The Weak Link in Predicting Private Equity Investment Success
Talent decision analytics pay off across every business metric!
No industry is more disciplined in analyzing data relevant to investments than are Private Equity firms. Their financial, operational and market analyses are comprehensive and rigorous to ensure the best investment decisions for their investors and portfolio companies.
On the other hand, evaluation of leadership, organization and culture is subjective at best. While many case studies demonstrate that the health of an organization’s culture and quality of leadership are top predictors of success, measuring those critical factors has been more an art than a science. In fact, recent McKinsey research found that investors have attributed 65% of portfolio company failures to people and organizational issues. 1 Having a sound succession plan and the right team in place for ongoing success has been a top priority for global organizations for many years. This advice is equally vital for PE firms. Yet, measuring leadership fit and cultural health has been the weak link in predicting success for Private Equity investments!
Read more
Organizations have been utilizing the 9-box approach to succession planning for many years, yet the challenge of measuring potential is often very subjective and based on who knows whom! Organizations have sought to reduce the impact of the “halo effect” or “fair-haired” syndrome by developing leadership competency models and applying them to the evaluation process. However, the challenge of actually measuring one’s potential relative to competencies generally remains subjective. Finally, there is a behavioral analytics approach that removes the subjectivity of predicting leadership potential. How is it accomplished?
Is your Board and executive team developing human capital strategies to gain competitive advantage and accelerate their business goals? Is your organization seeking new ways to positively impact engagement and retention? If so, they are not alone! Deloitte Consulting and Bersin identifies three primary areas of strategic focus in their Global Human Capital Trends report: Lead & Develop, Attract and Engage, and Transform and Reinvent. Among these strategic trends, leadership, retention and engagement, talent acquisition and reskilling HR were the top urgent needs to support business priorities and goals. Additional research by Aberdeen Group of Best-in-Class organizations demonstrates that top performing organizations, successfully utilize behavioral assessment as an enabler in each of the strategic talent needs.