Insights from the Operating Partners (Virtual) Forum - September 2020
Top Takeaways from the Accordion (Virtual) Forum
On September 16th, exactly six months since “the day everything changed,” Accordion gathered an esteemed group of Operating Partners (OPs) for our 7th virtual forum – an outlet for exchanging advice and intel regarding the current state of the private equity industry.
In this latest installment, OPs discussed the various ways they reorganized their businesses—including the difficult decisions they made—in the wake of the pandemic. Unsurprisingly, those who engaged early and made substantive changes fared better amidst the downturn than those that did not. We asked OPs to share the specific actions they took to mitigate risk during the crisis, as well as what they’re doing to reach the “next normal” safely. These were some of the key themes and discussion points:
On Early Engagement
- Looking Back: One OP reflected on the early days of the pandemic, citing how he instantly engaged with certain portfolio companies to re-work their value creation plans. He also said that he spent—and continues to spend—more time with portfolio companies that are “flat” as opposed to companies that have already bottomed-out.
- Looking Forward: Another OP shared that her firm is going “back to the basics.” In other words, she’s focusing on investment theses, doubling down on value creation planning, and assessing overall market conditions to identify current gaps/opportunities to fill those gaps.
On Collective Collaboration
If COVID has unearthed one silver lining, it’s that traditionally tech-averse teams have discovered that collaboration via technology is not only possible: it’s productive. The value of collaborative decision-making was a key point in the discussion, as OPs shared the various ways they’re staying connected to management teams – while also providing CEOs with greater autonomy and authority.
“We’ve realized that engaging management teams early in the decision-making process is critical to the success of the entire portfolio. We started a virtual Q&A session back in March to bounce ideas off one another, challenge one another, and ensure decisions are being made methodically. This has provided everyone with a voice at the table…and in some sense, we feel more connected than ever.”
On Resource Allocation
Human capital is a scarce resource, and in today’s climate, it’s increasingly imperative for companies to understand:
- Where to deploy talent
- Whether talent is effective in their current role
One OP mentioned that they created a matrix across all portfolios to actively assess talent’s effectiveness, and then reallocate resources accordingly. Ultimately, the conversation shifted its focus to CEOs – specifically: the difference between “war time” and “peace time” CEOs, and the urgent need for both sets of capabilities.
“You might have a great ‘peace time’ CEO who struggles during times of crisis and is unable to face the challenge head-on. Understanding this early, and then making the hard decision, is critical to the success of the company. If a CEO isn’t cut-out for ‘war time’ you must act immediately. The problem won’t go away on its own.”
Another OP offered a different perspective:
“One way to turn a ‘peace time’ CEO into a ‘war time’ CEO is to make the numbers the common enemy, not the person – that way, you’re working together and helping the CEO fight.”
On Digital Transformation
As we inch towards returning to the workplace, many companies are planning a combination of remote and on-site working. This hybrid model would provide employees working from home with access to the same applications as they’d have on-site – yet, while potential benefits are substantial, mixing the two isn’t entirely straight forward. One OP said, “every company is trying to figure out what they can do now to ensure they’re ready for the future workplace.”
Another OP mentioned that they’re planning to use a “themed” approach:
“We’re putting companies in similar industries, or with similar profiles, into groups and identifying which company or industry would benefit the most from digital transformation – based on their experience during the pandemic.”
The common theme seemed to be that, collectively, all OPs have made digital transformation a top priority and are determining the best ways to make the transition as peaceful as possible across their portfolio companies. For many, digital transformation was on the docket before COVID, but now that timeframe has accelerated and there’s increased pressure for funding.