Attributes of PE-backed CEOs

Private equity cynics warn that CEOs taking on private equity investors run the risk of being replaced shortly after the investment. In reality, most private equity firms not only want to retain portfolio company CEOs, but they view the CEO as a key element in achieving success together. Their vision, leadership and command of the business are often the contributing factors to the company becoming an attractive investment opportunity.??

Unity Partners’ model not only prioritizes the importance of a company CEO, but views backing a strong, ambitious leader as the first prong of its strategy. Therefore, early conversations between Unity and any leadership team are designed to determine whether there is a shared vision for ‘building better together’ and the leadership qualities that will drive success. The following are four attributes that Unity looks for in a prospective platform leader:?

1-Communication?

We value CEOs that are focused on consistent, top-down communication, repeatedly and clearly articulating the mission and values of the organization, and reinforcing key goals. They must also recognize that doing this effectively requires a multi-channel effort, including regular town halls, employee email blasts, and other tools that distribute key messages throughout the organization. If executed correctly, the entire organization will be aligned around what is most important to the company, and each teammate will know their individual role in the company’s success.?

Early on in an investment, we partner with the CEO on articulating “the Why” of the organization, where we identify the shared mission and values. From there, we establish ambitious short and long-term plans that align with and reinforce “the Why” through goal setting and tracking toward those goals, which are shared throughout the organization.?

Employees’ takeaway from this should not be just “work hard so we hit our numbers.” It’s critical that employees understand how individual and team efforts come together, and that success is a shared responsibility.?

When executed correctly, CEO communication creates a healthy loop where employees give feedback that increases awareness of where and how the business is growing and how they are making an impact.?

2-Transparency?

Executive communication must be more than celebrating the good while de-emphasizing the bad. Cheerleader is one role of a CEO, but without hearing about the challenges the business faces, employees will grow confused and distrustful. We’ve all been in situations where employees know something’s not right because of what management does or doesn’t say.?

Once the goals are communicated, CEOs must be transparent with employees and investors about how the company is performing on a regular basis using quantitative data on KPIs, along with the proper context of their importance. This will give employees clarity and confidence—even when the results are not where they need to be, as long as a plan for improvement comes close behind.?

True transparency can be further achieved by proactively soliciting input from employees via surveys, roundtable events and other touchpoints. These help everyone develop a useful understanding of how goals and KPIs are being executed against and any disconnects among the team. It also helps ensure employees remain engaged and focused on their role in driving results.?

3-Accountability?

Top CEOs track high on the accountability scale, and they build this accountability into their organizations across leaders, business units and teams. It’s important that accountability not be confused with achievement, because organizations with a strong sense of accountability are more likely to rally around ambitious, “stretch” goals.?

We find CEOs who embrace this approach—while remaining accountable themselves—can clearly articulate the reason that any goals are not being met, and point to solutions that will help improve the future outcomes.?

4-Ambition?

As mentioned, an essential prong of Unity’s strategy is to back an ambitious leader. Evaluating a CEO’s professional ambition is an imperfect science, but is critical for understanding the potential of partnering. We look for leaders who have built successful businesses but have their sights set even higher on goals that are more likely achieved with a partner.?

Our first platform CEO led our initial meeting by saying “we’ve worked our way to $10 million in revenue, but we see a path to $100 million.” That is the kind of ambition we want to hear.?

We’re very intentional in the first meeting, engaging in a “Building Better Together” discussion while beginning work on a shared growth plan. We walk through how our team will drive value acceleration as we scale, and we look for signals that the leadership team is leaning in and energized by the prospect of the growth and effort that comes with it. This process tends to weed out founders/CEOs who are primarily interested in an exit, and not looking to lead the next leg of growth.?

These four qualities have historically driven successful outcomes for CEOs and their organizations looking to achieve ambitious goals. For any CEO considering partnering with private equity, it is important to from the outset establish whether their leadership attributes and goals align with that of their prospective investor.??