Executive Coaching Needs Are Different For A Private Equity-Backed Business
While executive coaches often provide counsel to portfolio company management, not all coaches are skilled in navigating the complex world of Private Equity.
Originally published in Forbes, March 2023.
Private equity (PE) firms invest in companies across a multitude of sectors, so the consultants and advisors they engage with must deeply understand a wide range of industries. It also means they must acknowledge the unique contextual realities organizations face when taking on institutional capital—many for the first time.
While executive coaches often provide counsel to portfolio company (portco) leaders, not all coaches are well-versed in this complex world. What’s more, few PE firms or portco leaders have the ability to, at least initially, differentiate between merely adequate and excellent, strategic, value-creating advice and coaching.
Chris “Mitch” Mitchell
This article is the first in a series about the unique human capital needs and opportunities facing PE investors and their investments. It will highlight how coaching and advising in the private equity context are quite different, largely because of people-related challenges that often go unnoticed or unaddressed.
Investing Is A Highly Charged Moment
When private equity investors make their pitches, they often point out their ability to provide organizations with the support that creates value, meaning financial and operational support. However, most PE firms find it challenging to help their portcos manage human capital issues, which are typically enormously complex and time-consuming for leaders to solve. The irony is that the act of PE investment puts people issues front and center at a very intense and highly charged moment.
In acquiring organizations, PE firms and their operating partners automatically upend internal status quos and power dynamics, which brings individuals’ fears, egos and other differences to the surface. Without meaning to, firms can become an intimidating presence met with mistrust.
The resulting “us versus them” dynamic prevents PE investors and management teams from achieving the alignment required to tap into organizations’ full potential. Instead, people issues fester under the surface, inevitably showing up as roadblocks to value-creation efforts. This generates high levels of frustration and distraction, meaning leaders can't focus on their investment theses. Ultimately, the investment suffers.
To meet this challenge, executive advisors and coaches who engage with PE clients must seek to recognize, understand and break down barriers between the investment's key players—general partners, operating partners, portfolio company leaders and the organization. By enhancing communications and building alignment, coaches can get these parties working metaphorically—and perhaps literally—from the same side of the conference room table.
The Dual Depth Of Understanding
In order for coaches to ensure they're delivering outsized returns on their work with private equity investors, both parties should understand what’s required to make such investments most successful. While this includes an ability to recognize and solve the PE-specific people issues that arise, other areas of knowledge and fine-tuned perspectives also become vital for value-creation efforts.
“Most PE firms find it challenging to help their portcos manage human capital issues, which are typically enormously complex and time-consuming. The irony is that the act of PE investment puts people issues front and center at a very intense and highly charged moment.”
For example, the most successful coaching engagements among PE-backed companies involve both advisors and clients whose view of executive leadership coaching extends beyond one-on-one sessions with the CEO. Coaching is viewed as a more holistic practice that can help build high-functioning professional relationships among a variety of stakeholders, ultimately serving to enhance an organization’s ability to accelerate its performance and meet and exceed ambitious goals.
Additionally, coaches and clients who understand the profound benefits of initiating work at the very beginning of PE acquisitions typically get the most value out of engagements. Their ability to prioritize and bring in coaches early—often pre-close—best ensures the leaders charged with driving organizational value at this key inflection point are working together as seamlessly and productively as possible.
When coaches and advisors work in close partnership with their PE clients and bring a deep understanding of private equity’s unique dynamics and contextualized best practices, they have every ability to repair strained professional relationships. Better yet, they can keep them from fraying in the first place. By convening the right conversations, they can recalibrate and/or preserve critical bonds between key parties, creating and maintaining the alignment required to accelerate value creation.
Next up in this series: coaching the private equity-backed company CEO.
Read this article as it originally appeared in Forbes here.
Chris “Mitch” Mitchell is a Principal at FMG Leading, a human capital strategy firm that helps clients build world-class organizations at the intersection of humanity and high performance. Mitch leads the firm’s Private Equity practice, partnering with investors, boards, and management teams to accelerate strategic growth and create value.