Motivation is the most important factor when selecting a CEO or a complete team for a portfolio company. But we are not talking about the standard HR interview set of questions of “What motivates you to get this job”, or similar. These are rather questions around How strongly do you believe in the business model of our portfolio company.

Are you ready to co-invest with us? How much?

As investors, we acquire companies, generate or re-generate value and sell companies. We are in no way interested in standard job seekers, rather we are looking for a “motivation” to participate in the project. We are project-oriented investors, and we prefer project-oriented people.

Where do you see yourself at the end of the investment?

and not “Where do you see yourself in 5 years”, being equal to “what should we do for you in the next 5 years”. The real “motivation” of a CEO in a Private Equity portfolio company is/ could be for example Management Buy-Out, were at the end of the investment cycle the CEO, and/or his team buy out the company from the Private Equity firm.

In general we are looking for a purpose driven (motivated) managers, not job-seekers. 

The CVs are very often “boosted”, and do not represent the true skills, achievements, and contribution of the manager. Very often we use professional firms to identify the right managers for us. After the first round of interviews we put the managers to

Workshops with real life topics

where they must devise how they approach a specific situation or a topic. Very often we quickly see that the managers are not able to perform under pressure or in unexpected situations. Many times we use assessment centers to get an insight into the values of the manager and behavioral profile.

We only hire people from internal network

Some of the Private Equity partners commented they would never hire a person that they do not know personally for several years, and have checked the manager’s reputation and achievements. (Author’s note: in fact, there is a very specific group of people that move from one Private Equity Project to another, due to their track record and reputation/ recommendations).

Start as independent interim manager, later conversion to a permanent contract

Yes, it is possible. We often engage interim managers to take over the initial and the most demanding phase of a transformation. Later on, after there are real achievements and mutual trust, the interim managers very often stay with us throughout the project and even co-invest with us. For these cases, we have special arrangements, and a participation scheme.

In general, the private equity partners concluded that “When there is doubt, there is no doubt”, they (are also known to) act quickly, or immediately. The most typical cases are:

Underperformance

In a Private Equity word cash is king, and time is money, there is no room for second guesses or second chances. Once there is underperformance towards the expectations and agreed path, the CEO or the complete management is replaced immediately.

Change of Market Conditions

Today, more than ever we are witnessing a significant change in the market conditions. Sometimes we hired a manager to lead the portfolio company through an accelerated growth, and currently we must downsize, and cut costs. In such cases, the manager’s motivation deteriorates quicky, and we must act. In such a situation, there is no time to look via headhunters, and we hire an external, and immediately available interim manager for at least 6 months.

Critical Situation

Sometimes, the personal situation of the CEO does change, and we must replace him, because he can not commit 100% of his attention to the mission. In most cases, these are family related issues, or triggers coming from the private sphere of the manager.

Special Occasions

Unfortunately these situations happen to us as well. Typical cases are fraud, breach of anti-competition rules, or in general “strange behaviour or bad gut feeling”. In such cases we take the decision within hours, not days.