Change Management: Key Factors for PE-Backed Executives as Deal Flow is on the Rise

May 23, 2024

Authored By Eric Walczykowski

Signs are that the second half of the year may see an increase in deal volume for the private equity sector. If that takes place, the shift will mean a wide range of changes for companies with private equity sponsors.

Change management as a discipline can help the leaders of these companies and the private equity teams working with them to navigate these changes.

I sat down recently to discuss this with Leslie Beale, the CEO of Profusion Strategies, one of our key alliance partners in leadership development and executive coaching.

Bespoke Partners is the largest recruiting firm solely focused on software and SaaS companies, and we specialize in firms backed by private equity sponsors.

You can see the full interview with Leslie in our Tailored Talent vodcast series, here: https://www.bespokepartners.com/tailored-talent-private-equity-talent-trends-interview-archives/

Here is a summarized Q&A of my conversation with Leslie about leadership strategies for Executives during the increasingly pressing push for exits.

Eric: Given your work with leaders in the private equity space, what trends do you see on the horizon as we see more deal activity and dry powder being put to work?

Leslie: Faster paced change. Organizations and leaders are already dealing with a pace of change they aren’t really equipped to handle. That is something that needs to be on the radar screen for key leaders in private equity as they’re moving towards more deal flow, more change for the organizations in their span of influence. Just know that your leaders are already a little bit stressed and dealing with more complexity than they’ve dealt with in the past.

Eric: When you think about the increase in the pace of change, what are some key things that leaders need to think about as that pace picks up?

Leslie: For a leader to show up and be an asset to their organization, to their team, they really need to be focused on their own self-care and their own self-awareness. So, one of the things that we know is when the level of complexity around us increases, we all start to respond from a place of insecurity and uncertainty. Leaders need to know themselves well enough to understand how they show up when the pressure’s on and some of the areas that they may need to soften. They also need to really tune into their own ability to be flexible, tap into their own stores for resilience and model those sorts of adaptability behaviors. We forget that people are looking to us as leaders. So, really showing up in that place of adaptability and resilience is crucially important.

Eric: Part of keeping the organization on task with the objective is ensuring that the people show up as their best self. I think the only way to do that effectively is to be present and calm, even though things may be crumbling or the obstacles in front of you are huge. Well, it seems like change management is a major theme for success, particularly in private equity. What is at risk in a sale or acquisition if change is not handled well?

Leslie: The first thing that’s at risk is that failed or poorly managed change can have a direct impact on valuation or the bottom line. There’s a real dollar and cents impact from failed change management. What we typically think of as the biggest impact from failed change is the people side of the house. And on that side, you’re looking at things like frustration, burnout, challenges with trust. To me, the biggest impact is that every time we fail to execute change well, we’re teaching ourselves and the organization “we can’t do change” so we adopt that mindset and that identity. And that means that the next time you need to make an important shift within the business, we’re less resilient. That sort of learned incompetence is the biggest pitfall that goes unnoticed. I’ll see organizations, five to seven years later saying they’re just not very good at change. And if we trace it back, there’s been a big, missed opportunity to execute change well, somewhere in their past.

Eric: As we talk about acquisitions in general, private equity firms are under significant pressure to exit some of their portfolio companies. When you think about the stress that an acquisition puts on the leadership team and the entire organization, I think it’s important, to lean into an outside resource, an executive coach, someone steeped in leadership development that can help you remain calm in the stress of an acquisition. Wouldn’t you agree?

Leslie:

It is important for everybody to have an escape hatch, a place where they can go. As leaders, one of the things we don’t get is an opportunity to say, I’m stressed. I need to tap out. I’m not showing up as my best. When you’re in that space as a leader, that has a cascading effect on everybody around you. And so, being able to take those emotions, needs and perspectives outside of the organization and have that same sounding board is important. And it keeps the stress from spilling over unnecessarily into the rest of the organization.

Eric: What skills do executive leaders need to focus on to be an asset to their organization during high pressure times like a sale or an acquisition?

Leslie:

We’ve talked about modeling adaptability, agility, and resilience. Managing your own stress levels, leaning into your own self-awareness so that you know when you don’t show up as your best self, which alone is an asset. The thing we haven’t touched on is communication skills. Executives tend to have a blind spot in that they are often in meetings and having conversations that employees aren’t privy to, so there’s a tendency as leaders to get worn out with an idea, and not communicate it to our teams fully enough.

I was meeting with a CEO the other day and she said, “When I’m worn out and think I’m communicating too much, I know I’m just starting to communicate enough.” And I think that’s well said because we spend a lot of time planning communication, but our employees don’t hear all that planning. We need to over communicate and lean into listening. For change to be effective, for people to show up around you in the best way possible, it takes trust, which is established through listening.

Eric: At Bespoke Partners, our executive leadership team have all done a Hogan assessment. So, we know our strengths, but also know how we show up under stress. And as the CEO of the organization, I recognize when my team members show up under stress and can manage through that.

For communication it is that realization of, we may be planning for this communication, but we are taking for granted the fact that we’ve been involved in every step. What most leaders haven’t really looked at is how these plans are going to be communicated and how the message might be received. So, I think that’s very valuable advice, particularly as we think about turbulent times in the market and this heightened awareness in 2024 around acquisitions.

About Profusion Strategies

The mission of Profusion Strategies is to equip leaders and teams with actionable skills that will put points on the board today while ensuring blue-chip success tomorrow.

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About Bespoke Partners

Bespoke Partners can help companies seize emerging opportunities by staying ahead in the software and SaaS leadership market.

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Author:
Eric Walczykowski
Chief Executive Officer

Eric is passionate about building high-performing teams that value doing their best, working together, overcoming adversity and learning.

As a proven growth executive, Eric has served as CEO, President, Board Member, Investor and Advisor for technology companies that achieved over $4.5B in successful exits.

Eric brings to Bespoke Partners significant professional services experience from Deloitte and Andersen, as well as the high-growth client executive perspective for private equity-backed technology companies.

Eric earned an MBA from the Kellogg School of Management at Northwestern University and a BS in Business from Fresno State University.

Outside of work, Eric enjoys spending time with family, coaching baseball, travel, attending live events and sipping good wine.

Featuring:
Leslie Beale, PCC, JD
CEO, Profusion Strategies

About Leslie

Rich background in leadership development & executive coaching
Expertise in navigating the challenges of rapid organizational change and fostering resilience and adaptability among leaders

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