The Key to Private Equity CEO Speed

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HIGHLIGHTS

Speed of execution is arguably the most-prized CEO trait in the eyes of private equity firms.


Too many private equity CEOs don’t move quickly enough.


A dose of self-awareness and a simple formula for pace.


SPEED OF EXECUTION

All CEOs believe they move fast and yet many are caught flat-footed when joining a PE-backed company due to the breakneck pace of most sponsors. In my experience, there are two primary reasons why CEOs don’t move as quickly as they should.

  1. Fear of Failure – All CEOs deal with fear of failure.  Some leverage it to their advantage by using it as a source of motivation.  However, many CEOs use fear of failure as a reason to postpone important initiatives and to generally procrastinate more than they should.  CEOs shouldembrace the fear as part of relentless exeuction against the investment thesis.
  2. Need for Too Much Data – Many CEOs need too much information before making a decision.  These data-centric leaders will seek 90-95% of the available information before making a call.  This mode is indicative of the slow lane and private equity runs on the autobahn. Decisive leadership is key in private equity.  And while data and analysis matter, the best CEOs operate with +/-80% of the information and replace the remaining 20% with judgment, instinct and experience.  Waiting for 90/95+% of the information will undermine a decisive culture and contribute to a relatively sluggish management team dynamic.  Moreover, the incremental 10-15% (above 80%) comes that much more slowly resulting in exponentially slower execution compared to best-in-class leaders.  Hold periods are finite.  4-5 years.  Urgency is a premium.

A RECIPE FOR SPEED

The best private equity CEOs move at a top-of-market pace by using the 80% guideline while employing three key complementary perspectives:

  1. Be open to and proactively seek counsel from the Board.  Many CEOs lack the self-esteem and relative vulnerability to admit they need help to be at their best.  Great CEOs understand the power of the ‘wisdom of the team’ and leverage their Boards accordingly.
  2. Embrace a “fail fast” culture.  Occasional failure is inevitable for a portfolio company CEO.  The key is to fail fast, recognize mistakes quickly, course correct and keep driving forward at light speed.  CEOs would be wise to mitigate their fear of failure by embracing the power of failing fast.  Embrace micro failures to avoid macro failure!
  3. CEOs need to insure the their speed strengthens the company’s culture.  Some urgent CEOs move at a blind pace without the realization of the cultural damage they may be inflicting on a portfolio company’s culture.  Over time, this behavior will almost certainly lead to the CEO’s derailment.

CONCLUSION

Speed kills for private equity CEOs.  The presence of speed can kill the competition and deliver a winning outcome for all stakeholders.  The absence of speed can kill a deal’s momentum, suppress returns and result in a CEO’s dismissal.  Whatever a CEO’s approach, each should adopt a model or mantra that fuels incredile pace as part of a winning, comprehensive leadership approach.

ABOUT ROB HUXTABLE

Rob is a recognized expert on the topic of private equity CEO performance.  He is Founder & Principal of PrivateEquityCEO.com.  He is also Managing Partner of Integis which is the nation’s leading search firm focused exclusively on the private equity-backed, middle market.

Written by Rob Huxtable

Rob is a recognized expert on the topic of private equity CEO performance and recruitment. He is Founder & Principal of PrivateEquityCEO.com. He is also Managing Partner of Integis which is the nation’s leading search firm focused exclusively on the private equity-backed, middle market.

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