Coaching The Private Equity-Backed Company CEO
An executive coach’s ability to recognize key patterns among CEOs of PE-backed companies enhances their ability to harness leadership potential and meaningfully accelerate value creation.
Originally published in Forbes, July 2023.
As stated in my last Forbes article, the most successful executive coaching engagements go beyond sessions with CEOs; they incorporate a variety of other stakeholders, seeking to instill in organizations a “coaching mindset.” Still, the fact remains that chief executives play pivotal roles in driving value creation in a business. This means that coaches working with them must deeply understand their unique challenges, which are often more pronounced and complex in private equity (PE) portfolio companies.
This article is the second in a series about the financial and people-centric pressures, needs and opportunities facing PE investors and their investments, helping executive coaches understand how to best work with chief executives of PE-backed companies. Collaborating with PE operating partners on building the most productive working relationships with their top management leaders is critical, helping everyone embrace the ethos of working from the same side of the conference room table.
Chris “Mitch” Mitchell, FMG Leading
While serving as a CEO is, by nature, immensely challenging, those who take on these positions at PE-backed companies face unique challenges. Namely, businesses that have accepted investments from private equity firms have tight and strict timelines to hit aggressive financial milestones—targets that tend to creep up on executives faster than they anticipate, causing significant stress. As one PE partner likes to say, “In private equity, a lost week is really like losing a month.” When weeks are months, timeframes are supremely unforgiving.
What’s more, as is the case in most organizations, PE-backed company CEOs often experience acute loneliness at the top of the organizational structure. Yet they also remain “underneath” the watchful eyes of the board. Nobody else in the system can truly understand this tension, the scope of their responsibility or the isolation that comes with the job. Coaches can add value here. Helping CEOs best navigate such challenges requires trusted coaches who immerse themselves in the organization's specific context, from the investment thesis and the value creation plan to all the obstacles that inhibit strategy execution and culture-building.
That said, PE-focused coaches repeatedly come across many of the same CEO archetypes. Their ability to recognize patterns among such executives enhances their ability to harness CEOs’ leadership potential to accelerate value fully. PE operating partners who recognize and understand these archetypes are also at a competitive advantage, better able to maximize their talent and win.
Listed below are the most common portfolio company CEO archetypes, including some details about how to best support each through ongoing coaching:
The first-time Private Equity CEO
Even individuals who bring C-suite experience but have never served in the top job at a PE-backed company are consistently shocked by the vast difference between serving in this specific leadership seat and others they have occupied. They can derive particular benefit from working with coaches with strong PE backgrounds; this can help acclimation to this new leadership elevation come more quickly.
The first CEO after the founder
Taking the CEO role immediately after the founder has stepped down brings unique complications, especially in organizations looking to scale. New executives can benefit from the assistance of coaches in considering and responding to such factors as how much influence a founder still has within the business, whether a founder is truly ready to cede control, how well a founder actually worked with the rest of the company’s leadership and how much of the organization’s mission, vision and values predominantly existed in the founder’s heart and mind.
The CEO who is not meeting targets
Sometimes a CEO has a rough start and doesn’t hit the milestones outlined in the plan but still shows strong potential. Their coach and the board can work closely with the CEO to align precisely on what adjustments are needed, what leadership gaps they need to fill and how to achieve needed change to the CEO’s leadership approach.
The CEO who doesn’t want coaching
Like the proverbial horse that can only be led to water, some CEOs resist the idea of coaching and will not be open to feedback or willing to change. This creates a near-impossible situation, even with a board advocating for coaching, as successful coaching engagements require cooperation on the part of the coachee.
The experienced Private Equity CEO brought in early after a PE investment
In this ideal scenario, coaches can become strong thought partners and help accelerate the likely success of this CEO by reminding the executive to stay focused and not get thwarted by the gravitational forces of the day-to-day that can distract them.
While there are universal elements among PE-backed CEOs, the details surrounding individuals, companies and situations are always dramatically different. The best coaches will add value by recognizing patterns while constantly adjusting their approach from engagement to engagement, treating no two exactly alike.
Next up: Coaching the private equity management team.
Read this article as it originally appeared in Forbes here.
Mitch Mitchell is a Principal at FMG Leading. He leads the firm’s private equity practice, partnering with senior executives, investors, and boards to accelerate growth and create exponential value.