Arris Insights

Why Transformative Change is Vital to Private Equity Success


Today’s PE portfolio companies are facing an unprecedented level of disruption. In the face of this complexity and volatility, leaders must be able to drive transformation at portfolio companies when it comes to strategy, operating model, organization, people and processes. But creating and executing a successful transformation, which can take years to implement, requires establishing the right team, leadership, organization and culture.

Improved operating performance has traditionally been the foundation for sustainable investment re-turns in private equity, boiling down to concrete steps typically taken early in the life of an investment. This has given rise to the concept of the ‘100 day plan’ as an attempt to make swift operational improvements. However, with today’s massive levels of disruption, traditional operational drivers may not provide the lift they once did, particularly due to rapid changes brought on by growth in emerging markets and the global economy’s uneven journey. It’s arguably now more important than ever before to be able to drive transformation in portfolio companies.

In most cases, transformation isn’t a preference; rather, it is a necessity as a result of resistance to change. And achieving a successful transformation requires creativity, courage, excellent planning and execution, frequent measuring and course adjustments, persistence and stamina. Transformational change must keep strategic initiatives front and center, and be made with the customer in mind.

It starts with a need, but requires energy and ideas to fuel the engine that drives it forward. Established habits and orthodoxies must be broken and reimagined, while unconventional ideas and innovation are embraced. Negative energy can be obstructive and must be dissipated.

It Takes Special Talent to Transform Portfolio Companies

Many executives understand how to make incremental, discrete changes, but not all are as skilled when it comes to engineering and executing successful portfolio company transformation. When your goal is to find talent to drive transformational change in perspective and refer-ence point of the company, it’s important to recognize the characteristics that define someone who can be successful in that role within a PE portfolio company environment.

Transforming a portfolio company requires specialized talent who understand what it takes to success-fully drive radical change. You must identify and secure leadership that has business transformation skills as part of their core DNA, along with the personal capabilities to build significant value in one of the most demanding business sectors. Hiring the right transformation and operations talent can have a profound impact on a portfolio company’s overall performance.

The challenge lies in the fact that, in most cases, transformation isn’t successful. According to a recent survey by McKinsey Quarterly, only 38 percent of the global executives reported that a recent transformation they knew about had a ‘completely’ or ‘mostly’ successful impact on performance. And, about a tenth said that a major change effort they had been involved with was either ‘completely’ or ‘mostly’ unsuccessful.

Successful transformation requires the necessary resources, scale and ambition. Leaders must set an appropriate and inspiring aspiration, or vision for change and find a way to bring it to life for everyone. However, that’s only the beginning. The other side is creating, mobilizing and sustaining the transformation process, which means ensuring there is a continuous flow of energy and ideas to fuel the for-ward motion. The transformation agent must understand why change is needed, what needs to change, who needs to change and how to change.
Arris Partners specializes in recruiting exceptional people who have success driving transformational changes both at the executive and the professional levels within private equity portfolio companies. Please contact us to discuss how we can be of assistance to you as you develop your plans for transformational change in your organization.

If you are interested in adding exceptional leaders in all executive and functional areas of your PE port-folio company, please contact me at your earliest convenience.

Brian McMerty
Managing Partner
Arris Partners
DD: 919-424-1592
bmcmerty@arris.partners