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Hiring for Private Equity

January 21st, 2021 by Amy Suitter

Hiring for Private Equity

9 critical factors for CEOs or CFOs

By Bill Benson

The difference between winning and losing often comes down to having the right players on the team. Private equity firms have significant skin in the game and are acutely aware of the need to hire the right executives for their portfolio companies. PEG firms will typically prefer a candidate who has been part of a private equity grow and sell transaction. Candidates who have this experience are increasingly hard to find. It will likely be necessary to consider candidates who have relatable experience and the right intangibles. Here are 9 essential candidate qualities to consider when vetting your C-level executive for private equity.

1. Motivation – You need a driven candidate with a large motor to tackle the challenge and lead organization to a finish line. Money can and should be a huge motivating factor. The person who has been through repetitive sales exits may not be as motivated as someone looking for their first big win. This is not a fit for someone seeking work life balance as a priority.

2. Team Leadership – This is not an individual sport. It is critical for a team to work together to accomplish the mountain of work associated with building a platform or growth company. The right candidate will be confident without being arrogant. They will listen, ask questions and be genuine during the interview.

3. Transparent – The CEO and CFO are critical links in a flow of information. Withholding information or hiding problems will undermine confidence with sponsors and investors within the PE environment.

4. Smart – Intelligence on its own is not a guarantee of success. You will however need someone who can verbally and mentally hang with whip smart investors and equity partners. The person will need to have critical thinking capability. IQ needs to be combined with common sense and EQ. Sorry if screening by intelligence offends the egalitarians out there. PE is not an “everyone gets a ribbon” environment.

5. Temperance and resilience – It takes a level of patience, self-confidence, and open-mindedness to be highly functioning within this dynamic, team-oriented environment. Making sound decisions quickly and under pressure requires the person who can stay present during chaos. The right candidate cannot be thin skinned, easily agitated or intellectually rigid. Having failed or experienced significant challenges should not be considered a sign of weakness. Things will never go exactly as planned so you want someone who has experienced adversity. It is key to understand how they reacted to challenges they have faced.

6. Systems and Data Thinker – In a growth company environment, the leader needs to envision the company in the next state and put the building blocks in place to get there quickly. This person is often replacing an entrepreneur who did not have this capability. Having a combination of experience in larger environments as well as growth companies, is a good under pinning. More important is a person’s ability to lead by more than the strength of their personality. The right candidate will use data to make decisions, create repeatable processes and integrate with the right systems to support both the short- and long-term goals.

7. Shirtsleeve – Senior leaders in middle market PE growth companies will spend a percent of their time being “hands-on”. This is a key consideration if you are considering a corporate executive for a PE leadership role. This person will need to be ready to “zoom in” and “zoom out” to gain that hands-on understanding of progress to goal across the organization. Being able to both execute and create strategy is not part of every leader’s DNA. Many prefer to sit at a more strategic level. It is critical for someone moving from corporate to private equity to be prepared for a less cushy and resource laden environment. Being prepared to regularly communicate a “hands-on”, detailed understanding of the organization to investors will be required.

8. Bias for Action – Choose urgency over process or empathy. The clock is often ticking toward a time frame to sell. This creates a heightened expectation around the speed of growth or cost cutting. This person will need to be collaborative and be transparent with decisions. They will need to listen and show concern for employees but also make decisions quickly and backed with data not feelings. Some highly empathetic leaders who might thrive in some environments, may not be able to make decisions as urgently as the PE owned business requires.

9. Decision Maker – We have discussed that PE firms value urgency and data. It is also important that the leader can make decisions without all the information and under challenging circumstances. Often these decisions are shrouded with urgency, ambiguity, complexity and/or volatility. This requires using a combination of intuition and facts along with a mind that is open and agile. A good rule of thumb is articulated by the US Marine Corps which they call the ‘‘The 70% Solution’. This is used for warfare and combat situations, but it also applies to business.

How to Hire Better Talent

November 23rd, 2020 by Amy Suitter

How To Hire Better Talent

Selecting the Right Candidate

Successfully finding and hiring the best people is largely based on selecting the right candidate during a hiring process. We often see postings with a laundry list of requirements relating to very specific experiences, industries or even technical requirements such as software skills. These items are typically taken right off the job description. This leads to the assumption that someone who checks all the boxes or has performed a similar role will be the best person to hire. Why is this likely the wrong approach? Let’s consider these six options.

1. What are the odds that the perfect “experience” candidate is also the best potential performer? Even if the candidate that checks all the boxes is out there, it would be like arranging the moon and the stars for that person to also be the best performer or talent available. It is very often not the case.

2. Often the job description does not address what you are looking for the person to accomplish. Make a list of desired outcomes for the prospective hire. This provides a better screening guideline.

3. What factors do you consider when you promote someone from within? Do you look at years of experience and check lists of requirements or do you consider their performance? Why not look at the same factors for external candidates?

4. You want to expand the field of candidates, not limit it. The best candidates typically evolve out of a larger pool, rather than a limited one. Despite the pandemic, we are still in a talent short market, and painting yourself into a corner with a long list of requirements will not help you hire the best person.

5. Don’t “fall in love” with a particular attribute or experience. E.g. Worked for a specific competitor or company, degree from a certain school, or other singular “WOW” factor. These biases or perceptions often have little to do with actual performance.

6. Finally, don’t disqualify a great candidate because of a particular factor. Just because you had a bad experience hiring someone from a certain company or with a certain background, it doesn’t mean that it applies to all candidates with that attribute. We all have a tendency to project our past issues forward, but it is important to stay objective and be open-minded, so we aren’t screening out someone that may be a great fit.

How to Hire Better Talent

Selecting a Search Firm

September 9th, 2020 by Amy Suitter

Selecting a Search Firm

by Bill Benson

There are many good reasons for companies to use an executive search firm. Two of these reasons include gaining access to a larger pool of potential candidates and adding a layer of candidate evaluation and screening. This extra layer will provide objectivity to help mitigate the costly risk of a hiring mistake. The right search professional will help you navigate the process to a successful outcome. When it comes to finding an executive, one size does not fit all. Your most important decision about the search will involve selecting the right partner to help lead you to the right candidate. Whether you are leading a Search Committee hiring a CEO or you’re seeking a top executive or a key specialized technical resource…. choosing the right search firm partner will likely determine your success. .

This article will explore 6 factors to help you make the right decision.

1.Capability to Build a Complete Candidate Pool

The key to a successful search is building a high-quality and deep talent pool. This is accomplished by recruiting candidates who are not actively looking. Active or networking candidates are just the “tip of the iceberg”. You may get lucky and find a great person through an ad or posting, but it is hard to measure a candidate without strong comparisons. Make sure your search firm partner is primarily a search/recruiting firm. Understand how they are accessing the entire pool of candidates (iceberg). Many consulting firms and human resource organizations include executive search as a service offering. These firms are typically posting the position along with some networking. You want to make sure the prospective search firm is focused on researching and outreach as a key part of the process.

2. Where Should the Firm be Located?

I think we have all heard the quote “A profit is not without honor, except in his own land”. Don’t assume the right search solution is a large “national” firm and located in a big city. It is a misconception that a national search cannot be conducted from Grand Rapids, Michigan, Des Moines, Iowa, or any other location. A firm located nearby will be more effective in selling the local “place to live and work” to an unfamiliar out of town candidate.You will have less cost and flight risk with candidates who do not have to relocate. Every search starts concentrically with the local market or region, so leaping to a large city out of your area may not be in your best interest. The firm located near you is also more likely to care about building a long-term relationship due to having shared interests and contacts. Clearly if you are seeking a “C level” executive for a large company, someone who specializes in these positions may be located in a larger city or work for that “name brand” search firm. When selecting a firm specialized in a vertical space like Fashion, CPG or Pharma, that firm might be located where the industry is concentrated. Sometimes the best resource for a specific niche may be located in a completely different location.

3. Evaluate the “Person” Not Just the Firm

You might believe that hiring that “name brand” search firm will assure a successful outcome. It is more likely the person conducting the search will determine the success of the search. Top consultants at these larger firms are working on high profile positions. If you are looking for the CFO of General Motors, you want someone networked at that level. If you are a mid-sized company looking for an executive, then you often get a more experienced search professional when you work with a boutique, mid-sized firm. Ask questions to understand who will be conducting the search, vetting the candidates, and consulting on the assignment. A trusting relationship with the professional conducting the search is important. You also need a search professional who understands and can assess work style and culture fit. Often, an executive is derailed due to “fit” rather than technical capability. The right consulting resource will also help you navigate the onboarding/integration of the candidate as well.

4. Demonstrated and Repetitive Success

When selecting a search firm, you want a firm that can demonstrate that they have successfully completed similar searches. Everyone believes their business and industry is unique, but you do not need a clockmaker to find a COO of a clock manufacturing company. You need a clockmaker to make a clock and an executive search professional with repetitive success filling leadership positions with companies of similar size. The firm should have success within the function (finance, operations, sales) and/or the industry or related industries. The other two factors are the location and level of the position. If your position is a “C level” position in a Fortune 500 company then you want a firm that has worked on similar positions. If you are a mid-sized family-owned business, then experience with these organizations is important.

5. Gauge the Motivation & Commitment Level

Not every firm or individual will approach your assignment with the same level of commitment. Make sure the firm/search consultant is fully invested in finding the candidate who will deliver the best results. Do you have mutual interests or connections with the firm? How important is your business to this firm? You want to feel as though the search professional has a shared responsibility for the successful outcome beyond collecting a fee. Do you feel as though your relationship is important to them? Do they offer a guarantee that backs up their commitment?

6. Costs, Capacity and Other Factors to Consider

While you want to understand the total costs associated with selecting a firm you do not want to use price as a primary reason to exclude or select a firm. The value associated with hiring the right candidate should far exceed any price difference. You want to understand the search professional’s capacity to perform the search. If you’re selecting a firm due to their specialization within an industry, make sure the search professional is not hamstrung from contacting candidates who might be working for “clients” within that industry space. Ask whether specific companies are “off limits” because they are clients. This will give you a good start to determine the right search firm partner for your critical hiring need.Selecting an Executive Search Firm