How investing in leadership calms private equity turbulence
Mark Wright
Leadership consultant, bespoke learning designer, business team coach, keynote speaker. Helping leaders create high performance cultures that they can be proud of.
For businesses acquired by private equity, the transformation process is both an exciting opportunity and source of deep turbulence. Teams will face significant shifts in priorities, pressure to deliver quick results, and uncertainty about the future. Amid these challenges, senior leaders play a decisive role in shaping a confident, high-performing culture that not only embraces change but turns it into fuel for growth.
In this article I want to share our insights about the opportunities for private equity companies to leverage leadership in pursuit of their objectives.
“The capability of management to drive growth and deliver operational effectiveness has become a much more important part of the value creation equation”
Bridging the Disconnect: A Leadership Imperative
One of the greatest struggles post-acquisition is the disconnect between the goals of the private equity firm and the reality on the ground. Acquired companies can feel as though they are caught between two worlds—executing rapid changes to meet investor expectations while maintaining day-to-day operations. Strong, confident leadership is critical here. The senior leadership team must not only execute the strategic vision but also act as translators, helping their teams understand the “why” behind the changes and giving them the confidence to navigate uncertainty.
Leadership teams that focus solely on operational metrics often miss invisible behavioural value drains such as low morale, increased turnover, and disengagement, all of which silently erode performance. Research suggests that companies undergoing transformation can see productivity drops of up to 40% if cultural and behavioural issues aren’t addressed. Senior leaders must proactively foster a culture of transparency and alignment to minimise friction and build trust across the organisation.
“Private equity firms have a responsibility to drive not just financial growth but long-term, sustainable value creation. This means investing in leadership development and culture to unlock innovation and resilience within their portfolio companies.”
Cascading a Culture of Confidence
Successful transformations are led by senior teams who create a “cascade of confidence.” These leaders model the behaviours, attitudes, and commitment they wish to see throughout the organisation. This approach extends beyond setting high-level goals; it involves consistent communication, visible leadership, and ensuring that middle management is aligned with the same vision.
Studies clearly show the power of leadership confidence: when leaders demonstrate clarity and determination, it creates a ripple effect that stabilises teams and reduces uncertainty.
According to a McKinsey study discussing transformation efforts, 70% of transformational initiatives fail primarily due to a lack of employee engagement. In their report, they attribute the high failure rate to several factors, including insufficient employee buy-in, inadequate leadership aspiration, and a lack of clear communication about the need for change. When leadership teams fail to engage employees at all levels, it significantly impacts the success of transformations.
Our experience highlights eight hidden value constraints within organisations, which we call the Leadership Loopholes. These include behavioural paralysis, inadvertent blundering, and cultural selfishness – each contributing to lost potential and organisational dysfunction. These loopholes arise when leadership fails to address behavioural and cultural dynamics, resulting in a loss of focus, energy, and collaboration, which ultimately undermines business performance.
By contrast, when leaders communicate openly about the challenges and opportunities ahead, they create trust. A survey by Gallup found that companies with highly engaged employees report 21% higher profitability and 17% more productive than those with disengaged teams. And ultimately, employees are much more likely to engage fully when they see their leaders acting decisively and communicating openly.
Addressing Resistance and Building Resilience
Transformation usually triggers explicit or subtle resistance, whether from middle management uncertain of their roles or long-standing employees reluctant to adopt new ways of working. If left unaddressed, these blockers drain value and delay progress. Senior leadership needs to anticipate these resistance points and develop strategies to overcome them, whether through targeted communication, leadership development, or cultural realignment.
Leadership’s ability to shift the narrative from fear to opportunity is a key factor in overcoming resistance. By emphasising the opportunities transformation brings, rather than solely focusing on cost-cutting or efficiencies, leaders can cultivate an environment in which change is seen as a path to growth. Moreover, building resilience within teams ensures they can adapt to ongoing changes and remain engaged throughout the transformation process.
“Private equity firms have a unique opportunity to create growth in innovative ways by combining financial restructuring with leadership and culture-building. This holistic approach transforms acquisitions into long-term value-creation engines.”
Case Study: Apex Tech vs Omega Manufacturing
Leadership Makes (or Breaks) the Deal
To illustrate how leadership impacts transformation in private equity-backed companies, consider the cases of Apex Tech and Omega Manufacturing (not their real names).
Apex Tech is a well established, UK-based IT security company acquired by a leading private equity firm. Its aim was to boost the company’s revenue through operational efficiency and international expansion. However, the leadership team at Apex, and their private equity partners, recognised that transformation was not just about structural changes. They knew that without attention to culture and employee engagement, any operational improvements would be short-lived.
The leadership team engaged us an external consultancy because of our experience and expertise in organisational transformation and leadership development. We introduced a series of tailored development programmes that equipped senior executives and middle managers with the skills to lead through uncertainty. Senior leaders held open and regular town halls to ensure that employees understood the strategic vision and felt engaged in the company’s future.
We also helped Apex’s senior leaders conduct cultural assessments to ensure alignment between the PE firm’s objectives and the company’s values. They implemented measures to foster transparency, communication, and engagement at all levels of the organisation.
Within the first year, Apex Tech saw a significant improvement in employee engagement, with 86% of employees reporting that they felt confident in the company’s direction. Productivity increased by 23%, and the company achieved its growth targets four months ahead of schedule. Employee turnover dropped by 8%, and the company’s financial performance improved significantly as a result of better alignment between its people and strategic goals.
Omega Manufacturing, a well established industrial fabricator, faced a different outcome. After its acquisition by a global PE firm, Omega’s leadership team focused heavily on operational targets, but failed to address the broader cultural and behavioural issues that arose. The PE firm installed a new CEO with a strong financial background but limited experience in handling transformational change within an industrial setting. Senior leadership continued to focus on hitting performance metrics but paid little attention to employee engagement or cultural integration.
The lack of communication from Omega’s senior leaders led to widespread confusion and anxiety. Managers were unclear about their new roles, and employees felt disconnected from the company’s direction. Within six months, Omega experienced a 27% turnover in senior management. Morale plummeted, and productivity fell by 18%. The anticipated operational improvements never materialised, and the company struggled to meet the private equity firm’s performance expectations.
The stark contrast between Apex Tech and Omega Manufacturing highlights the importance of leadership and cultural alignment in driving successful transformation. Apex Tech’s focus on leadership development, transparency, and communication enabled the company to thrive, while Omega’s neglect of these critical factors led to disruption and underperformance.
Two Theories of Organisational Transformation
Organisational transformation requires not only a robust strategy but also a thoughtful, structured approach grounded in behavioural psychology and culture. Two key models that provide insight into why leadership and culture are essential during transformation are Edgar Schein’s Organisational Culture model and William Bridges’ Transition model.
Edgar Schein’s Organisational Culture Model
Schein’s model views organisational culture as a multi-layered construct encompassing evidence (artefacts, visible organisational structures and processes), intentions (espoused values, stated strategies, goals, and philosophies), and assumptions (unconscious beliefs, perceptions, and feelings). Schein asserts that true transformation can only occur when leadership addresses these deeper layers of culture, particularly the underlying assumptions that may drive resistance to change.
In the case of private equity acquisitions, leadership must recognise that the existing culture of the acquired company may not always align with the PE firm’s goals. To bridge this gap, senior leaders must engage with these deeper layers of culture, identifying and addressing unconscious assumptions that may be limiting the company’s ability to adapt. Apex Tech’sapproach demonstrates the importance of this cultural alignment, while Omega Manufacturing’sfailure illustrates the risks of neglecting it.
Schein’s model also underscores the need for leadership to align both their leadership style and the cultural values of the organisation. By doing so, companies can ensure that strategic initiatives are supported by a healthy and aligned culture, maximising their chances of success.
William Bridges’ Transition Model
While Schein’s model focuses on organisational culture, William Bridges’ Transition model explains the human side of change. Bridges distinguishes between change (an external event) and transition (the internal psychological process people undergo as they adjust to a new reality). This distinction is crucial, as many leaders focus on the structural elements of change—such as new roles, procedures, or strategies—without addressing the emotional and psychological transition their employees experience.
Bridges identifies three stages of transition:
For private equity-backed companies, senior leadership plays a vital role in guiding teams through these stages. Apex Tech’s leadership team, through structured communication and developmental support, successfully helped their employees navigate these transition stages. In contrast, Omega Manufacturing’s leadership failed to address the human element of change, leaving employees stuck in the neutral zone, unsure of how to proceed.
Bridges’ model reinforces the importance of understanding the emotional journey employees undergo during periods of change. Leaders who provide clear guidance and support through these stages are far more likely to succeed in their transformation efforts.
The Expertise that Supports Leadership and Cultural Transformation
Engaging professional experts, such as ourselves, to guide the behavioural and cultural aspects of transformation is as crucial as consulting financial or operational specialists during significant organisational shifts.?
As?behavioural strategists?and?leadership development experts?with strong experience working in PE-back environments in a wide range of international businesses, we provide the psychological and cultural insight necessary to drive meaningful, sustainable change. Our professional insights and structured support ensure that transformations not only address the “structural” factors like systems and processes but also the deeper, “meaningful” elements, such as employee engagement, motivation, and cultural alignment.?
As with any form of support, this expertise is vital for preventing invisible value drains like low morale and disengagement, which can undermine even the most well-structured change initiatives.
Both Schein’s and Bridges’ frameworks highlight the importance of a structured, psychology-based approach to transformation. Given the complexities of organisational change, external professional expertise is invaluable.
By integrating both the technical aspects of transformation with a structured approach to human behaviour and culture, private equity firms are turning the potential disruptions of transformation into sustainable, long-term growth. Leadership and culture are not secondary to financial strategy—they are central to it.
“In private equity, behavioural value creation is the new frontier.
Behavioural Value Creation: The New Frontier
While financial restructuring and operational optimisation remain central to private equity success, behavioural factors—such as how leaders engage with their teams, manage uncertainty, and foster collaboration—can be just as impactful in driving growth. Addressing these subtle elements of leadership enables businesses to not only survive the turbulence of transformation but also to thrive in the process.
For acquired companies, senior leadership is the linchpin in managing the delicate balance between financial goals and cultural needs. By cultivating a leadership culture that addresses both strategic goals and behavioural requirements, businesses can transform the potential disruptions of transformation into sustainable, long-term growth.
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