The Disruption Matters special podcast miniseries is back for its fourth season, and this year, leading industry experts will discuss how private markets can deliver “weatherproof growth”, despite the headwinds of a tech revolution, geopolitics and volatile global markets.
In this second episode, we focus on how best to assess, manage and, where necessary, recruit leaders capable of delivering growth in the face of such macroeconomic uncertainty. We learn about the very special “PhDs” that are fit for the moment, how technology can help with such a task, and how analog issues still matter most when it comes to leadership.
Guests include Ted Bililies, global co-leader of transformative leadership at AlixPartners; Jason McDannold, Americas co-leader of private equity at AlixPartners; Hoyoung Pak, global co-leader, AI and data at AlixPartners; Allison Walker, head of talent for FTV Capital; Tyler Wolfram, managing partner of Oak Hill Capital Partners; Ditte Marstrand Wulf, head of leadership and culture at Triton; Andrew Weinberg, founder, CEO and co-chair of Brightstar Capital Partners; and Erik Brooks, founder and managing partner of Ethos Capital.
READ TRANSCRIPT BELOW
[00:00] Intro
In times of constant disruption, the leader, typically the CEO, really becomes the role model and the culture carrier. We think of culture as a performance asset. This is not a glass tower private equity industry anymore. We really try to look for PhDs, poor, hungry and driven.
Host
Welcome back to Disruption Matters, a podcast miniseries produced by Private Equity International in partnership with series sponsor Alex Partners that delves into the forces that are reshaping our world and how the private markets can not only address these changes, but emerge stronger from them. I’m Rob Kitecki, a deputy editor with PEI Group and your host.
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[04:18] Host
Here’s Allison Walker, the head of talent for FTV Capital, on how to make the culture issues more concrete.
Ali Walker
By definition, we think of culture as a performance asset. So, one of the things that differentiates organizations that actually have a culture of performance is one that integrates culture into their board meetings. They speak to it as an actual, again, performance asset, and what we look for are repeatable patterns of the culture that have resulted in repeatable patterns of success. Ideally, you’re looking for positive outcomes as opposed to problematic outcomes. It really should be a discussion that is happening at the quarterly level with the board to gain an understanding and to see that the CEO has embraced and that the leadership has embraced culture translating into action.
So, I know that sounds a little bit fluffy, but it actually is a mechanism by which you can tie your KPIs to every individual within the organization that of course, ultimately rolls up to the CEO.
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[11:24] Host
Allison’s firm echoes that approach by taking a microscope to that track record.
[11:29] Ali Walker
When FTV is evaluating potential leaders of new companies, we of course look at the results that they have achieved. But what we really dig down on is how they helped accomplish those results. We look at it very forensically, and we ask them what part they played in that, where they collaborated, how the organization operated in a horizontal fashion, where they used outside advisors, where they employed their board. Additionally, we’re huge advocates of the Hogan.
[12:03] Host
If you’re not familiar, Hogan assessments are a particular personality test. And part of these tests gauge how a candidate may react in times of stress, fatigue or dysfunction, like say the last five years.
[12:16] Ali Walker
There are three typical groupings of reactions. One is individuals that retract and they go to their bunker because they tend to be more reserved and that is how they problem solve.
There is the charismatic cluster. We see many of our CEOs and leaders being quite charismatic. They fall into this fighting fire with fire solution orientation. They go right at the problem. They don’t hesitate. They’re high on mischievous, colorfulness, bored and innovation.
Then the last two, the dutiful and diligent, want to solve the problem together. So, we do use the Hogan to look at behavioral characteristics. We want to see high humility; we want to see high agility so they can turn on that dime.
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[16:28] Host
References can be invaluable, but leaders by their very nature tend to be charming. Here’s Allison.
[16:33] Ali Walker
You know, we meet so many leaders and generally speaking, we like them all. There’s a high likeability factor to the people that we’re fortunate enough to meet.
The assessment is very hard. It’s hard to assess – how do we know if these people can do what we want them to do? My big takeaway is it goes back to the patterns that you can observe, and it’s just what they’ve done. But how did they do it? What kind of behaviors did they use to get the things done that they got done? What’s the organizational health like? Not just the metrics. How have they involved their board, how have they involved others? What’s the shrapnel that is on the sidelines based on their results, or has it been more elegant and the followership is higher?
It’s really, it’s just a holistic perspective on how they’ve accomplished what they’ve accomplished.
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[19:43] Host
That’s one of the most powerful aspects of the private equity process. This idea that enterprises get the chance to re-found themselves. They declare a new “day one,” suddenly free to devise new and better ways to go forward unbound by tradition or its lackluster equivalent known as “how we’ve always done things.” But let’s say the current leader actually has some undeniable strengths but still needs to grow into what the company needs now. Basically, if you can’t find the perfect fit, how can you develop the leader you have? Here’s Allison.
[20:11] Ali Walker
We invest primarily in still founder-led companies. Even as our check sizes have gotten larger, I would say they’re still 80-85% founder- or co-founder-led. And we’re very proud of the fact that we’ve won the Inc. Founder-friendly Award a number of years in a row, because we, as many of my colleagues here on this call, we go into our investments locked arms with the value creation plan and the growth plan of these founders on how we want to achieve our growth strategy.
Occasionally, founders will raise their hand and say, I am not the person to take you to the next limit and the next goal and let’s find my replacement together. We don’t think we have it internally or we might have it internally, but it’s really what I think everybody’s referenced and I don’t know that I’ve heard the word, but it’s implicit and that is “trust.” So not only do private equity investors and capital partners need to trust the founders and the founders need to trust their boards, the colleagues and the C-suite need to trust one another. And that is the way that you’re going to continue to achieve alignment and accountability and then ultimately the results.
I will use a word that our managing partner does not like at all and that is “psychological safety.” And you know, you use the word “vulnerability,” “humility.” You have to have confidence, but you also have to have humility. You have to feel safe enough to take those risks, put yourself out there on the front line, and say, “I’m not sure if I’m the right person for this next level role” or “if there is somebody better out there, but I’m willing to put myself on the frontline to prove that I can do it or not.”