Q. DO PRIVATE EQUITY-BACKED COMPANIES HAVE AN ADVANTAGE WHEN RECRUITING TOP EXECUTIVES?
John Marshall: It depends on the scenario, but there are key aspects that can create a recruiting advantage. Top executives are often attracted to private equity portfolio companies because of the opportunity to have a transformational impact on the business, which can result in significant personal wealth creation. The ultimate goal of going public or selling the company creates straightforward objectives for incoming executives, making it easy to tie incentives to performance. Executives understand that if they accomplish what they set out to and lead the company to a successful outcome, they will realize substantial financial gains in a relatively short period of time. And without the quarterly reporting requirements of public companies, which emphasize near-term earnings, portfolio company leaders can focus on strategic changes to maximize value three to five years down the line.
Q. HOW CAN INVESTORS ADD VALUE TO THE RECRUITING PROCESS FOR PORTFOLIO COMPANIES?
JM: Private equity investors can play a major role in both attracting the best candidates and assuring that the company hires the right leader.
A private equity firm’s brand and prior successes offer clear differentiation. Executives often evaluate an opportunity with a portfolio company based on the investor’s reputation. Investors are also well-positioned to sell the vision for the company by articulating their investment thesis. With prior success substantiating the vision, the investor’s perspective can validate the opportunity and make it more appealing to candidates.
Investors can also help assure that the right candidate is hired. Private equity investors know what it takes to win in a specific industry and what the leadership team needs to accomplish, so they understand the capabilities and experience required of candidates. Compared with operating executives or independent board members, investors are typically more experienced in evaluating C-level talent because they have worked with various management teams and have participated in a number of search processes for CEOs, CFOs and other functional leaders. […]
John Marshall is founder and CEO of JM Search, an executive search firm that recruits leaders for private equity and venture capital portfolio companies and other growth-oriented organizations. Marshall founded JM Search in 1980, and the firm has focused on serving the private equity and venture capital community since the late 1990s.