Finding the right executives for private equity portfolio companies is a critical challenge. It affects the returns investors see. It affects how much sleep you get at night.
The European Financial Review recently published an article about how to select the leader you want instead of the merely experienced. It starts like this (and you can continue reading if you'd like):
Effective leaders must meet challenges and resolve them productively, day after day, for many years. They must constantly adapt to the unforeseen—and must mobilize, coordinate, and direct others. But when hiring executives, how do you know which candidates possess such qualities? When they all look good on paper, how do you make a choice? Given the frequency of CEO turnover, and the frequent cases of CEO failure after long, successful careers in the same place where they became CEO (e.g., Jeffrey Immelt at GE, David Pottruck at Schwab, Doug Ivester at Coke), it's apparently not that easy. But it can be done, by including an analysis of executives’ readiness to acquire new skills and strategies for coping with complexity and change – in other words, their active coping.
Active Coping is a Style of Approaching Life, Baked into Who you Are
How a person approaches life's challenges develops as a result of nature and nurture. Some people run from problems, some lash out at others, and some passionately wait and hope that problems (or even opportunities) will just go away.
Active copers, by contrast, are built to be capable and eager to deal with whatever obstacles and opportunities they face. Active coping is being ready and able to adapt creatively and effectively to challenge and change. Active copers continually strive to achieve personal aims and overcome difficulties, rather than passively retreat from or be overwhelmed by frustration. They move towards the problems and opportunities with open hearts and open minds.
In business, unexpected events occur, for which no playbook has been written. Active copers do not lose their footing in such cases, but rather thrive on the opportunity to seek out information about what is happening, rally the right team, and learn as part of the process of steering towards success.
Leaders with other personalities and styles may do as well in circumstances that can be predicted in advance, but active copers are the best people to have in place when the unexpected occurs. Continue reading…
I’ll continue writing about how to find top leaders for your portfolio companies and whether there are some elements you might want to add. You'll do better with a higher percentage of "active copers" on your team.
Leslie S. Pratch
Leslie Pratch is the founder and CEO of Pratch & Company. A clinical psychologist and MBA she advises private equity investors and management committees and Boards of Directors of public and privately held companies identify whether the executives being considered to lead companies possess the psychological resources and personality strengths needed to succeed.
Pratch & Company offers two services. It provides executive assessments to predict performance among already highly accomplished candidates for senior executive roles. Pratch’s Active Coping AssessmentSM System has a success rate in excess of 98% in predicting performance outcomes, based on ratings of clients in a position to evaluate executive's performance over the course of many years. It evolves from research that Leslie Pratch led at The University of Chicago Booth School of Business. Pratch & Company also offers human capital advisory services, to ensure that portfolio company executives are performing their function in the value creation plan and to coach and mentor up-and-coming executives.
Leslie’s book Looks Good on Paper?: Using In-Depth Personality Assessments to Predict Leadership Performance (Columbia University Press; 2014 shares insights from more than twenty years of executive evaluations and offers an empirically based approach to identify executives who will be effective within organizations—and to flag those who will ultimately very likely fail—by evaluating aspects of personality and character that are hidden beneath the surface. Central to effective leadership is a psychological quality called “active coping,” which she defines and explores in the book by referencing case studies, historical figures, and her own scholarly work. In this blog, she discusses among other topics, the relevance of active coping to CEO performance.
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