things are going and the ability to share bad news quickly and honestly. There is not much time in the turnaround process to be political or fear-driven in decision-making.
7. Knowing “when to fold ‘em.”
PE hiring teams tend to decide quickly, within 9 months or so, whether the executive hire is working out well or not. Removing an executive judged to be failing makes room for one that can succeed, and the sooner the better when the time frame is five years or less to turn the company around.
Thrive TRM has everything busy PE hiring teams need to keep track of multiple executive searches and conduct shared evaluations among the hiring team as the process unfolds. Thrive TRM improves time-to-hire by instantly sharing information and insights with the entire team so that quick decisions can be made and the new executive can be put in place quickly. Discover solutions for VC / PE firms and see how Thrive TRM can help your PE firm find and win the executive talent it needs to succeed.