As private equity (PE) investment professionals reassess their investment and value creation strategies, it might be time to reconsider the talent required to achieve these goals. The pandemic has tested portfolio company leaders in unprecedented ways. Since early 2022, it has become evident that some leaders have adapted well to the volatility and uncertainty, while others have struggled despite their best efforts.

Reflecting on this period, we aimed to understand how leadership behavior and style influenced these varied outcomes. To uncover the answers, we analyzed CEO leadership data through the lens of our proprietary Leadership Span framework, developed in collaboration with Hogan Assessments. Leadership Span evaluates leaders’ performance across four key categories: Setting Strategy, Executing for Results, Leading Teams, and Relationships & Influence.

Within each category, it assesses how fluidly an executive can move between “loud” competencies (disruptive, risk-taking, heroic, galvanizing) and their “quiet” counterparts (pragmatic, reluctant, vulnerable, connecting). Our data shows that portfolio company CEOs typically score higher on loud dimensions of leadership than other CEOs but are less likely to exhibit the quieter dimensions.

This finding has both positive and negative implications. Loud qualities often serve portfolio companies well during growth phases, driving forward momentum. However, when growth slows, CEOs with predominantly loud qualities may encounter more challenges. Three key themes stand out from our data:

1. Disruptive Strategy Setting: Portfolio company CEOs often take a more disruptive approach to setting strategy than other CEOs. However, they are less likely to filter ideas for feasibility, which can lead to moving too quickly or in the wrong direction.
2. Risk-Taking: These CEOs are more inclined to take risks but less likely to consider potential downsides. This approach can leave them vulnerable to failure when conditions change unexpectedly.
3. Empathy in Leadership: The ability to empathize with employees, rather than just inspire or prod them, has become increasingly important. Yet, portfolio company CEOs are less likely to show vulnerability in leading their teams, risking key team member loss and eroding morale.

To succeed in today’s business environment, portfolio company CEOs need a broader range of leadership competencies than they might have in the past. While PE firms should continue to prioritize loud qualities, they must also filter for the ability to shift gears and adopt a more measured and humble approach when necessary.

Key Steps for PE Firms:

1. Multidimensional Value Creation Plans: PE firms should create dynamic strategies and scorecards for their portfolio companies, avoiding one-dimensional assumptions about the future.
2. Appoint Agile Leaders: Hire CEOs who can quickly adapt their styles, shifting from a hard-charging, growth-oriented approach to a more measured one that ensures long-term survival.
3. Support Leaders Struggling to Pivot: Provide coaching and support for leaders who might be struggling to pivot, helping them strengthen their weaknesses with clear development goals and strategies aligned with organizational needs.
4. Build Balance Across the Leadership Team: Ensure a mix of strengths across the C-suite, including CFOs and other executives who can provide unique strengths to create a balanced and resilient leadership team.

Looking Ahead

As businesses transition into a post-pandemic era, PE firms need to recalibrate both value creation plans and the leadership competencies required to achieve them. While the classic growth-oriented portfolio company CEO archetype has many benefits, additional qualities such as agility, empathy, and balance will be crucial for future success. These attributes will enable executives to adapt quickly to a rapidly changing business environment and provide the operational and people leadership necessary to navigate forward in the face of headwinds.

IBG Insights

The next era of leadership in portfolio companies will demand a blend of traditional strengths and new competencies. By focusing on agility, empathy, and balance, PE firms can ensure their portfolio company CEOs are equipped to lead effectively through uncertainty and drive sustained success.