4 leadership qualities private equity firms want.

Many senior executives at large private and public companies reach out to me when they start thinking about transitioning into leadership positions with private equity portfolio companies. Many are motivated by the opportunity for career growth and development. For others, the logic is more black and white: the equity on a successful exit can be a significant wealth-generation event.

But not everyone is cut out to make the transition. What’s more, not every background prepares new leaders equally for success. So before you decide to make the leap, it’s time for a critical gut check: Do you have these four qualities that private equity firms are looking for in leadership? 

1. an entrepreneurial mindset

This is by far the most important thing: Private equity is looking for an entrepreneurial mindset in any prospective leader for one of their portfolio companies. But what does that mean, exactly? 

In part, it’s the difference between managing and doing. Having an entrepreneurial mindset means, among other things:

  • being ready to roll up your sleeves — and to wear a lot of hats
  • making decisions quickly using the 80/20 rule — do not overanalyze every decision
  • working efficiently — with a finite amount of capital
  • focusing on top-line revenue growth — cost cutting is rarely the path to enlightenment within private equity portfolio companies

Candidates coming from large, monolithic organizations often bring impressive and seemingly relevant leadership experience to the table. But if a large part of their skill set is managing corporate politics, managing up as well as cost cutting initiatives, they may come up short in the eyes of private equity when being evaluated for portfolio leadership positions. Excellence navigating organizational politics seldom translates to excellence as a leader at the helm of a private equity backed company.

the bottom line

Be ready to roll up your sleeves, wear a lot of hats, lead from the front and focus on top-line revenue. 

2. P&L ownership experience

After an entrepreneurial mindset, no quality is quite so prized as having a demonstrated track record of P&L ownership. That’s at the top of the list: a “must-have,” not a “nice-to-have” attribute. 

In part, that’s a reflection of the increasingly matrixed org charts at most organizations today, a result of which is that fewer and fewer individuals have full responsibility for a piece of their company’s business. That makes full P&L ownership a real — and increasingly compelling — differentiator among candidates.

the bottom line

Without true P&L ownership experience, you haven’t really had your hands on all of the levers, so it’s important to be up-front and honest about the extent of your P&L ownership responsibilities in the past. Candidates are sometimes tempted to conceal or spin the true nature of their P&L experience — and that’s something both executive search and private equity partners will see right through. 

3. confidence and humility

Studies have found that leaders who report greater self-confidence are perceived as being more effective by their peers, so projecting confidence during the interview process is essential. 

At the same time, while confidence is a must, it can’t come at the expense of humility. Don't project arrogance or make statements about how many “other opportunities” you are currently fielding. Admit what you know — and own up to what you don’t. That’s the only way to set yourself up for success in the event that you’re ultimately offered the role.

You also need to be patient and understand that there will be fierce competition for these roles. Expect a thorough and diligent hiring process and resist the temptation to ask how many other candidates are in the process or where the search partner thinks you “stack up.” The reason, to be blunt, is that asking these questions conveys a lack of confidence. I’ve seen firsthand the positive perception key stakeholders will have when a candidate is confident and seemingly unconcerned by how many others are being interviewed for the same position.

the bottom line

Confidence is key, just not at the expense of openness, honesty and transparency. Those are qualities that make for successful leaders in general, and they’re exactly the qualities private equity firms are looking for as well. That’s especially crucial in the context of a private equity portfolio company, where you will need to inspire your team from day one. 

4. A track record of success

This may seem like stating the obvious, but a proven and demonstrable track record of success is a must to be considered for a leadership position within a private equity portfolio company. I’m continually surprised by how many candidates believe that simply running a large business for a well-known and successful company is enough to qualify them for these highly sought-after leadership positions. When probed about whether their business grew and by how much, what strategy they employed to do so and what the specific, quantifiable results were, these candidates often won’t have answers. 

the bottom line

Come prepared to get specific about your results, strategies and specific contributions when discussing your previous leadership positions. Again, this may sound like a no-brainer, but if you don’t know your own numbers and story, key stakeholders will quickly lose confidence in your candidacy.

key takeaways 

As the managing director of our executive search practice at Tatum, I get daily insights into the ingredients that make for a strong "marriage" between leaders and private equity firms. It’s one of my areas of expertise, and it’s taught me that few ingredients are as important as the four outlined in this article. To review:  

  • Effective leaders demonstrate that they’ll approach challenges with an entrepreneurial mindset.    
  • A proven history of P&L ownership can be a key differentiator for candidates who want to move into leadership roles with private equity portfolio companies from large public or private companies. 
  • Demonstrating confidence and humility is important to convey the right temperament for a leadership position with a private equity portfolio company.
  • Having a track record of success is key — just make sure you can articulate it and back it up with quantifiable results.

For more actionable insights, and to find out how Tatum connects private equity companies with the candidates they need, contact us today

about the author
Tony Hazen

Director of Executive Search

As the managing director of executive search at Tatum, Tony works closely with the C-suite and boards of private and public companies. He specializes in complex executive placements and frequently partners with PE firms to identify and secure C-suite, vice president, director and senior-level management to help transform, stabilize and optimize operations