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11 Questions to Help Private Equity Firms Unearth Truly Standout Talent

The private equity industry needs talented, high performing leaders.

By Tim McEwan, Managing Director, Leadership Advisory and Roderic Yapp, Leadership Consultant

The private equity industry needs talented, high performing leaders. Yet talent in today’s hyper-competitive environment is both hard to come by and increasingly expensive. You need to know you’ve got a potential winner on your hands before you take them on because the risks of making the wrong choice are just too high.

But in a world of intense competition for talent, how do you find the stars – those individuals who are really going to stand out and make a difference?

First, you need to be clear on the skills and behaviours you need. When recruiting at senior level, it’s often useful to assess the existing leadership team so you can ascertain which skillsets or behaviours might be missing and therefore which skillsets or behaviours you might want to hire for.

In short, you’re looking for balance and diversity of thought. There’s no point hiring a bunch of people who are all the same – or in building a senior leadership team that lacks certain key skills. If the team is made up of analytical, task-focused individuals, you might want to look for someone who is more emotional and people-oriented. If you have a group of process-focused rule followers, you could probably benefit from adding some individuals who are more creative or innovative.  

The details are less important than the process. Set the context for who you have already and what sort of people you need. From here, consider the following eleven questions when deciding whether or not someone will be a good fit for the team.  

Question 1: Why do you want to work at a private equity-backed firm versus an established company?

Many experienced executives say they want to work for a PE-backed firm, often because they expect it to come with the possibility of earning company shares that they will profit from when the company is sold. Have they done their research? Do they really know what PE backing entails? Not everyone has the mindset for the unique challenges, stresses, and risks of working in this environment, so you need to check they’ve at least done their homework and aren’t walking in blind.

Question 2: What do you think are the different challenges of working at a PE-backed firm versus an established company?

Senior leaders at PE-backed firms must often balance the needs of customers and the company with the needs of the investors. The hours can be punishing, and executives are responsible for driving constant change rather than keeping things running on an even keel. Again, you’re looking for evidence that your prospective candidates have thought this through.

Can they offer up any examples of dealing with potential conflicts of interest, rapid turnarounds, or tight targets? How do they deal with long hours or stress? A candidate who comes up with such examples – without you asking – has thought through what you need and whether they might be a good fit.

Question 3: What are a few key principles that are relevant to your role?

This question seeks to establish the individual’s level of knowledge about the role, but it goes a little deeper than that. Someone who can explain something on the level of first principles really understands it. Remember, you’re looking for the stars, the outliers. A candidate who understands first principles is able to ask questions, to be flexible, and to reinterpret their role according to the various needs of the business and its investors.

Question 4: What did you do to prepare for this interview?

You’re not looking for a checklist of specific preparatory actions here. Rather, this is a test of how they think. After all, how a person does anything is how they do everything, which will give you an insight into their thought processes and mindset, as well as how seriously they’re taking this opportunity.

Question 5: From an external perspective, what do you think we could do differently? What do you think we could do better?

There’s a CEO of a major luxury hotel chain with hotels in Milan, London, Paris, Dubai, Beijing and other locations. Each time this CEO visits one of his hotels he stays in a different room and looks for dusty corners, leaking shower heads, or burned-out lightbulbs. He experiences the hotel through the eyes of the customer, so he understands what it’s like to stay there.

Has your candidate done the same? If your company sells clothes online, have they bought them and returned them to experience your service levels? Have they downloaded your app and tried to use it? Have they spoken to customers to get their views?

In other words, have they attempted to understand your product or the customer experience you offer? Do they know the potential sticking points or loops in your customer journey?

You’re looking for a couple of things here:

  1. Someone who has taken the time to do this kind of due diligence
  2. Someone who recognises the importance of the customer experience

Someone who displays both of these qualities is almost certainly a star in the making – if not one already.

Question 6: What is something that you are learning right now? / What is something you are doing to improve or develop yourself?

Two variations on the same idea with this question. Right now, one of your authors is working on improving as a runner, as well as working to get his golf handicap down.

In terms of running, that means learning about effective leading measures. How to manage time effectively so you can get five runs in a week, and do that metronomically, regardless of how busy you are. It means learning about mental game, how to fuel your body over distance, all kinds of things. In terms of golf, that means making tiny adjustments and consistent, deliberate practice.

It doesn’t matter what the domain of expertise is – or the level of expertise. Hell, they could have done a cookery course after years of being a terrible cook. Or just taken up painting for the first time ever. It really doesn’t matter.

What you’re looking for here are signs that someone has the patience and dedication to develop a skill or set of skills, along with a recognition of the value of lifelong learning. It can show someone’s ability to get out of their comfort zone and try something new. Or it can show an action-oriented character. Private equity often needs leaders who are action takers and decision makers. If a candidate talks about how they went on a painting course because they’d always wanted to do something creative, that shows you someone who is self-aware and self-actualising. 

In other words, it’s the character you’re looking for, not the skillset itself.

Question 7: How do you build relationships and develop trust with your key stakeholders?

Private equity contains several stakeholders whose interests need to be balanced, and whose support the individual will need if they’re going to stand a chance of being successful in a senior role.

No matter how brilliant a candidate’s experience looks on paper, if they can’t build trust quickly, they will fail. Trust is the fabric that holds everything together, so you want them to talk you through the process of how they build it.

Question 8: What is your proudest accomplishment and why?

One of your authors had a friend at university who worked on the university newspaper. He wanted a career in journalism and ended up as a deputy political editor for the Sun. When he was applying to train as a journalist after university, he was asked about the work he’d decided to include in his portfolio.

He had been part of a team of journalists at the university paper that had uncovered a controversial story. They were first to publish it, and it had become national news in the UK shortly after. The details of the story are a little lurid, so we won’t go over them here. The point, however, is that the piece he was proudest of including in his portfolio was not that story, but rather one about the student union moving to a new location.

He liked it because that was a dull story that people needed to know about, and he’d needed all his skill and talent to make it interesting. For him, that cut to the heart of what good journalism is – the relaying of important but sometimes dull information that people often need to know.

This story is relevant to this question because what someone chooses as their proudest accomplishment will tell you a lot about them, their worldview and mindset. This can be a great indication of how well they will fit into your existing senior team.

Question 9: Talk to me about a time when you failed.

The important thing here to not to ask outright what the candidate learned from their failure. That’s for them to add to their answer. This question is often asked but not always fully understood.

Yes, you want to know how that person reacted to a failure and what they learned from it. But you want to know more. What is their attitude to failure? Are they ashamed of it? Or are they at the opposite end of that spectrum, where they are too blasé about it?

You’re looking for the people that are able to take failure seriously but are able to deal with it, to learn from it, and still have the guts to make difficult decisions. Someone who can’t name a significant failure in their career is, arguably, someone who has never learned anything, since failure is the best and most profound teacher in business.

Question 10: Talk to me about a time when you made the right decision but got the wrong outcome.

Some individuals may not be able to answer this one, but it’s a great question for those that can. We all know that most times, leaders have to make crucial decisions without having access to all the information they might want. What you’re looking for here is someone who has made a decision with the best information they had to hand at the time, and it didn’t pan out the way they’d hoped.

Faced with making the decision again, would they have made the same one? The star candidate says yes; it was the right decision under the circumstances, even if they ended up with the wrong outcome. Have they got the guts to make difficult decisions? That’s what you want to know.

Question 11: How do you balance data-based decision making with intuition?

When do they rely on data? When do they rely on intuition? What does that process look like and how might their mindset fit into your existing senior team?

Everyone likes to rely on data when they can, but sometimes intuition is needed too. Being able to see when a set of numbers doesn’t quite add up, for example. Or the ability to sense when an employee is lying. Or even just having the wherewithal to question commonly-held assumptions about the way things have been done before.

It’s often the case that leaders must make decisions that can’t be proved with data, so you need to know how they do that. On the other hand, to what extent might they let intuition get in the way?

One of your authors recalls a time shortly after joining the Royal Marine Commandos when his commanding officer gave his men a week to winterise and water-proof the unit’s land rover vehicles for a training exercise in Norway. The logistics people said it couldn’t be done. The commanding officer responded that he wanted to see evidence of all the tasks involved broken down and analysed to prove it couldn’t be done.

Once the men had broken down the tasks, they realised the data told them that the task could be done after all. It required the marines to work around the clock and sleep in shifts, but it could be done, and it was done. Intuition and perception can hinder as much as help, so you’ll want to know how and when a candidate is able to balance these decisions.

Exceptional people are worth taking the effort to find

Very often, senior executive recruitment is dominated by finding people as quickly as possible. This can often result in an attitude that “good enough” is good enough. But it really isn’t. Those who are going to lead PE-backed companies need to be exceptional. To find them, you need to refuse to settle for good enough, to take the time to know what skills and behaviours you really need, and to seek out those attributes with the patience and tenacity of a bloodhound.