How do leaders in private equity pass the torch to the next generation? Panelists at last week’s Rising Stars of Private Equity SPEAK event opined about the potentially competing roles institutional culture and forecasting future needs for technical capabilities play in grooming new firm leaders.
One point of contention—the extent to which talent development can be systematized.
“I’d be lying if I said, ‘23 years ago we had a succession plan,’” says Cyprium Partners founding member and partner Michael Conaton. “But after 23 years, you learn a lot and you evolve. And so today, embedded in our LP documents and other management agreement documents we certainly have the structure and the template for the technical aspect of succession.”
While the panelists generally agreed development entails some degree of passing down firm culture, the extent to which that process is sufficient for talent development put the panelists along a spectrum. Is succession planning about mapping who’s next at bat based on cultural affinity, or do new challenges require an evolving screen for future leaders?
“As you think about succession, it’s really thinking about the capabilities you need for the future, and then developing, building or buying those capabilities and ensuring you’re embedding them inside the organization,” says Arsenal Capital chief talent officer Michelle Nasir. “We have been very successful in thinking about human capital as a core dimension of our playbook. As I think about succession and how we create leaders for the future, I think about that as an iterative, continuing cycle. And so I think it’s about the technical capabilities to build, thinking about new capabilities to add, and ensuring you continue to go about fostering values and behaviors.”
A testament to this approach’s ability to shape employees’ skill trajectories, Nasir adds, is Arsenal’s robust slate of internal promotions.
“Another outcome to having a succession plan is creating that DNA of development inside the firm,” Nassir says. “The practice of developing that plan also puts in the mindset of the leaders that we‘re developing the next generation.”
Conaton agrees that development is an iterative process that improves over time, evincing his firm’s approach to prioritizing culture.
“Building a culture of communication comes, in our experience, over time,” Conaton says. “And with that experience, a big part of that planning for succession is all about keeping those lines of communication open with the entire firm.”
See the full panel here: Video: Dealmakers Pass the Leadership Torch.