Private equity board shift from management to leadership

 Leadership Board Trend

 

Private equity governance has for years set the route for management professionalization with industrial advisors on their board teams. As any other business, they however also from time to time experience that even the best plans fail due to lack of execution skills for which leadership is key.

Thus, a leadership advisor approach may be maturing as a supplement to their classical industry advisor approach – what do you think?

Clear trend on board professionalization and competent teams

Private equity funds have long been at the forefront when it comes to professionalization and composition of board teams based on business challenges and competence needs, rather than classical networking relationships. With a typical exit horizon of 4-7 years and clear ambitions to maximize value creation during the ownership period, it has been natural to introduce new management paradigms from top to bottom of the management systems.

Need for speed and skills

Examples of this are, when private equity funds already during the acquisition process have made extensive fact analysis, so they up front can set the right board and management team to execute the strategic and operational tasks as defined for the ownership period. Or they turn from comparing oneself with the nearest competitors to world class benchmarking, and long democratic decision-making processes are replaced by short fact-based decision-making processes. Last but not least, their ability to handle large amounts of complexity under very tight deadlines.

With the right competencies on the board team, it is also natural and moreover fruitful, that boards engage more closely in management sparring and business development projects - of course with due regard to the principles and recommendations for good corporate governance.

The private equity approach drives both employee satisfaction and value

A lot has been said about the way capital funds conduct business, not everything just beautifully and there are probably many prejudices in between. However, over the years several essential managerial disciplines, with sound and legitimate purpose to accelerate change and create value have demonstrated proof of concept. Thus, we today do find research examples that private equity out beat the average ownership form on both employee satisfaction and value creation - for example with the Danish Venture Capital and Private Equity Association (Extract DVCA Annual Review 2016-2017). I would even argue, that this trend to some extent has travelled to other ownership forms like family owned, partner owned and some owner led SME:s, who have all seen the benefit of adopting an active and professional board.

Private equity may even drive a new leadership trend

Being a firm believer of the need to strike the right balance of management and leadership to accelerate change and value creation, I am happy to experience that the private equity sector now also seem to focus on excellence in ownership. Through my discussions with various private equity partners, it appears that they as any other businesses also from time to time experience that even the best plans fail due to lack of execution skills for which leadership is key. This even goes for the hyped world of digitization, where it’s not only about technology skills, but basically about customer driven leadership.

It is not enough to know “what” needs to be done, but also “how” and not least “why”, making the strong leadership a key table stake. Thus, a leadership advisor approach for the board team seems to be maturing as a supplement to their classical industry advisor approach.

Do you see examples of the same?

Would you agree that the private equity sector could play a key role in setting a new leadership trend, as they did with management?

Mads Middelboe

Executive Advisor & CEO

Leadmore ® 

Clear trend on board professionalization and competent teams

Private equity funds have long been at the forefront when it comes to professionalization and composition of board teams based on business challenges and competence needs, rather than classical networking relationships. With a typical exit horizon of 4-7 years and clear ambitions to maximize value creation during the ownership period, it has been natural to introduce new management paradigms from top to bottom of the management systems.

Need for speed and skills

Examples of this are, when private equity funds already during the acquisition process have made extensive fact analysis, so they up front can set the right board and management team to execute the strategic and operational tasks as defined for the ownership period. Or they turn from comparing oneself with the nearest competitors to world class benchmarking, and long democratic decision-making processes are replaced by short fact-based decision-making processes. Last but not least, their ability to handle large amounts of complexity under very tight deadlines.

With the right competencies on the board team, it is also natural and moreover fruitful, that boards engage more closely in management sparring and business development projects - of course with due regard to the principles and recommendations for good corporate governance.

The private equity approach drives both employee satisfaction and value

A lot has been said about the way capital funds conduct business, not everything just beautifully and there are probably many prejudices in between. However, over the years several essential managerial disciplines, with sound and legitimate purpose to accelerate change and create value have demonstrated proof of concept. Thus, we today do find research examples that private equity out beat the average ownership form on both employee satisfaction and value creation - for example with the Danish Venture Capital and Private Equity Association (Extract DVCA Annual Review 2016-2017). I would even argue, that this trend to some extent has travelled to other ownership forms like family owned, partner owned and some owner led SME:s, who have all seen the benefit of adopting an active and professional board.

Private equity may even drive a new leadership trend

Being a firm believer of the need to strike the right balance of management and leadership to accelerate change and value creation, I am happy to experience that the private equity sector now also seem to focus on excellence in ownership. Through my discussions with various private equity partners, it appears that they as any other businesses also from time to time experience that even the best plans fail due to lack of execution skills for which leadership is key. This even goes for the hyped world of digitization, where it’s not only about technology skills, but basically about customer driven leadership.

It is not enough to know “what” needs to be done, but also “how” and not least “why”, making the strong leadership a key table stake. Thus, a leadership advisor approach for the board team seems to be maturing as a supplement to their classical industry advisor approach.

Do you see examples of the same?

Would you agree that the private equity sector could play a key role in setting a new leadership trend, as they did with management?

Mads Middelboe

Executive Advisor & CEO

Leadmore®

Additional information