What Working with Private Equity Taught Me

​For over seven years I worked with some private equity (PE) owned organizations. To say it was an education is an understatement. Like most of the best learning-on-the-job, I made some mistakes, especially early on. However, I am grateful for the experience it gave me. In retrospect, it feels like I received another Master’s degree because the way they think and look at businesses was often different than my earlier learning.
 
Most people understand that PE invests in companies because they believe that they can create more value than the current operations and business structure are able to achieve.  The company I worked with didn’t buy distressed companies. For the most part, they bought good companies where they believed there was unrealized value to be found through some combination of growth, operational excellence initiatives and other efficiencies. They invested in companies and often in the leadership and people strategies and systems – which is how they found me.
 
Here is what they taught me:

• Whatever time frame you give to most projects, they can be shortened and made more efficient. Sometimes they would ask me to do something (e.g., implement a new management performance system) and I had a mental model of the time this would take for adoption. Well, they had a different mental model and if you are really clear about the expectations (it will not be perfect), you can get big projects implemented faster than you think. And they will be good. You can adjust them later and you will.
• The right leaders can change faster. They will surprise you. Even the most entrenched mindset can shift with the right combination of clarity of expectations, development coaching, training, incentives and high touch recognition and appreciation. Sometimes you meet these amazing leaders in small companies who would be stars wherever they go. They are sponges and soak in all the learning offered. If you think the best leaders are at Fortune 500 or big tech like Google and Apple, I would challenge you to think again. When you visit these successful, privately-owned businesses where people have been doing things with fewer resources and money forever, you see incredible innovation, entrepreneurship and creativity that will take your breath away.    
• Like organizations everywhere, some of the legacy managers will resist change and have trouble getting on the bus. But just as many others will act like learning sponges. And they will be appreciative of every opportunity offered. In general, I found folks in these companies to be less jaded and less entitled.

 
For the record I am aware that some people think of PE as unethical or evil. I knew that when I signed on. As I had no experience I wanted to make my own call. Did they do some things that I thought were short-sighted? Yes, I believe they did. But that is really wired into their goals. With a 3-5-year window for some kind of event (e.g., sale, spin, etc.), they aren’t in it for the long hall. Sometimes they chose people to lead their acquisitions that I think were better suited for other roles (and that is putting it very nicely). In the end, why I continued to do the work is that they did some things exceptionally well. Under their ownership, performance improved. Leaders and teams were challenged to learn new skills and grow (sometimes for the first time) and they sharpened their financial and operational chops. People got a chance to get better. I believe I helped with that and for everything I learned, I hope I was able to contribute something back.
 
The most important thing they taught me was that every business model and structure has strengths and weaknesses. I have come to think of businesses as “evil” when they allow an abusive or uncaring manager to stay in place, when they allow unethical behavior or mismanagement that has the potential to drive the business into the ground. Having worked in over 12 industries for the last 17 years, with both private and public companies, I can say with confidence that these types of leaders can be found in every type of business.  In the end, what separates most good businesses from bad is whether or not they are led by smart, ethical people who care about their employees and demonstrate that through their actions and words. Thankfully, I find these leaders everywhere.