October 22, 2020
Leadership in private equity is the key lever for value creation. The senior leadership team of a business are ultimately responsible for the successful execution of a value creation plan; and as executives within the organisation, they should take on more than just a strategic, direction-setting role. Building a successful leadership team is therefore crucial to enabling value creation.
However, the shape, size, experience and responsibilities of a senior leadership team are not necessarily immediately apparent, and most don’t go into business to build a successful team. It’s a necessary consequence to creating a great business.
Trying to build a senior leadership team is therefore a complex, multi-faceted problem; and one without an immediately obvious solution. Questions such as: “How large should a senior leadership team be?”, “What are the roles within the team?”, and “How do the roles differ from one another?” can complicate and nuance the problem, making it more than the simple assembly of a five-piece jigsaw puzzle.
Within a senior leadership team, individual team members ideally play distinct and separate roles. In practice, the capability of the leadership team is the combination of these varying and different leaders, who ideally complement one another and come together to form a strong and value creating team.
This is especially true when a company’s senior leadership team develops organically, not by design, particularly in an environment such as private equity, where the frame of reference for any leadership team is likely to be their previous experience.
At drxDATA, we have been developing insights into how to construct a leadership team to fit to any organisation’s needs and experiences. The leadership team within an organisation should be a reflection of their requirements now and into the future. It’s all about having the right person, in the right job, at the right time.
We have used data on the successful value creation by leadership teams in private equity since 2010, leveraging data analytics, behavioural psychology and decades of leadership advisory experience, in order to create a model of leadership applicable to any business in private equity. With our Leadership Success Propensity Model (LSPM), a leadership team can be designed, and the odds of success stacked in your favour.
The Leadership Success Propensity Model breaks downs the traits and experiences of leaders into four key component parts, based upon an understanding of both what they do, and how they go about achieving it. In quantifying the capability of a leadership team against these four independent axes, it is possible to develop a richer insight and understanding of the dynamics at play within the senior leadership team.
Core to our analysis now lies the “Functional Archetypes”, which can simply be understood as the typical profile of a successful leader in any given role. However, our research clearly demonstrates that there isn’t just one type of “CFO” or “CEO” in any given function. We have therefore developed a framework which enables us to understand the benchmark Functional Archetype within the context of any specific organisation.
Applying this framework has enabled drxDATA to define the Functional Archetype for six core leadership functions: Chair, CEO, CFO, COO, CTO, CRO. These are valuable to help us understand what the best leadership looks like in every context.
Using this model of Functional Archetypes, drxDATA is able to identify and then design the ideal leadership team for any organisation, at any given point through the value creation process.
The drxDATA Functional Archetype Model is therefore the first step towards taking a comprehensive approach to the leadership requirements of an organisation. It is our attempt to solve leadership. It is the first step to enabling leadership by design.
Director, Head of drxDATA