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Event Recap  |  05/05/2013  |  New York

Talent For Change Environment

Talent For Change Environment

  • It is obvious that sponsors are more proactive today than ever before when it comes to directing portfolio companies on the evaluation and assessment of leadership changes.
  • There is general agreement that a CFO is the C- level position most often replaced after an acquisition, mostly due to the changing requirements within the finance function.
  • Some believe that CFOs are heavily scrutinized, and even replaced 50- 100% of the time, because their institutional partners are finance professionals with high expectations for metrics, reporting and financial infrastructure.
  • Replacing a member of the leadership team takes time. A misfire when hiring a new member of management (or waiting too long to make a change) is often a mistake that takes 2 years to correct. With an investment horizon of 5-7 years, this mistake can have a big impact.

ASSESSING DESIRABLE TRAITS

  • A management team doesn’t necessarily need a specific set of skills. It is about matching the strategy and investment thesis with the skills and functional expertise of management. The type of company and its stage of life will also dictate the executive leadership requirements.
  • It is very important that CEOs and CFOs are both coachable and adaptable. Some find more value in adaptability than individual experience or functional expertise, especially when the right coaching resources are present.
  • When assessing a management team, it’s easy to correlate past track record with a probability of future success; however, it is important to focus on the contributing factors to fully understand if an individual’s past performance is predictive.
  • While a CFO isn’t driving the most value within the management team, they can represent the largest impediment to value: “you can’t manage what you don’t measure.”

TOOLS AND SOLUTIONS

  • There is an increasing trend towards standardizing the assessment and evaluation process of senior management. Quantifying and tracking desirable traits and characteristics is becoming common practice, the execution of which depends on the strategy of the sponsor.
  • HR and talent management for executive leadership at the portfolio level has become a top priority. The role of HR is going to continue to get stronger going forward; there has been a huge increase in emphasis on the specific science and expertise of HR.
  • Most sponsors now have some form of detailed HR Assessment & Review Programs for portfolio company management, which are used both for initial diligence prior to investment and post investment.
  • Executive level boot -camps and roundtable events can be helpful for management teams to leverage each others’ ideas and experiences. Regardless of industry or service, they often provide the specific anecdotal experience people need to really learn.
  • Boards who have gone through the same challenges can be the most valuable advisors and mentors to management, since quite literally they have been there and done that.