The 10 commandments for successfully hiring portfolio company executives

1. Expert Commentary PE Manager | MAY 2012 | Issue 93
PORTFOLIO EXECUTIVES
Star search
The 10 commandments for successfully hiring portfolio company executives is unveiled by Morgan
Samuels partner Struan Scott
“I don’t know if the CEO is going to Others have hired former senior retained
make it. I am going to give her a few search professionals. And some firms
more months to turn it around.” have a COO skilled in HR who works
closely with portfolio companies. Best
“For one of my portfolio companies, I in class firms leverage this HR expert
have had to change the CEO three times to lift the performance of the executives
in five years; company performance is and HR leads within the portfolio
significantly lagging expectations.” companies. Best practices will often
be shared across companies informally
“The CEO was a disastrous hire. He was or through regularly scheduled events.
a terrible culture fit; we didn’t do a good They also drive improved performance
job of assessing him.” through better organisational design,
compensation, executive coaching,
I hear similar horror stories from private hiring, etc.
equity professionals on a weekly basis. Scott: a seeker of ‘rock star’ calibre talent
Fortunately the solution to these issues 2. Before you launch a search
is easy. Private equity firms need to for an executive, develop a clear
view hiring as a deliberate, strategic, understanding of the critical use the key drivers of success to accelerate
and rigorous process. This will enable drivers of success a quick start and monitor progress.
firms to hire “rock stars” who will Determine which sort of leader is
drive phenomenal portfolio company appropriate for this stage of your 3. Ensure all key stakeholders
performance. business. For example, for a turnaround agree on the key drivers of success
a command and control style might be Sponsors as well as key levels of
Consider the following 10 commandments to more appropriate than an empowerment management should agree what a great
achieve human capital success: leadership style. candidate will look like before you
What is unique about your culture? start your search. This is particularly
1. Hire a senior resource What sort of executive will be effective? important for club deals.
dedicated to human capital What sort of person will be motivated
issues. GPs embrace creating to tough out the hard times? 4. Develop a system to track
centres of excellence for IT and Develop key metric driven objectives the performance of each senior
Procurement. The same should that the hired candidate will need level search conducted at every
apply for HR to achieve in the next 24 months. portfolio company and adjust
Human Resources isn’t as easy as it Understand that just because a candidate your hiring strategies accordingly
sounds. Often portfolio companies do not has delivered similar objectives in the past I recently spoke with two of the largest
have the resources to hire and develop does not mean they will be successful at private equity firms about their approach.
world class HR talent. Some private your company – leadership acumen and One tracks the type of search and the fee
equity firms have hired former Fortune cultural fit are crucial. charged and they are noticing they have
500 chief human resources officers. When you have hired your candidate, been awarding searches to a recruiting
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2. Expert Commentary
firm that charges the lowest price even Many search firms will take your the key objectives for the role. If
though the performance of the executives position description, tell you they you don’t like the plan, don’t hire
placed has been terrible. Another has know what you need, disappear them
been tracking the number of searches for months, return with some
each recruiting firm has done and they candidates, and tell you to pick one. 8. Be thoughtful about references
have been awarding searches based • Do they truly conduct original Combine references provided by the
on the number of searches previously research? Some will tout their large candidate with “blind” references. Ensure
awarded even though the performance database and research capabilities the people providing the references
of the executives hired has been woeful. only to end up just recycling understand the key objectives for the
resumes. role and the company culture. Talk to
5. Avoid getting burned by • How do they attract candidates? supervisors, peers, reports, clients, etc.
retained search firms. Key Don’t just go off the perceived status
questions to consider: of the firm’s brand. 9. Continue to assess your finalist.
• Does the firm show you their • Can they demonstrate a combination Be wary if your finalist demonstrates
most senior partners and “bait and of science, art, and resources in their high ego needs. Pay attention to how they
switch” with junior resources? approach to assessment? What are negotiate their offer. If they are selfish
• Does the search firm view this their assessment strategies? Don’t and overly demanding, you should walk
search as importantly as you do? rely on people who say “Trust me away.
• What is the firm’s closure rate? – I have been interviewing for 30
Some of the best known search years.” 10. Don’t underestimate the
firms only successfully close around importance of executive coaching.
80 percent of their searches. 6. Be thoughtful and strategic A private equity human capital-focused
• How quickly do they close searches? about how you interview operating partner recently shared
• What other private equity firms candidates. “Gut feel” doesn’t that the COO at one of his portfolio
have they worked for? Reach out usually work companies performed very poorly for
directly to these other firms for Craft behavioral interview questions to the first year. The COO overanalysed
validation of value provided by the understand: everything and couldn’t make a decision.
search firm. • How the candidate will meet key The operating partner started coaching
• Does the firm offer flexible pricing objectives for the role the COO. He also guided the CEO on
based on their and/or the executive’s • Cultural fit the best way to manage the COO and
performance? • Track record and how it was in a few months the COO became an
• Do they listen? What is their achieved (e.g. have they always had exceptional performer.
process for understanding your a strong brand name and resources If you use the same level of rigour
portfolio company’s strategic to help them) in hiring as you do when purchasing
business objectives and culture? • Motivation companies, your hiring success can
• Potential derailers (e.g. pressure only improve. The right human capital
from family and friends not to strategy can be the difference between
relocate) a fair return on investment and an
Be wary if your Create a feedback process – once the exceptional one. n
finalist demonstrates candidate has been hired, look over your
high ego needs…If they notes to see trends in how good and bad Struan Scott leads the private equity practice
hires answer questions. at Morgan Samuels, a human capital
are selfish and consulting firm focused on retained executive
overly demanding, you 7. Ask your finalist to present search. Struan can be reached at sscott@
should walk away their plan for how they will meet morgansamuels.com
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