Building the Right Executive Team in Private Equity Portfolio Companies

In private equity-backed portfolio companies, leadership selection plays a pivotal role in the success of an investment. While much attention is given to selecting the right CEO and CFO, the true catalyst for value creation often lies in building a robust and well-rounded executive team. This team should include leaders with complementary skills that collectively advance the private equity (PE) firm’s investment thesis. Selecting not only the right CEO and CFO but also surrounding them with functional expertise tailored to the company’s strategic goals is essential for successful transformation, growth, and long-term value creation.

1. The Central Role of CEOs and CFOs in Private Equity-Backed Firms

In PE-backed portfolio companies, the CEO and CFO play crucial roles in aligning the business with the PE firm’s objectives. This often means a high-performance, growth-oriented culture, agile decision-making, and the disciplined execution of an investment thesis.

• CEO as a Visionary and Executor: The CEO must embody the vision for the company while also ensuring that each department executes the business strategy. The CEO in a PE-backed firm often faces accelerated timelines for growth and profitability, requiring a skillset that combines visionary leadership with a pragmatic, hands-on approach.
• CFO as a Financial Strategist and Risk Manager: A CFO in a PE context is more than a financial custodian; they are expected to drive financial performance, manage risk, and maximize returns. The PE firm relies on the CFO to maintain a robust financial structure that supports growth while ensuring transparency and accountability. A successful CFO in this setting understands the nuances of debt and liquidity and that working capital needs to be aligned with both operational goals and financial targets.

However, the reality is that these roles alone cannot address all the challenges and opportunities facing a portfolio company. Without the right team to support them, even the most talented CEO and CFO can fall short of executing on the PE firm’s thesis.

2. The Importance of Functional Leaders: Building a High-Performance Executive Team

To fulfill a PE firm’s investment thesis, companies must often undergo significant operational changes, product expansions, geographic scaling, buy and build integrations, or digital transformations. Achieving these ambitious goals requires specialized expertise, which the CEO and CFO alone cannot provide. Surrounding them with a team of leaders who possess specific functional skills is essential to building a resilient and agile organization.

Key Functional Roles and Their Impact

• Chief Operating Officer (COO): A COO brings operational excellence to the executive team, focusing on optimizing processes, managing resources, and driving efficiency. They enable the company to scale operations smoothly, which is critical in the fast-paced, growth-driven context of PE-backed firms.
• Chief Technology Officer (CTO) or Chief Digital Officer (CDO): In an increasingly digital world, having a leader responsible for technological innovation or digital transformation can be a game changer. Whether the goal is implementing new digital tools, expanding e-commerce capabilities, or improving cybersecurity, a CTO/CDO ensures the organization stays competitive and future ready.
• Chief Marketing Officer (CMO): A seasoned CMO can fuel demand generation, brand positioning, and customer engagement, all of which are vital for rapid growth. PE-backed companies often face the dual challenge of growing market share while scaling up operationally, and the right CMO can translate strategic goals into market-facing initiatives that resonate with customers and drive revenue.
• Chief Human Resources Officer (CHRO) or Chief People Officer (CPO): Growth requires talent. A CPO ensures the company attracts, develops, and retains top talent and fosters a culture that aligns with the investment thesis. This role is crucial in maintaining the organizational health needed to navigate through the rapid transformations that PE-backed firms often undergo.
• Chief Revenue Officer (CRO): As companies aim to grow revenue quickly, a CRO who oversees sales and revenue operations can focus on driving top-line growth. They work closely with both marketing and product teams to optimize the customer journey, streamline sales operations, and unlock new revenue streams.

3. Functional Team Alignment: Accelerating the Execution of the Investment Thesis

Creating a symbiotic relationship between the CEO, CFO, and functional leaders fosters a collaborative environment where the investment thesis becomes a shared vision rather than a mandate handed down from above.

To ensure alignment:

• Establish Clear KPIs: Each functional leader should have specific, measurable goals that directly contribute to the investment thesis. The CEO and CFO can leverage these KPIs to monitor progress, maintain accountability, and identify areas needing adjustment.
• Encourage Cross-Functional Collaboration: A culture of collaboration among executive leaders fosters innovation and accelerates problem-solving. Cross-functional teams are better equipped to tackle complex initiatives, such as market expansion, operational transformation, and customer engagement strategies.
• Build Agility into the Organizational DNA: PE-backed companies must adapt quickly to changing market conditions and investor demands. By hiring functional leaders with a track record of adaptability, the firm can create a nimble organization capable of shifting strategy without sacrificing performance. 

4. The Role of Private Equity Sponsors: Support Beyond Capital

PE sponsors play a proactive role not only in identifying CEO and CFO candidates but also in ensuring that a balanced and complementary executive team surrounds them. By leveraging their network and experience, PE firms can help portfolio companies access top talent across all the necessary functional areas.

• Board-Level Involvement: PE sponsors, often with seats on the board, can provide oversight and strategic guidance, helping to shape a well-rounded executive team.
• Access to Industry Experts: PE firms can provide portfolio companies with access to industry experts, interim executives, or consultants who can fill knowledge gaps, mentor existing team members, and provide specialized insights.
• Continuous Performance Monitoring: PE sponsors are known for holding their investments to rigorous performance standards. Regular check-ins and performance reviews help ensure that the executive team remains aligned with the investment thesis and can adjust strategies as needed.

5. Conclusion: The Value of the Right Executive Team Composition

In a PE-backed portfolio company, selecting a high-caliber CEO and CFO is only the beginning; the true measure of success lies in building a team of skilled functional leaders who bring specific expertise and collectively work toward fulfilling the investment thesis. This executive team alignment enables portfolio companies to execute effectively, adapt to change, and maximize value creation within the PE firm’s expected timeline. In essence, the strategic composition of the executive team can transform a high-potential investment into a high-performance company, underscoring that successful PE investments require more than just funding—they require the right people in the right roles, working in harmony toward a shared vision of growth and profitability.

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To learn more about RHR’s approach to assessing, coaching, and developing PE leaders, please check out these resources:

• RHR solutions for private markets

To begin a conversation with us, please contact: Nick Twyman, Partner and Head of Private Markets