Perspective - Private Equity

Speed, transformation – and the right leaders

Private equity places significantly higher demands on management than most other forms of ownership. The time horizon is shorter, the level of ambition is higher, and the requirements for value creation are both concrete and measurable from day one.

When a company changes hands, the direction is rarely up for debate: performance must improve and potential must be realised quickly. This typically leads to a sharper commercial focus, faster decision-making, and a more disciplined approach to governance and operational management. In this context, the quality of management decisions becomes crucial.

The experience from private equity-owned companies is also clear: the pressure on top management is significant and CEO changes occur frequently in the early years of ownership. This emphasises how crucial it is to have the right management capacity in place from the beginning.

At the same time, the picture is more nuanced than the classic perception of a one-sided short-term focus. The most successful PE leaders do not only work with quick results in mind, but they also focus on building businesses that are robust and attractive – both for current and future owners.

This requires leaders who can balance short-term execution with long-term value creation.

Discipline in value creation

A key difference in PE-owned companies is the degree of management discipline. The best leaders consistently work with an outside-in perspective on business – like an investor would. They continuously revisit their own potential and challenge strategy, operations, and organisation to uncover untapped opportunities.

At the same time, there is a strong focus on the quality of earnings. While many organisations have traditionally focused on growth in turnover, PE leaders work much more consistently with profitability. This often involves difficult prioritisation, where activities, customers, or products that do not contribute to earnings are eliminated. Experience shows that it can free up significant capacity and boost overall performance significantly.

This requires leaders with both analytical insight and decisiveness – and leaders who are able to make decisions that may be challenging in the short term, but which strengthen the company in the long term.

Another dimension of value creation is the use of incentive programmes, which play a key role in many PE-owned companies. The most effective programmes create a clear link between management effort and value creation – and contribute to a common direction and purpose across the management team.

It also requires managers who are not only motivated by the role, but who also actively want to be part of the value creation that is realised during the ownership period.

In our Executive Search process, we systematically clarify the candidate’s motivation for and ability to participate in incentive programmes – as an integral part of the assessment.

The right leaders – at the right time

In our work with Executive Search in PE-owned companies, we see recurring patterns. Challenges rarely arise because the strategy is unclear – but because the management capacity does not match the ambitions.

Especially in the investment and due diligence phases, a structured assessment of management capacity becomes crucial to reduce risk and ensure a realistic starting point for value creation. It is in this context that the same challenges often recur. Typically, it comes down to three things:

• Firstly, existing management often lacks experience with the speed and complexity that characterises transformation.
• Secondly, the need for change management in the organisation is underestimated.
• And thirdly, there is a lack of a clear pipeline of candidates to take over when requirements change during the ownership period.

This is where the strongest PE environments stand out. They actively work with ongoing management calibration – not only in relation to the current situation, but in relation to what it takes to realise the value creation plan over time. McKinsey analyses indicate that the best CEOs prioritise building a fit for purpose leadership team that can deliver quick results as well as scale the business going forward.

Talent as a driving force – not a support function

One of the most interesting insights is that talent and leadership consistently top the agenda of successful PE leaders – often ahead of both strategy and operations.

It reflects a realisation that the fastest way to create value is through the right people. That’s why talent management is not a support function, but an integral part of the business strategy.

This means a much more active approach to the selection, development and eventual replacement of key profiles. It also requires the organisation to continuously identify and develop internal talent that can take on greater responsibility – often at short notice.

Search, succession, and leadership development as value creators

As the complexity of PE owned companies increases, the work with leadership becomes more systematic. Recruitment, succession planning, and leadership development are not isolated HR disciplines, but central to value creation.

This is especially true in situations like:

• change of ownership or generational change
• strategic shifts and repositioning
• digital transformation or technological boosts
• acquisitions and integration.

In these situations, the ability to quickly identify, assess, and develop the right leaders becomes key to realising potential.

The most successful organisations work in a structured way with a pool of both internal and external candidates – and with an ongoing assessment of which skills will be crucial in the next phase.

Perspective

In its most concentrated form, private equity epitomises what is increasingly true across the world of business: value creation depends on the right leaders, in the right roles, at the right time.

This places higher demands on discipline in recruitment, succession, and leadership development – and on the ability to continuously adjust the organisation’s leadership capacity as the business evolves.

From insight to action

For companies in private equity ownership, the biggest difference is rarely the strategy – but the ability to ensure that the right management capacity is in place at the right times during the ownership period.

This requires a more systematic approach to search, succession, and leadership development. Not as standalone initiatives – but as integrated elements of value creation.

At GML, we work with this approach in practice – from executive search and management assessment to ongoing calibration of management teams in portfolio companies to ensure:

• that the right leaders are identified and attracted
• that the management team is continuously calibrated in relation to ambition and phase
• that the organisation has a qualified pool of internal and external candidates

Transformation rarely happens by accident – it is driven by the right leaders. The question is whether they are in place when needed.

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