Rethinking the Try Before You Buy Approach for C-Suite Hires
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Private equity firms often face the challenge of building strong leadership teams for their portfolio companies. One common approach is the "try before you buy" strategy, which involves hiring potential C-suite team members on a temporary basis before making a final decision. While this approach may seem logical at first glance, it may not be the best strategy for private equity firms. In this blog post, we will explore the drawbacks of this method and discuss why a more thorough and targeted hiring process might be a better solution.
- Time and resource consumption
The "try before you buy" approach can lead to a significant amount of time and resources spent on evaluating temporary hires (Bamberger, 2017). Private equity firms may have to go through several trial periods with different candidates before finding the right fit, and this can be a costly and time-consuming process. In contrast, a more thorough and targeted hiring process can help private equity firms find the right candidate faster and more efficiently.
- Potential negative impact on company culture
Bringing in temporary executives may create a sense of instability and uncertainty within the organization (Teten & O'Leary, 2016). This can lead to a lack of trust and cohesion among team members, negatively affecting the overall company culture. A well-planned hiring process, with clear expectations and a long-term focus, can help avoid such disruptions.
- Disruption of leadership continuity
Frequent leadership changes can disrupt the continuity and momentum of a company's strategic initiatives (Benson & Zajac, 2010). Temporary executives may not have the same level of commitment and ownership as permanent hires, which can impact the execution and success of crucial projects. Hiring the right candidate for the long term ensures continuity and better alignment with the company's goals.
- Impact on the candidate pool
The "try before you buy" approach may limit the pool of potential candidates, as top executives might be less inclined to accept a temporary position (Groysberg, 2010). This can result in private equity firms missing out on the best talent available in the market. A more targeted and strategic hiring process can help attract a broader range of high-quality candidates.
- Inability to assess long-term fit
A temporary trial period may not provide enough time to adequately assess the long-term fit of a candidate (Braddy & Fleenor, 2010). Skills and capabilities that are crucial to the success of the portfolio company might only become apparent over a longer period. A comprehensive hiring process that includes in-depth interviews, assessments, and reference checks can provide a better understanding of a candidate's potential for long-term success.
Conclusion
While the "try before you buy" approach might seem like a practical solution for hiring C-suite team members in private equity portfolio companies, it has several drawbacks. A more thorough and targeted hiring process can help private equity firms find the right candidates faster, minimize disruption to company culture and leadership continuity, and ensure a better long-term fit for the portfolio company.
References
Bamberger, P. (2017). Onboarding New Executive Talent: A Guide for Success. Organizational Dynamics, 46(3), 128-137.
Benson, B., & Zajac, E. (2010). Top management incentives, monitoring, and risk bearing: A study of executive compensation, ownership, and board structure in initial public offerings. Administrative Science Quarterly, 55(2), 195-216.
Braddy, P., & Fleenor, J. (2010). The importance of the assessment process in executive selection. The Psychologist-Manager Journal, 13(2), 92-104.
