17.1 Leadership Coaching | Human Resources Director, private equity firm
The client was the Human Resources Director of a successful private equity firm. Whilst very successful financially for the founders of the firm, they had failed to bring on the next generation of leaders effectively. Despite having built a large infrastructure and recruited successive years of bright MBA students, the founders still felt that they were the only ones in the firm capable of doing ‘origination’ (sourcing potential investment deals) and making key investment decisions (handled by the investment committee – the key group in any private equity firm).
The culture of the firm was very ‘command and control’, with juniors given little help to develop their skills. The attitude of senior management was, ‘you’ve either got it or you haven’t’ and, because they had never had any management development themselves, felt that this was a waste of (their) money.
Yet the need for the next generation of leaders to perform well is higher in private equity than in almost any other sector, given how much of the founders’ wealth is tied up in funds that have not yet paid out the ‘carry’ to the directors.
To help solve this problem, they created a new position and brought in a highly capable and experienced HR director. Having been in role for less than a year, he felt the need for some coaching, as he was finding it challenging to get traction with the directors of the firm, yet they were loading him up with a huge number of tactical projects that were leading to very long working hours and limited impact.
The coaching challenge revolved around a few key issues. Firstly, helping the client think through why the directors consistently seemed to ignore his recommendations. Whilst these, from a technical and practical perspective made sense, the struggle of the directors to relinquish control was a more profound emotional challenge. In part, it seemed to relate to their ambivalence about leaving the firm that they had created and that had come to define their personal identities – what would they do next? In part, it was an insecurity about the highly-educated nature of the people below them – typically, these were much more analytical than the founders.
The directors’ thinking style was predominantly cognitive with a blindness to and denial of the emotional dynamics that the HR director was drawing to their attention. Their strong valuation of ‘independent thinking’ was at the cost of realising the next generation’s need for mentorship and guidance, a need that senior management viewed as a sign of weakness.
But a second issue related to the type of people they had recruited. The question of whether they had brought in the right people was a profound one. The directors felt they had brought in the right people, but they were simply not as capable as the directors themselves. The juniors felt that they were not being given the development and the opportunity to rise to the challenge of stepping up. There was little middle ground in the perspectives within the firm – leaving the HR director with the need to determine what capabilities were required for success in private equity and then analyse the degree to which the junior managers were able to exhibit these capabilities.
This represented a failure by senior management to recognise how much the firm had changed. The firm had been built around their particular skills and leadership style which, whilst effective in a smaller firm, were no longer so appropriate for the size the firm had grown to. At a deeper, more unconscious level, their feelings of nostalgia for times past were getting in the way of the need to move forward and consciously develop a cadre of upcoming talent with the necessary skills to run an organisation at scale.
A third issue was the culture of the firm. Was it inevitable that a private equity firm have a culture where a few made the overwhelming number of key decisions and took the vast majority of the financial compensation? If so, how would they transition to a second generation of leaders, if their confidence had been undermined so profoundly?
This issue of confidence, or the lack thereof, became the dominant theme in the coaching. The HR director, a very charming and experienced executive, had lost a lot of confidence in himself and his ability to influence the directors and become overwhelmed by relatively unimportant tactical activities, like sorting out individual executive problems and contracts. This insight led to the client defining his success by the degree to which he could enable the directors (a group of ‘under confident overachievers’) to develop greater confidence within themselves as managers and leaders and therefore a greater ability to engender confidence in those below them.
The perennial intergenerational unconscious feelings of envy and jealousy that the old, fearing themselves as soon to be past their prime, had towards the energy and curiosity of the young also played a part in a failure to perceive potential strength in the next generation, and a focus on their naivete and shortcomings. This observation enabled the HR director to take a different perspective on some of the more critical and negative observations of senior managers.