Managing People Challenges

Life as you know it has changed. You have private equity investors.

The trends are shifting. Are privately held companies becoming more like public companies? The move for a privately held company to assume debt in the form of ownership by a private equity firm has changed the landscape. The private firm, once a stand alone entity, with the ability to make quick, responsive decisions, to invest in new projects, capital equipment as company needs dictate, now experiences the challenges of more structured decision making, more people involved in the decisions, more approvals, and most vexing, a requirement demonstrate profitability quarterly.

This last demand is a most onerous challenge. Now the leaders must approach their decision making much like public companies with quarterly results pressure and yet another ‘boss’ looking over their shoulders.

How will this growing trend do to change the world of privately held businesses? In the nineties we experienced the dot com boom…and it seemed that dot coms could do no wrong…. If you were looking for a place to realize terrific financial growth, invest in a dot com. We came to learn that the dot coms that succeeded were those who managed well. “Good management is good management” said Harvard University’s Rosabeth Moss Kanter.

Today the ‘hot’ area appears to be private equity. Lots of money flowing in, lots of opportunity to invest in privately held companies, turn them, make your fortune and move on.

The problem is the individuals companies are now managing significant debt. The good news: the company has been able to use the money infusion to penetrate new markets, generate higher profits, and create growth. Or perhaps, they are simply burdened with more debt.

But now the way the company is managed must change. Obviously some change is inevitable and necessary….but managing to quarterly financial expectations can create barriers to innovation and reinvestment in the core business.

Someone may have seen great return and maybe the only lesson is ‘Shame on me’ for not being a part of the investment team. So be it. But if you are the CEO left to manage the lesson you may learn is, ‘Be wary of quick fixes. They may bite more than you ever thought possible.’

Managing the new relationship with the equity owner is one more crucial mission for the CEO. This mission unmet can result in a new CEO at the helm. Life as you know it has changed.

Managing the new relationship presents tremendous personal and professional demands. Yes, you know how to manage your company as it has been, but the world of private equity presents additional challenges. Get some help from someone who has learned t manage up successfully.

Before you sink, get some help.

The Nielsen Group                                             It’s Always About People.