How Some Private Equity Investors Use Management Assessments
Private equity investors use management assessments to figure out how best to work with the management of the firm in which they are investing. They can learn about:
- Whether the manager has the cognitive capacity to run a complex organization
- Whether the manager has the judgment, coping, and interpersonal skill to run a complex organization
- Whether the manager will develop the capabilities in the future that will allow him to run the organization as it grows, and if the developmental trajectory of the manager be in sync with that of the firm
- What motivates the manager
- How best to work with the manager to get the most out of him
- How to structure compensation packages that will be “very motivational” to the manager
- Whether (and when) the manager will need to be replaced or require supplementary expertise/capability
In this one-minute video, Jim Bland of HCP explains how he uses management assessments to reduce risk and improve performance in his firm’s private equity investments.
And in this short video, James Sprayregen, restructuring partner and head of Kirkland & Ellis’ global restructuring practice, talks about the relevant contexts for assessments –not merely in private equity, but whenever a management team is being reconfigured.
A version of this post was originally published in The European Financial Review
About the Author
Leslie S. Pratch is the founder and CEO of Pratch & Company. A clinical psychologist and MBA, she advises private equity investors, management committees and Boards of Directors of public and privately held companies whether the executives being considered to lead companies possess the psychological resources and personality strengths needed to succeed. In her recently published book, Looks Good on Paper? (Columbia University Press, 2014), she shares insights from more than twenty years of executive evaluations and offers an empirically based approach to identify executives who will be effective within organisations — and to flag those who will ultimately very likely fail — by evaluating aspects of personality and character that are hidden beneath the surface.