In private equity, talent drives returns. Firms with the right leadership teams in place move faster, execute more effectively, and exit stronger. But too often, leadership is viewed through a narrow lens—focused solely (or at least primarily) on the CEO or a few key C-suite roles.
At Townsend Search Group, we’ve worked with hundreds of executives across portfolio companies, and we’ve seen what separates the good from the great. They’re organization builders. They mentor, develop, and elevate the people around them—and in doing so, they unlock value well beyond what any one leader can deliver alone.
The Long-Term Payoff of a Development Mindset
McKinsey research backs up the assertion that a strategic focus on developing talent across an organization is essential for driving returns: companies that reallocate talent effectively and early in a CEO’s tenure are 2.5 times more likely to outperform on return on investment. These are companies where leadership development isn’t an afterthought — it’s a strategy.
In PE-backed companies, especially those undergoing transformation, this matters more than ever. According to McKinsey, new portfolio company CEOs often need to rebuild 30–40% of “level two” roles (CFO, CHRO, CRO, etc.) and 50–65% of “level three” roles (VPs and functional heads). These leaders aren’t just responsible for execution. They are the cultural builders, department mentors, and future successors whose development can determine whether a value creation plan takes root.
However, holistic team development often gets overlooked, primarily because private equity timelines tend to run short. Three to five years may be all the runway a leadership team gets. The pressure to hit milestones, professionalize operations, and execute transformation plans can crowd out longer-term priorities like mentoring and succession planning.
But failing to invest in leadership development has a cost. Without strong, empowered leaders two layers deep, organizations stall out. CEOs get stuck in the weeds. Execution bottlenecks emerge. And when someone key leaves, there’s no one ready to step up.
What the Best C-suite Leaders Do Differently
In our experience, the best C-suite leaders:
- Invest time in developing their direct reports, not just managing them.
- Model mentorship and expect it at every level of the organization.
- Design the organization for scalability, not just immediate output.
- Identify and elevate future leaders, especially in critical functions like sales, operations, and finance.
These leaders don’t just fill roles—they build capability. That’s how they generate sustainable value.
What PE Firms Can Do Differently
For PE sponsors, this starts with a shift in mindset. During executive searches, ask not only Can this person lead? but Can this person develop others? Look for signs of a coaching mentality. Probe how they’ve mentored up-and-coming talent in prior roles.
Beyond hiring, PE firms can:
- Encourage onboarding plans that include mentorship and internal development goals.
- Invest early in HR leadership and organizational development through training.
- Track internal promotion metrics as leading indicators of culture and execution strength.
At Townsend, we help private equity sponsors identify and place executives who understand the power of developing talent throughout the organization.
We look beyond résumés to evaluate leadership style, team-building skills, and the ability to mentor and scale others. We know what patterns to look for, because we’ve seen them work across dozens of industries and investment theses.
Final Thought: Build Leaders to Build Value
Strong leadership at the top is essential. But deep, scalable leadership throughout the organization? That’s the edge many private equity firms don’t fully capitalize on.
If you want to build a business that thrives during the hold period and beyond exit, start by building leaders who can build others.
About the Author
Tom Chinonis is a Managing Director at Townsend Search Group and specializes in representing private equity firms with C-suite placement across middle market and lower middle market platforms across the country. Tom works closely with management teams and investment professionals identifying key leadership for multi-national organizations across wide ranging industries, typically with locations that serve both domestic and global markets. Tom began his career as a corporate attorney specializing in mergers and acquisitions at an AmLaw Top 50 law firm, then served as the CEO in multiple start-up organizations before joining Townsend Search Group in 2021.
