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Creating value in today’s economy: lessons from the best for private equity
PE firms are waking up to the fact that all the financial engineering in the world can’t substitute for non-working leadership. Check whether you are investing sufficiently in leadership scalability, and consult the tips on PE’s new value-creation playbook.
Leadership scalability checklist
- Does my management team have the ability to scale 3x revenue?
- Do executives have the emotional intelligence to manage complex stakeholder dynamics?
- Are we building leadership depth throughout the organization?
- Are we creating a data-driven culture?
- Are we using data-driven approaches to assess leadership effectiveness?
- Are we investing in cultural integration?
PE’s new value-creation playbook
Deal evaluation
Make leadership evaluation the center of investment decision-making. Establish systematic processes for evaluating not just current leadership quality but leadership scalability. This requires data-driven approaches to leadership effectiveness assessment that go beyond resume review and gut feel.
Integration planning
In roll-ups and carve-outs, cultural integration needs to be planned as meticulously as systems integration. That includes assessing cultural fit during due diligence, examining likely areas of conflict, and making concrete plans for creating shared identity and aligned incentives. Creating a data-driven culture is especially critical when two or more organizations need to function as one integrated entity.
Continuous value creation
Rather than focusing only on operations-driven enhancements, spend steadily on leadership development throughout the ownership period. Create cross-portfolio learning networks so leaders can share best practices and work through common issues. Make succession planning a routine boardroom agenda item. Spend on leadership effectiveness at all levels, not just the C-suite.
Exit preparation
Place leadership strength and cultural health at the forefront of value drivers in the sales process. Clever buyers increasingly compare organizational capability to financial performance. Companies with evident leadership depth receive premium valuations.
Key takeaway
PE firms today need no longer be fixers and dealmakers, but talent builders and culture designers capable of constructing data-driven cultures that support sustainable value creation. The best companies are developing leadership development platforms that can spot, attract, build, and deploy outstanding talent across their entire franchise.
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