The Varying Challenges of Executive Search According to Your Business’s Ownership Model
Among the key determiners of a company’s success or failure is its leadership—the executive team that is charged with charting a company’s future course, anticipating twists and turns in the journey, and ensuring that, in both the short- and long-term, it arrives at its destination and achieves its principal objective—an acceptable rate of return on investment.
The course that each company follows to get there is necessarily different and can vary significantly according to a company’s industry, market, offering, maturity, size, and even ownership. This is because a company’s culture and operating dynamic, as well as the skills and aptitudes required of its leadership, are affected by its external and internal constituencies and stakeholders.
Part 1 of this two-part series examines the talents required of executives in Private Equity-Owned and Venture Capital-Backed companies. Next month, Part 2 will examine the skill sets required of executives in Family-Controlled businesses and Publicly Held corporations.
PART 1: Hiring the Right Executive for a Private Equity-Owned or Venture Capital-Backed Company
One can argue that the managerial expertise, functional skills, and leadership capabilities required to be a successful executive at most companies are comparable: a facility with large amounts of internal and external information, familiarity with industry sales trends and customer preferences, the ability to anticipate or act on marketplace changes, and the capacity to prioritize business and organizational challenges. Add to this an aptitude for reconciling the demands of diverse stakeholders, a stomach for affecting necessary change, and the charisma to inspire and drive employees to meet department and company objectives, and you’ve got just about all the requisite talents.
If only the qualifications were actually so standardized and straightforward. In fact, although the above attributes are key components of almost any marketing, sales, or operations executive’s skill set, they are far from comprehensive and also vary in importance from one company to another—because, as we all know, every company is different, with its own unique culture, objectives, and definition of what success looks like. What’s more, preferred executive traits and talents often vary according to industry and functional area, with some industries and functions valuing certain skills more than others. Perhaps nowhere is this more apparent than in the skills required of executives in companies owned by Private Equity (PE) groups and those backed by Venture Capital (VC) firms.
Executive Management in PE-Owned Companies—Leveraging Latent Strengths to Create a Robust Future and to Boost Return on Investment
PE groups typically acquire companies that they judge to be undervalued as a result of misdirection and underperformance or that present some other potential for profit. The types of companies PE firms buy run the gamut, from commercial and B-to-B manufacturing to specialty retail and consumer and B-to-B services, but, in almost all cases, a PE firm’s goal in acquiring a business is to increase its value for eventual resale or to take it public. Achieving this end can entail marketing and sales enhancements such as value proposition refinement and channel optimization, as well as other improvements like financial re-engineering and organizational restructuring. Frequently, it sometimes requires changes to the senior management team that will be responsible for deploying these measures.
The implementation of such significant change requires company executives and functional-area senior managers who possess the necessary technical expertise to identify needed improvements and also have the management skills to make changes without disrupting operations—for example, to identify and exploit new target markets and customer applications without ignoring an already developed and profitable user base; to revise product positioning and company messaging without straying too far from established branding; to develop promising sales channels without alienating tried and true ones; and to retain highly knowledgeable veteran employees while attracting new and innovative team members. Typically, this requires experienced marketing, sales, operations, and general management that has survived countless business cycles and brings to the table a wealth of industry knowledge and expertise in marketing, sales, general management, and other key business functions. In other words, senior managers who can identify needed changes and understand how to implement them but who also know better than to throw the baby out with the bathwater.
Senior Management in the VC-Backed Enterprise—Harnessing Nascent Energy to Realize a Vision and to Forge a Clear Path Forward
Stereotypes abound regarding the nature of most VC-backed businesses, with the most common cliché portraying the majority as Silicon Valley or NYC-based software and technology start-ups with high-growth prospects. The “high growth” and “start up” portions of this characterization are typically valid; however, the range of industries in which VC-backed companies are found is far broader. Still, whatever their business sector, a distinguishing trait of many such companies is their potential to disrupt a market with an innovative offering or to create a new product category that satisfies heretofore unmet customer expectations. Uber and its effect on the urban transportation market, i.e., the taxi business, is an outstanding example of the former, whereas the Blackberry, the first broadly adopted multi-purpose mobile phone, is a good example of the latter.
Another common characteristic of VC-backed companies is an entrepreneurial “can do” mindset that is perhaps more tolerant of risk-taking and seat-of-the-pants cost-benefit analysis than is good business practice, particularly across the areas of marketing, sales, and product development. To bring more discipline to a start-up while preserving innovative product development and fostering a creative marketing and sales environment, the senior management of these functions must insist that due diligence be completed prior to making strategic marketing, sales, and product development decisions and that calculated, operationally sound steps be outlined and followed to ensure effective business execution—in short, that marketing strategy and sales goals align with product development plans as well as production and service capacity.
Enacting rigorous, repeatable business processes in any company requires seasoned managers who know how to weigh potential market opportunities and sales objectives against operational capabilities and organizational readiness. Sometimes, in a start-up—whether VC-backed or not—they will also be called upon to lead a talent base that is distrustful of conventional business practices and hierarchical structures. Consequently, VC-backed companies in start-up mode often hire executives who are veterans of medium- to big-sized companies and have a track record of successfully reconciling the potentially conflicting imperatives of marketing and sales with those of finance and new product research and development. Often, the biggest challenge and the most crucial skill of the management team in such a company is to the ability to keep the product innovation engine humming and the marketing and sales functions primed and funded while running operations efficiently enough to provide the desired return on investment.
The Quest for Executive and Senior Management Candidates Who Are a Perfect Fit
Finding marketing, sales, product development, and general management executives with the optimal mix of functional experience, leadership ability, and organizational aptitude necessary for the successful operation of a PE-owned or VC-backed company is not easy, especially since many such companies—and the firms that own a controlling interest in them—have scant HR functions. This is unfortunate because a bad executive hire is not easy for any organization to weather, but the ramifications can be even more significant in companies such as these, which usually have aggressive sales and marketing plans and sometimes have ROI goals that are ascendant, moving targets. These circumstances demand stability and continuity of leadership, whereas a short executive tenure often leads to the opposite—inevitable changes in marketing, sales, and product development direction and policy that can present an obstacle to effective management as well as employee retention.
One way for a company to avoid this fate is to turn to an executive search firm with consultants who are experienced in executive search for PE-owned or VC-backed operating entities, since they will be familiar with the challenges of these two arenas, giving them a leg up in the search process. Additionally, because of the cultural and operating subtleties that sometimes characterize such companies, it is likely a good idea to hire a firm that has a proven, repeatable search process and employs competency-based behavioral interviewing. This will help ensure that the executive candidates presented have the functional know how, leadership skills, and correct values to make them a perfect fit.
Hiring the right mission-critical leaders for a PE-owned or VC-backed company—i.e., marketing, sales, product development, and general marketing executives who are attuned to its operating and cultural rhythms as well in step with its customers and markets—is crucial to making it successful. This, in turn, argues for investing a little more in the executive recruitment and hiring process. After all, placing an outside leader in an organization is rather like adding a fish to an aquarium. If you’ve done your research and you’re certain that the new addition is suited to its setting, the chances of its surviving and the environment thriving are better than average. However, if you haven’t done your homework, whether the scenario involves a fish in an aquarium or a company leader, the consequences might very well turn out to be toxic.
This is the first part of a two-part series examining the different aptitudes and skills that employers should look for in candidates for executive marketing, sales, operations, and general management roles in Private Equity-Owned, Venture Capital-Backed, Family Controlled, and Publicly Held Companies. Next month, part 2 will review the talents required of senior managers and executives in Family Controlled and Publicly Held corporations.
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- Posted by Ilana Katz
- On August 17, 2017
- 0 Comments