This is one of the concerns I am increasingly hearing from business owners deciding whether to go the PE route.
I am preparing for a large strategy conference for an excellent company, and watched one of my favourite strategists, Gary Hamel, interview Eric Schmidt from Google.
At about 23 minutes in, Eric asks the audience if they are familiar with people from private equity and then comments that private equity is not interested in the assets of Google, the employees. He talks about how private equity is most interested in the cash flow.
"Yes," I thought, "Specialization of management of a business is required and many business owners really benefit from private equity's financial sophistication."
But Eric is giving an off-the-cuff, honest comment and he is an incredibly high level client/partner of private equity. This is like getting a focus group "AHA" from private equity's dream client. One thing I have learned is to listen - really listen - to these throw out lines because they contain the key to building competitive advantage.
Eric's comment should make all private equity people pause and consider. Imagine if your private equity organization made it their strategic focus? Imagine the competitive advantage you could build?
The "IT" I am talking about is the people.
Could you make that top priority in a way that would please Eric?
Talking about the strategic culture of a company made me recall McKinsey's recent report on private equity and my pod cast interview with Sacha Gaie. What sto0d out for me was how few private equity funds made the big profits and how many did very badly. These top achievers were not the big players either. I wonder now if these private equity teams were more tuned in to the culture and the people inside their partnered companies?