If you’re in private equity and serve as the Board representative of your investors, you help select and oversee the top management of your portfolio companies.
Is that oversight as smooth and efficient as you would like?
CEOs for portfolio companies need to handle the unexpected
When you pick a CEO, you need someone who can handle well both the expected and the unexpected.
- The expected. You want someone who can execute your investment thesis. So you'll check their track record to see that they've done the needed tasks before. You'll rely on your own due diligence or get help from your search firm or even an outside interviewer or an evaluator.
- The unexpected. The future is never what we expect. You need to know "how will the candidate respond when the future presents something unexpected."
What to expect when it's unexpected
Predicting what highly skilled people will do with the unexpected is Leslie S. Pratch's life's work. She helps private equity investors understand who are active copers. Active coping is being able—emotionally, intellectually, and behaviorally—to successfully confront unforeseen challenges and successfully capitalize on emergent opportunities. For most people, it's not something you can tell much from their business track record. Identifying it takes a different approach.
How you can proceed
Looks Good on Paper? (Columbia University Press, 2014) outlines Leslie Pratch's approach, and private equity investors use it to identify CEOs who can lead through turbulence and seize upside opportunities.
- You can learn more in the coming months.
- You can talk to Leslie, whose ultimate goal is to apply what she knows to make you more successful.
- She wants to reduce the time and energy you spend on overseeing your portfolio companies, and give you more time to raise money and find deals, and at the same time
- To improve the performance and ROI of your portfolio companies.
