CEO Hiring at Top Private Equity Firms: Skillset Prospects
The average tenure of a CEO at an S&P firm is about 10 yrs, which is in high contrast to the average tenure of a CEO at a PE firm. Private equity firms, at a time, holds investments in multiple private companies, and after every single investment, they usually replace the CEO. As opposed to publicly traded companies, PE firms appoint more than one C-suite leaders in a year.
How the Hiring Process for CEOs is Approached?
Focus is less converged to work experience and track records, and more on proficiency in soft skills. Especially, in the US private equity firms, the CEOs play a critical role in the revenue-building and profitability aspects, which are vital to the existence of the concerned PE firm in the first place.
A bad selection in terms of an executive in a C-suite can cause irreparable harm to the private equity firm in question in the long-term. And therefore, a very cautious approach is taken in the shortlisting and selection of a PE firm CEO.
Hiring Factors That Weigh the Most for a PE Firm CEO
Experienced Candidates from Blue-Chip Business Schools are Overrated
When hiring an individual for as crucial a job position as a CEO, it would be easy to hire in a traditional manner, that involves selecting a professional having years of experience behind him working at a C-suite level for some other firm in a similar industry. But, that would be considered a safe choice, which will bring you average results in terms of growth and profitability.
Further, the said approach will narrow down your executive-search to an extent, from where there will exist a very few choices that will conform to the highly stringent and orthodox qualifying criteria set by you.
Private Equity Professionals with an Unconventional Background are Making the Mark: A number of interviewees have stated that over the last decade, private equity professionals that have been hired as ‘CEOs’ at the top US private equity firms have come from completely non-traditional backgrounds. These are the individuals not possessing a business degree from a top-tier business school, and not even progressed in their respective careers in a linear fashion.
One of the PE recruitment executives said – “We are seeking someone in the said position of repute, who can pick things up quickly when being introduced in a new situation, or business environment. The adaptability factor, and the skillset, play the most prolific roles in the process.”
Team-Builders are Preferred over Those that Boast about Self Achievements
The highest-ranked attribute in the present times in the shortlisting and selection of a CEO candidate is the individual’s ability to gather a high-performing team. The reason being, most of the private equity investments demanding turnarounds, that require the new CEO to build a completely new C-suite team each time an investment is being made.
Also, noteworthy is that PE portfolio firms are significantly small in size compared to publicly traded organizations, and hence, the CEO’s role becomes even more crucial in deciding the fate of the business.
Overly Empathetic Leaders Simply Cannot Make the Cut
A private equity career as a C-suite executive requires you to sometimes steer away from being empathetic when the duty calls you to take some tough decisions in times of urgency. The history demonstrates clearly that some of the most empathetic leaders in the PE domain, while having all the requisite private equity qualifications under their belt, have underperformed, given that they were not being able to make tough personnel decisions when required.
I hope the article has provided you with much-needed insights into the selection criteria for C-suite executives in the PE domain.