As I mentioned in an earlier post, there was some research done by Alix Partners in which 2 separate groups of PE investors and portfolio executives agreed that:
✅ A “world-class management team” is the #1 predictor of a strong exit for a portfolio company, and…
✅ On the flipside, the factor that can most erode IRR is “leadership and talent.”
Investors and executives alike recognize that, at the most fundamental level, people—the ones that make up your portfolio companies—create value. That talent and leadership is the “meta-lever” among growth levers. It is the “meta-return-driver” among return-drivers.
But when we accept this as true, it begs an important question for investors, boards, and executive teams to ask themselves:
What amount of your board discussions are spent discussing people?
We know that what gets talked about gets attention. Ergo, the amount of time spent discussing critical issues in a board context should be proportional to the importance and impact of those issues.
But we hear from Ram Charan (an expert on corporate governance and seasoned board director) in his book Talent Wins, “Most boards don’t focus on talent as intently as you want yours to.”
There are some encouraging signs that this is changing… that boards are beginning to realize how important talent is to success and shareholder returns. In a recent McKinsey survey of board directors, for the first time in the survey’s history, directors say they want talent to become as much of a priority as strategy.
Boards are taking a greater interest than ever before in ensuring that companies have the talent needed to drive success & returns.
But engaging on the topic of talent is a new muscle for many boards. The role of the board is evolving. This strict focus on compliance, fiduciary obligations, compensation, and financial performance is slowly becoming more balanced with a focus on the primary input that drives financial performance—talent and leadership.
So, I want to share 6 door-opening questions that can bring the all-important but often-overlooked topic of talent & leadership out of the shadows, and into the center of your boardroom table.
But first, it is important to discuss as a board: what is our responsibility when it comes to talent?
Does the board have a shared-view on the criticality of talent? Does it embrace a shared responsibility (together with management) for ensuring that the business has the talent and leadership required to drive growth and generate returns?
Once this foundation is laid, here are 6 important questions that bring talent to the foreground in your board discussions:
✅ What are the most critical roles in our company?
✅ Do we have the right people with the right capabilities in those roles?
✅ What are we doing to motivate & retain the people in these critical roles?
✅ What are we doing to ensure that the company has a culture that attracts great, diverse talent… and brings out their best?
✅ What are we doing to develop and raise up new leaders? Do we have the next generation of leadership talent at the ready? Are we creating a leadership pipeline capable of fueling the company’s success not merely this quarter or next, but 10 – 15 years into the future?
✅ Does our board contain the combination of skills, experience, & diverse perspective needed to support the company’s growth?
This is not a one-and-done conversation, but a never-ending, never-completed, ongoing board imperative at a time when, according to Ram Charan, “talent has never been more important to the success of a [business].”