Letting Portfolio Companies Take the Lead

By all accounts, Joe McDougall has mastered this balancing act.

As managing director of operating partners at Dallas-based private equity firm Trive Capital, McDougall knows how to tread lightly and gain the trust of portfolio company leaders—while also maximizing value creation. McDougall, who serves as an operating partner himself in addition to managing a growing team, draws on lessons from a deep career in human resources leadership and other management roles.

An Exhilarating Introduction

McDougall’s first experience with private equity came after a decade and a half at Honeywell, where he worked across human capital and communications and spent seven years as head of HR for Honeywell’s $9 billion chemical business. In 2015, when McDougall joined Axalta, a paint and coatings company that private equity firm Carlyle had carved out of DuPont, he knew immediately he had landed in the right place.

“The ride at Axalta was exhilarating. It was a $4.5 billion company with 13,000 employees, but we ran it like a startup. Carlyle wanted a white-sheet-of-paper approach. The company had been run one way by DuPont for 100 years, and at every turn our goal was to challenge those norms. The pace and amount of change was exciting, and we had a private equity sponsor that was wildly supportive of the work we were doing—mostly because we were driving incredibly positive results,” says McDougall. The results were so positive, in fact, that Carlyle decided to take the company public just 21 months later, a process for which McDougall was on the front lines.

“Joe came on board as head of HR, but he ultimately became like a chief of staff for me,” says Charles Shaver, who was chairman and CEO of Axalta at the time and currently serves as chairman and CEO of Carlyle portfolio company Nouryon. “Joe is one of those people who, if he walks into a room, everyone likes him immediately, even if they don’t know him. He exudes confidence and likability, and he’s extremely thoughtful. Joe has the analytical horsepower and experience to quickly assess what questions he needs to ask to arrive at the best solution for a problem.”

McDougall remained at Axalta for six years, ultimately leading its largest line of business, its $1.6 billion global refinish division, and overseeing the EMEA region.  “When we started to become another boring old public company, I knew it was time for a new opportunity,” says McDougall.

Hands-On Leadership

McDougall joined Trive Capital in 2019 to serve as an operating partner for the private equity firm’s portfolio companies and build out a more formalized operating partner team. For McDougall, the role provides an opportunity to do what he loves—have his hands in lots of different projects, apply his leadership skills to a variety of situations and move quickly to solve a wide range of problems.

Trive is a generalist firm. The firm’s more than 30 active portfolio companies span industries including aerospace and defense; consumer goods; education; energy; food and beverage; healthcare; and technology, media and telecom.

“We invest in a variety of businesses, not just from an industry perspective but also in terms of structure and maturity. I’m truly never bored. I might spend a morning working with a company in the human capital space and that afternoon with an industrial business and the next day working with a commercial bakery operation,” says McDougall.

I’m truly never bored. I might spend a morning working with a company in the human capital space and that afternoon with an industrial business and the next day working with a commercial bakery operation.

Joe McDougall

Trive Capital

Trive’s operating partner team is organized by functional expertise. There are currently 11 operating partners. Around half of those specialize in areas like finance, human capital and IT. The other half are generalists, most of whom are earlier in their careers and looking to pivot from the investment side of the business.

This functional focus makes sense for Trive’s investment thesis and helps to prevent tension between portfolio company leaders and the operating partners. “We’re not industry experts, which helps us be less threatening to the management team. We bring deep expertise in a variety of areas, but we don’t have the 30 or 40 years of experience in their industry that they have. Our goal is to work with them, learn from them, and offer help where we can,” says McDougall.

While McDougall oversees the operating partner team, he estimates he spends about 50%-70% of his time working directly for portfolio companies. “It’s what I love about the job,” he says.

McDougall’s personality and approach make him an ideal fit for working with CEOs and founders who have no prior experience with private equity. “In many cases, Trive will buy a smaller company that has never raised institutional capital before. They don’t ‘speak PE’ yet. Joe is the perfect person to bridge that gap between the deal team and the portfolio company operators, so they can feel more comfortable in this new setup,” says Ty Johnson, CEO of Trive portfolio company Cascade Services and a former Trive operating partner.

McDougall’s humility and can-do attitude extend outside of his professional role. Through a club at his daughter’s high school, The Pennington School, McDougall has volunteered on a service trip to support a refugee camp in Malawi and continues to help with the club’s efforts. The student-led club has collected and delivered refurbished iPads pre-loaded with learning materials, developed more affordable feminine hygiene products to allow menstruating teens to participate in school, designed desks to fit in the camp’s overcrowded classrooms, and more. “Joe is an all-hands-on-deck kind of guy. There’s no job he won’t do, and he’s always modest and humble—he just wants to contribute and add value, and it doesn’t matter if anyone notices him doing it,” says Susan Wirsig, director of applied science and mathematics teacher at The Pennington School.

Prioritizing True Partnership

Some view operating partners as something akin to enemy combatants, foisted on management teams by the acquiring firm post-close to slash costs and execute takeovers.

When McDougall joined Trive, his goal was to build a very different type of operating partner team. Rather than push their services on portfolio company CEOs, Trive’s operating partners rely on the CEOs to take the lead.

“The stereotypical view of an operating partner is as a shadow leader—they love to tell you what you’re doing wrong. Therefore, portfolio company management teams can be hesitant at first. But what we do is come in and roll up our sleeves and work as long as we have to. We’re there to partner and get in the mix, and that translates very quickly,” says McDougall.

Trive employs a “pull model,” in which portfolio company leaders identify their own needs and reach out to the operating partner team accordingly.

“Participation is completely optional. If you need expertise or assistance, it’s there. If you feel like you’re in good shape, there’s no pressure,” says Johnson.

Perhaps the most impactful marketing for the operating partner team comes every year at Trive’s leadership summit for portfolio company CEOs and CFOs. “The operating partner services can go a little bit viral at those summits,” says Johnson. “If you hear that one CEO worked with the operating partner team to increase this or reduce that, of course you want some of that too. It’s a natural incentive to utilize the team more.” 

For Trive, the goal is to optimize while respecting the company’s ethos and goals. “In fact, I would bet 100 bucks that our headcount is higher than it was when Trive bought the company,” says Scott Wise, CEO of Trive portfolio company Valor Healthcare. “They’re not looking to slash costs to hit an EBITDA target—their goal is to help provide resources to fuel the growth of the company. If that means we have to hire more people, but there’s an ROI at the end of the process, they’re all in. For me, as a leader of a company with an aggressive strategic growth plan, that’s a fantastic support system and attitude to have.”

For McDougall, prioritizing communication with both the investment team and management team is key, as is gathering feedback. After every project they work on, the operating partner team calculates a Net Promoter Score (typically used to measure customer loyalty) based on surveys from both the portfolio management and the Trive investment teams. “It’s crucial to get that real-time feedback from both sides and keep everyone happy,” says McDougall.

Not only do Trive portfolio companies appreciate the operating partners’ expertise—often, they want to permanently hire them. “The Trive operating partner team has become a bit of a talent importer and exporter for our portfolio companies,” says McDougall. “We rarely lose anyone on our team to anyone outside of Trive—but our portfolio companies frequently want to, and do, hire people on our team.” To date, seven operating partners have rotated permanently into portfolio companies.

McDougall celebrates these moves. “It’s great for the portfolio companies to know they have someone who knows their business, who can drop into these roles like they’ve been there forever. It’s great for Trive that we’re putting a trusted leader into one of our portfolio companies, and it’s great for furthering the individual operating partner’s career.”

A Flexible Foundation

One member of Trive’s operating partner team may fill in for a singular role at a portfolio company, or multiple members might serve as an interim management team while the company is being built up. The strength and diversity of the operating partners’ skills gives the firm an upper hand and allows them to be creative when it comes to structuring investments.

For example, in 2022, Trive created Cascade Services, the portfolio company of which Johnson is CEO, through a partnership with LP First Capital. Johnson had previously served as CEO of another Trive portfolio company, Select Interior Services, which ultimately was taken public. “At Cascade’s inception, I was the only employee,” says Johnson. “I had four Trive Capital operating partners as my management team for the first six to nine months. They built a financial infrastructure, managed all the hiring and payroll and benefits, and helped me think about the staff I wanted to build. The company wouldn’t have been created without them. Now, two years in, we’re at least 18 months ahead of where we would have been if I had to do all that myself.”

Valor Healthcare’s Wise also relied on the Trive operating partner team early on. As a carve-out, Valor had several glaring holes in services that it had been sharing with its parent company. “We didn’t have a CHRO, or a CFO for that matter. We leaned heavily on the operating partner team at that point and have also engaged significantly with Joe’s team since then, including an HR leader who helped our recruiting team with some challenges and a former CEO who has been serving as an interim COO for the last six months,” says Wise.

Every portfolio company has different needs. McDougall started his career at large-cap companies, which relied on rigid processes and deep talent benches to drive results. That’s often not the case at the businesses he works with today. “One of the most important lessons I’ve learned from my time in the middle market is that flexibility is key,” says McDougall. “It’s a much more fluid, entrepreneurial world. What works in an aerospace company might not work for a bakery or a financial services business. Above all, you have to be adaptable.”

Meghan Daniels is a freelance writer and editor based in Dutchess County, New York.