A CFO who has spent five years at a $500 million company might look like an excellent candidate to help a private equity sponsor quickly grow a $150 million portfolio business. But suppose that CFO inherited an experienced finance team and sophisticated reporting systems, while the portfolio company needs someone who can build both. That should change the hiring calculus.
In our work recruiting executives for PE-backed companies, we’ve learned how important it is to understand the circumstances behind a candidate’s success. Company size, recognizable employers, and strong financial results are useful indicators of experience. But they don’t always reveal whether someone has the capabilities a particular portfolio company needs.
Some of the most revealing information about an executive’s career never makes it onto the résumé.
What Really Drove the Results?
A CEO whose company doubled revenue over five years has an impressive accomplishment to discuss. But the growth may have come primarily from acquisitions or favorable market conditions. If a sponsor’s investment thesis depends on accelerating organic growth, understanding the executive’s personal contribution becomes particularly important.
The same applies to industry experience. A CEO who has spent 20 years in a particular sector may know its customers and competitors extremely well. But if the investment thesis depends on integrating acquisitions, an executive from another industry who has successfully managed that process may bring more relevant experience.
To get beyond the résumé, have candidates walk through a significant accomplishment in detail, including the decisions they personally made, obstacles they encountered, and contributions of others. Conversations with former colleagues and board members can help corroborate their accounts.
We’ve also found that setbacks can be especially revealing. Rather than simply asking about failures, explore a consequential decision that didn’t work out. A candidate’s ability to acknowledge mistakes, explain what went wrong, and describe how they responded can reveal a great deal about their judgment.
For PE sponsors, there’s another consideration. An operating partner or the sponsor’s internal resources may have played a significant role in a portfolio company’s transformation. Understanding who was responsible for what helps clarify which capabilities the executive would bring to a new organization.
Look at the People They’ve Developed
A CEO can deliver excellent financial results while remaining heavily involved in nearly every important decision. That approach may work in a smaller organization, but it becomes increasingly difficult as the company grows.
At some point, the CEO needs capable leaders who can operate more independently. Building that team requires different skills from personally solving the company’s most difficult problems.
One way to assess this ability is to examine the careers of people the executive has hired and developed. Have they advanced into larger roles? Reference checks are often focused on former supervisors, but former direct reports can also offer valuable perspectives on how effectively the executive delegated responsibility, coached employees, and developed future leaders.
This can be particularly important in middle-market businesses that need to develop greater management depth. An executive who consistently develops strong leaders helps build a more capable organization. And for a PE sponsor, the benefits may extend beyond that individual investment, as some of those leaders could eventually take on senior roles at other portfolio companies.
The Job May Change Before the Investment Ends
A company with immediate operational problems needs an executive who can address them. But sponsors also benefit from leaders who can adjust as their organizations and strategies evolve. One valuable quality is the willingness to challenge assumptions when circumstances change.
A CEO who understands the investment thesis and works effectively with the sponsor is essential. But that relationship should allow for candid disagreement. If the market changes or the original strategy stops producing the expected results, the sponsor needs an executive who will raise concerns early and help determine what to do next.
A useful way to assess this is to explore a time when a candidate recommended a significant change in strategy. What prompted the recommendation? How did the executive handle disagreements with ownership or the board? What happened as a result? Former board members or investors may be able to provide additional insight into how those conversations unfolded.
Another consideration is what motivates the executive. Meaningful equity participation can attract outstanding candidates to PE-backed companies. But the prospect of a significant financial outcome doesn’t necessarily mean an executive will enjoy the work required to achieve it.
Someone accustomed to a large organization with substantial resources may find the hands-on responsibilities of a smaller portfolio company frustrating. A candidate who genuinely enjoys building teams and improving operations may find the same environment energizing.
Go beyond the standard discussion of career goals. Talk candidly about the resources available, the problems the executive will inherit, and the work they’ll need to handle personally. How candidates respond can be revealing, particularly when compared with the environments in which they’ve previously succeeded.
Look Beyond the Obvious
An impressive track record deserves attention. But the conventional measures of executive success tell only part of the story.
For PE sponsors, understanding how an executive achieved past results, developed other leaders and responded when circumstances changed can provide a clearer picture of what that person might contribute.
That understanding requires more than a polished interview. It comes from probing specific experiences, examining the circumstances behind them, and speaking with people who have worked closely with the candidate.
The strongest candidate may well have the most impressive résumé. The important thing is to understand what lies behind it before making one of the most consequential hiring decisions of the investment.
About the Author
Tom Chinonis is a Senior 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.
