PE can still do better on talent

We see  different problems festering in portfolio companies (PortCos) such as a lack of a leadership pipeline, high executive turnover, reluctance or failure to address cultural issues until they become chronic. Reactive approaches are then employed:

• • Leadership is assessed after the deal closes.
  • The CEO is replaced in year one with little pre-planning.
  • Culture is ignored until it becomes a liability.
  • Talent performance isn’t tracked — until something goes wrong.

Collectively these are headwinds to value creation. Here is how PE can do better to drive PortCo performance.

1. Double down on Talent During Diligence

Leadership is assumed competent until proven otherwise. Cultural risk is overlooked. Interestingly, while assessments of PortCo executives are common – they often reflect deal partners’ bias – i.e. they are looking for evidence of an execution drive or ‘get it done’ persona. This ignores evidence of the importance of transformational capabilities such as adaptability, resilience, openness and EI.

A smarter play:

• • Assess the CEO and senior team’s readiness to deliver on the investment thesis.
  • Use structured tools — behavioural assessments, capability scorecards, team diagnostics – and ensure they cover the leadership capabilities required. I have used such tools in various engagements and their effectiveness when used pragmatically cannot be overstated.
  • Evaluate succession depth in the context of the strategy and operating model with a view on the capabilities required.  In this way, PE can identify PortCo leadership risks before they stall the plan — and avoid costly post-deal surprises.

2. Build a Talent Thesis Into Every Deal or Restructuring

Eyes roll when the word ‘talent’ is banded about. But instead of taking talent as read:

• • Define what kind of leadership is required to execute the growth plan.
  • Identify gaps and align talent investments with key commercial milestones.
  • Integrate talent moves — hiring, coaching, org changes — into the first 100-day plan.

This shifts the focus from reactive headcount decisions to a meaningful leadership alignment. 

3. Measure Talent Like You Measure EBITDA

Leadership is often judged by gut feel. There are no dashboards, no metrics, no accountability. Instead:

• • Track retention, engagement, onboarding speed, team cohesion, and succession depth.
  • Link leadership effectiveness to business KPIs.
  • Review talent data quarterly — alongside financials.

This enables owners to catch issues early and demonstrate the ROI of leadership investments.

4. Standardise What Works

PortCos frequently reinvent the wheel. Talent practices vary wildly. Success is accidental. So it makes sense to:

• • Build firm-wide playbooks: onboarding frameworks, CEO transition kits, leadership assessments, org design templates.
  • Run cross-portfolio talent programs or exec cohorts to share learning.
  • Systematize high-impact leadership practices.

This drives consistency, scalability, and faster value realization.

5. Make Culture a Lever

Culture is ignored, tolerated, or treated as fluff. Misalignment festers under the radar.

Instead, consider:

• • Using culture diagnostics during diligence and post-close or during a major PortCo merger/restructuring.
  • Defining the culture needed to execute the strategy in a pragmatic and end-game oriented way – make the changes to the main culture drivers quickly.
  • Aligning incentives, decision rights, and governance to reinforce desired behaviours and ways of working.

Aligned cultures move faster, retain talent, and outperform under pressure given their enhanced resilience.

6. Use Talent as an Exit Advantage

A potential multiple is not well served by a leadership black box where talent looks fragile and value feels unsustainable.

Instead:

• • Document the strength of the team, leadership pipeline, and cultural health.
  • Showcase stable executive performance and succession readiness in exit planning or PortCo restructuring.
  • Lock in key leaders with aligned incentives and post-deal retention plans.

A strong leadership story boosts buyer confidence — and often the multiple.

Takeaway
Management in a PE environment is not the same as in public companies. PE management requires operation and transformational capabilities, backed by owners who understand this. Better talent practices will drive both the perform and transform agenda.

MM&K is a leading independent adviser to PE firms and their portfolio companies on the design and implementation of human capital solutions and tailored pay structures. If you are curious and want to explore how MM&K could assist your Board to optimise the advantages of aligning pay, strategy and culture, contact Rob Miller (robert.miller@mm-k.com ) or Stuart James (stuart.james@mm-k.com).

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