Only as strong as the weakest link or greater than the sum of its parts?
I have always been a believer in patterns, threads, and kernels when it comes to ideas and discourses. What once was a kernel becomes a thread, what was a thread becomes a pattern and so on. At Marble Hill Partners’ latest private equity dinner in Birmingham, attended by 14 Chairman, CEO, and investors (and our good selves), it struck me how such a pattern has developed in recent times to become an ongoing dialogue and discourse.
The discourse I refer to is ‘people’. In the three hours of lively discussion covering topics ranging from management loan notes, the increasing cost of far east sourcing, and the longevity of private equity in its current form, it was the subject of ‘people’ that dominated proceedings.
It has long been a maxim within private equity that the quality of a senior management team is of paramount importance. This is nothing new. Having the right team in place can be the difference between success, failure, and mediocrity. The importance of this has never been questioned; how to get it right is always in question.
Once the management team is in place, what about the numerous questions facing you about the rest of the company. Identifying talent, or not, within the business. Getting the right people in the right positions. Attracting employees with the necessary skills, but more importantly, with the right attitude and appetite. Clearly, for any Chief Executive and management team, this is one of the hardest things to deliver quickly and successfully. Hindsight is ultimately useless in these situations and tends to focus the mind on wasted time and opportunity – ‘if only we had taken that decision sooner….’
The feeling that this process can take far too long resonated with all gathered round the table, be they investor, chairman, or CEO. There is no quick fix in many ways, but appreciating this fully going into a new deal is of vital importance if the process is to happen quickly.
The private equity environment demands a different level of energy, focus, and accountability. Not everyone is suited to it, but the quicker any private equity backed business can the get the right people in place, from top to bottom, the more likely the business will deliver the first year’s numbers. It is a virtuous circle thereafter – deliver the plan, investor enthused and on-side, management freed up to focus on strategy and delivery of exit.
If anything, it has become harder to attract the calibre of candidate required, with the right mentality. Private equity, in itself, doesn’t have the same attraction it once had; executives are less convinced by the promise of equity and significant financial gain. However, certain fundamentals remain in terms of the private equity environment: more dynamic, rapid change, entrepreneurial, quicker decision making, shorter lines of communication, greater focus, and increased accountability.
Individuals with the right appetite and mentality would see all of these as positives. It will excite them, they know they will flourish; the chance to really make a difference and be part of something tangible.
The quicker a management team can find these individuals the better. Success depends on it.
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