Permanent Equity

If you are an undergrad or MBA interested in the future of private capital, and the potential for innovative design around this work, the Olin Business School - WashU case competition is for you. What design choices are key in the context of the deployment of private capital over an extended time horizon? Are there new approaches that get around some of the challenges of a traditional private equity model? Are there win-wins in value creation and capture, or is value for one group always at the expense of the other? I am grateful for the input on the case design from the team at?Permanent Equity?(Brent Beshore),?Broadview Group Holdings, LLC?(Heath Hunter ,?Clay Hunter), and?Washington University Investment Management Company?(Adam Kurkiewicz,?Scott Wilson). So much insight was garnered as well in the Brookings project -- data that will inform the relevant recommendations. I am especially grateful for the insightful comments from Lynn Gorguze, Brendan Ballou, and Aaron "Ronnie" Chatterji on the challenges and design opportunities in the investment landscape. I hope you will consider joining us... sign-ups are this month, and the finalists will convene in St. Louis in February!

I wrote?last week?about our plans at Permanent Equity to try to shed some light on succession planning in order to do it better ourselves. In fact, we’ve also made this a priority for our newly minted company boards, so it was a topic of discussion at our recent Operators Summit, where we hosted all of our portfolio company CEOs here in Columbia, Missouri, for a couple of days of discussion and fun. Unbeknownst to me, our operating team had already begun working diligently on this topic and circulated to our CEOs a questionnaire that they would like filled out and then kept up to date so in the event of emergency, there was documentation in place to inform what we might do in the event succession was necessary. In the interest of open sourcing our way to better business outcomes, this is what we wanted to know: 1. Where am I key? 2. What is my influence? 3. How ready is my team? An interesting nuance that came up in the course of discussing how to answer these questions was whether this should be more of an “in an emergency break glass” document or a long-term oriented transition thought piece. Our hopeful answer to that was “Well, can it be both?” Of course, you usually can’t optimize for the short- and long-term simultaneously, but since problems can arise at any time, it’s helpful to be able to pivot at any time. Time will tell if documenting the answers to those questions will enable us to do that with our portfolio companies, but I certainly believe this is a case where something is better than nothing. I’m also interested to see the answers that come back. One of my suspicions about succession planning is that a reason it often doesn’t go so well is that successful CEOs may not be able to communicate why what they do works so well. When I was talking about that fact with?Ryan, one of our operating partners, he equated it to trying to recreate one of your mother-in-law’s famous recipes. While she may pass along the ingredients and instructions, it never comes out quite the same, does it?

A topic we’ve been talking about a lot at Permanent Equity recently is succession, both for ourselves and our portfolio companies. Because if we’re going to?have 27-year funds, we need to be prepared for unfortunate events to happen (and, yes, even more unfortunate than me?pulling my hammie). In fact, we’ve already had to implement succession plans at a handful of our portfolio companies, but to be candid the results have been mixed. And certainly mixed enough to say that we don’t have a foolproof approach to succession planning. That said, I don’t think anyone does. I was reminded of this over the summer when Starbucks?fired?the fourth hand picked successor to?3x Starbucks CEO?Howard Schultz. This was a guy who had trained under Schultz directly for six months and ostensibly knew what he was getting into. And then again when The Walt Disney Company announced a new head to its?succession planning committee?after they did such a good job picking Bob Iger’s replacement last time? Because if multi billion-dollar companies like Starbucks and Disney can’t get this stuff right, what hope do any of us have? Trying to answer that question is going to be a focus of our content efforts here at Permanent Equity now through the end of the year. Not only do we enjoy exploring topics we haven’t yet solved, but I have a particular soft spot for areas where supposed expertise seems to yield worse results than randomness (and, yes, a person off the street might have fared better than Orin Smith, Jim Donald, Kevin Johnson, Laxman Narasimhan, and Bob Chapek). Further, in reviewing the literature to date, it seems that everyone agrees that succession planning is a must-do, but few agree on how to do it. My hope is that an outcome of this work is clear thinking about what a succession plan should be and who should be in charge of making it. For example, Warren Buffett of Berkshire Hathaway made famous the idea that he had a name (or names) in an envelope that in the case of his death or incapacitation should be opened. But is that enough of a plan and is Buffett the right person to pick his successor? Perhaps one of the reasons Schultz’s successors failed at Starbucks is because they were chosen by Schultz because it may be the case that the very traits that make one a fantastic CEO also make one a terrible succession planner. Further, what if succession plans are overreaching by recommending who the successor should be and instead should just identify what a successor needs to do? While potentially less actionable, limiting the scope that way would also make a succession plan potentially less bad. Because if you have a plan, unless you’re vigilant with metrics, it can take a long time to that that plan was actually a bad one – a fact that trips us up from time to time Anyway, lots of questions, fewer answers, but a topic we’re aiming to shed some light on. And, of course, I/we would love to hear your thoughts.

We're loving requests for additions to the PE Operator's Dictionary. This one for "accountability" from Tom Godin ... Keep them coming! Find the full resource here: https://lnkd.in/e3AwZSzc #accountability #smallbusiness #smallbiz #operatorsdictionary #permanentequity

The PE Operator's Dictionary is live today! We've collected the definitions we've been dropping all summer into our indispensable guide to the terms, ideas, and phrases we use on the daily – and what we really mean when we do. Check it out here: https://lnkd.in/e3AwZSzc #operatorsdictionary #management #culture #smallbusiness #smallbiz #permanentequity

"For most people excellent at what they do, principal is the right route." These definitions are from our guide to terms/ideas/phrases, annotation c/o the PE Ops Desk. #principal #individualcontributor #operatorsdictionary #smallbusiness #smallbiz #permanentequity

The Operator's Dictionary is fundamentally about people management. But what does it mean to have a "people management philosophy"? (Full resource drops tomorrow!) #management #peoplemanagement #operatorsdictionary #smallbusiness #smallbiz #permanentequity

A job is a node on the line of a career... – The PE Operator's Dictionary, terms and phrases we find ourselves using over and over – with annotation and spice c/o the PE Ops Team. #job #career #operatorsdictionary #smallbusiness #smallbiz #permanentequity

On incentives... ...and the alignment thereof. – annotations for our Operator's Dictionary c/o the PE Ops Desk (Psst! The full dictionary drops tomorrow!) #incentives #goals #culture #operatorsdictionary #smallbiz #smallbusiness #permanentequity

Clear direction need priorities that are ranked and weighted. – The PE Operator's Dictionary #roadmap #priorities #communication #operatorsdictionary #smallbusiness #smallbiz #permanentequity