Robust assessment is key to avoiding pitfalls
A general consensus around what these qualities would be emerged, although it should be noted that one member of our group of PE specialist did argue that hiring a CPO untested in private equity is too great a step in an already high-risk industry. “When I go to the outside market, I’m looking to buy previous success,” says Jon Higginson, an operations advisor for Advent. “Ideally I want someone who has previously delivered in that role, under similar conditions.” He adds that though it is possible to accept a candidate with no previous PE experience, there persists a strong bias towards those with experience.
“There are ways to assess if an executive has the skills required, even if they haven’t done precisely directly relevant work before,” argues Xavier Cassignol, CPO of IDEMIA (Advent and Oberthur Technologies/Morpho). Adds Oscar Rego, CPO at TK Elevator: “At the end of the day, the focus isn’t that different — it’s still about delivering more with less, which requires solid change, communication and stakeholder management capabilities.”
What’s clear is that PE firms need to be rigorous and nuanced in their testing of prospective candidates, conducting strategic capability assessments, case study exercises, and deep referencing. Taking such an approach we believe it is possible for PE firms to discover dynamic, functionally excellent CPOs with no direct experience in PE who have an affinity for the PE environment.
The core indicators of PE affinity that de-risk hiring decisions and release fresh sources of CPO talent:
Cultural fit, collaborative style
Procurement is not an isolated function, particularly in PE, where undermining the effective performance of multiple symbiotic teams and functions damages the value creation plan. “You’re always dependent on sales or production or others,” says Tansu Kirimli, CPO at Swissport International. “Understanding what the journey is allows you to bring peers, stakeholders, and other partners in alignment with you.”
Deep-dive analysis of cultural fit repays the investment by revealing how an individual is likely to respond to PE specifics. “We want our CPO, in fact all our management teams for the portfolio companies, to have grit, determination, persistence,” says Paul Vega, partner at Cinven. “And given the complex stakeholder environment, we need really high levels of EQ.”
CPOs who demonstrate innate ease with the culture, married to highly collaborative styles, are very likely ready for PE. "Collaboration within and across teams drives enterprise leadership - helping each other for the greater good of the company, which is a crucial cultural change necessary for success,” states Wouter Hut, CPO of Ahlstrom-Munksjö.
A fundamental of the procurement role in private equity is that it is a principal enabler of value creation. It’s therefore essential to establish that an executive seeking to join PE is fully business-literate — able to identify and to focus relentlessly on the drivers of value-creation, as well as being able to talk intelligently about business with commercial partners.
IDEMIA’s Cassignol, who has worked in four different CPO roles under PE ownership, would expect a CPO candidate coming into PE to be “someone able to invest themself as CPO in the overall success of the company, able to look beyond their own function. I’d be looking for someone with an entrepreneur kind of background.”
That’s a view supported by Thierry Minel, CPO at GKN Automotive: “In PE the working capital is part of my DNA; we’re supporting our cash position, the supply chain, finance. And although we’ve been in business for 50 years, we have a start-up mindset, a very strong entrepreneurship mindset.”
Calm under pressure; comfortable with uncertainty
A CPO with no private equity experience is often coming from an environment where “people around them might be making decisions that we would expect a CPO to make,” says Swissport International’s Tansu Kirimli. “So the skill set I want to see in a non-private equity CPO is huge resilience and the ability to adapt fast. There’s going to be a pipeline of projects, all of which need reporting.
“And part of that is not making a big noise when we want to implement something — don’t start requesting steering committees and stuff. It’s your job to win over stakeholders.”
At IDEMIA, Cassignol highlights a defining challenge of PE: “It can be difficult dealing with uncertainty — you never really know for sure when you’re going to be exited.” So it’s vital to test whether a new CPO in their first experience understands their core role in delivering a well-managed exit strategy at peak value.
CPOs cannot expect to thrive in private equity if they bring with them rigid approaches to how things are done — one example cited was whether they would be able to step outside their past experiences, taking a forward-thinking and open minded approach, broadening their focus beyond spend under management and RFP.
Increasingly, says Cinven’s Vega, “with high expectations on impact and execution speed, private equity CPOs will have to be more agile to extract value both cross-functionally and end-to-end across the value chain.”
Ahlstrom-Munksjö’s Wouter Hut recalls his surprise at some of the findings to emerge from assessment exercises at his portfolio company regarding the capabilities displayed by those who thrive in a private equity environment.
“I thought there would be an emphasis on cost cutting and working extremely hard in tough conditions, but it was actually about being open for new things, engaging, accepting help for the benefit of the end goal,” says Hut. “It all made sense once it was laid out, but it was unexpected at first.”