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Wellness. I'm your host Jamie Cosmar and I'm your co host Samita Jayanti, and today we are here to talk to you about the role of talent and investment. And I'm very excited we are going to be speaking today about an article that Saan Jayanti wrote for pe Hub entitled the most important part of diligence that nobody is talking about. So this is the next frontier of investing.
Yeah, I think investing is such a particular industry, right. We happen to have a really good understanding of it because it's an industry that we do so much work in. But I think one of the biggest idiosyncrasies of it is that investment firms are making private equity investments and then have a very limited timeframe over which those investments play out, which then prompts the question of what are the biggest drivers of value in an investment? And that's what the article
is about, or one of the topics that it touches upon. So in this article you speak about the next frontier of due diligence in the investment process being hiring a deeper, broader pool of talent and having the right organizational architecture in place to enable high performance execution. So why don't you delve into a little bit about like what do you mean by this? Because there are a lot of big word yeah and big concepts, and how do these two elements
lead to improved value creation? So I think if you start at the beginning and you ask the question of what are the key value drivers of value creation and investments, one of the things at the very top of that list is human capital, right, and that's the leadership team, the management team of these companies. Traditionally, in private equity, there wasn't much of an emphasis
on a data driven methodology to actually assess management teams. Right. There were lots of There was lots of financial diligence, There was a lot of diligence around product market fit, around market sizing, etc. But traditionally there hasn't been a ton of diligence around talent. And I would also argue until several years ago, the awareness level of their being a variety of different assessment tools that can actually give you a data driven view of an individual and a team
didn't exist. Today, we're in a very different world and This is why best in class investment firms are embracing these tools of talent assessment to help them wrap their arms around one of the biggest value drivers that's going to drive the outcomes of their investing management team effectiveness, which is which is great because that segues wonderfully into our next question, which is you state in this article that
it remains the single most important factor determining the success actual success of an investment. So why don't we define for our audience today what we mean by effectiveness here? Right? Because that is a very term, the term where you could interpret a lot from it. And why is it the most important factor? And how does one determine how effective a team is? That's a great
question. So I think the reason that management team effectiveness is such a critical driver is that you can have the best laid plans, and if a management team isn't able to execute on those plans, then the plan falls apart,
right, and the investment falls apart. In many instances, management team effectiveness is really driven by three pillars which we spend a lot of time thinking about and working with coaching customers and coaches at at idemics, which are clarity around roles, alignment among those roles, and then last the communication and collaboration among
a management team. If any of those three things doesn't exist, there isn't either clarity around what each person's role is, there isn't alignment around how all of those roles fit together, and that team is not able to communicate and collaborate effectively in service of executing on the investment plan, then things fall apart. So basically, if there isn't clarity, if there isn't alignment, and if there isn't collaboration, then we could say the team is in effective exactly.
So then that leads to the question, is it how do we go about diagnosing an ineffective team and then how do we turn around ineffective team? Yeah, that's a great question. So I think to answer the first question of how do you actually diagnose whether a team is effective or not? Let's go back to the assessment tools, right, What are the assessment tools do?
There are a variety of different assessment tools. There are, there's a suite of six to eight and assessment tools that are really best in class and most appropriate to a professional services investment firm environment. And what those assessment tools allow us to get at our individual personality, individual professional skills, and then most importantly, perhaps how both of those knit together across a team to either
render that team effective or not effective. So here's an example. If you had a CEO who scored very low on vision and strategy and was very high on risk aversion, that's probably not a great set of qualities to have in a CEO because that person absolutely needs to be driving vision, strategy and execution.
On the other hand, if you had a CFO or a COO, both of which are roles really that are tossed with keep the trains running on time and moving forward, and they had no attention to detail, no clarity and ability to delegate roles effectively and manage process as well, then they're not
particularly effective in those roles. And so this picture that the assessment tools give us is is the talent set and the capabilities across this management team one that's going to knit together and work well well or there are some key strengths and
talents that are really missing. And it allows investment firms to look at that picture and then form a view on Hey, this management team, the CFO, the COO, and the CEO are great, but we now need a chief revenue officer, or we need a head of sales, and that person needs to have this set of complementary skills that fit well with the existing management team. So it's like taking a you're basically creating a map or a puzzle,
shall we say, of an executive management team. You're saying, I have all these pieces, but I actually then need also these additional pieces. So when I'm bringing in somebody new, or perhaps I'm I'm trying to grow the talent that I have, I'm doing it for these gaps. Exactly. Think of a management team as a puzzle, and if the pieces all fit together, then you get puzzle completion. And if you're missing a piece in this set of talents and skills that we're looking for in a management team,
then the puzzle doesn't complete. So I think, you know, we started to segue into the work that we particularly have been doing in this space because we have now a track record of working with clients in this way to basically complete these puzzles. To draw the analogy, So what have we seen, what have our clients said with the right coach, what sort of feedback have
we heard in these cases? So I think there are two things that have really stood out to me from the variety of feedback that we get, both from the coaches as well as the board members to whom these c suite teams report in the end, and those two things are that from a board perspective, they see a clear raising of the game and a clear positive change in the way that the management team is both working with and using the board,
communicating with the board, and executing on strategy, as evidenced by the performance
right and the results the financial results. Second, we've heard very consistently from CEOs and their direct reports the rest of the c suite team that in each case, even in cases where individuals have been averse to coaching or not understood the value of the coaching because of the hybrid approach that we use, where some of the work happens in a team based coaching session, but equally some of it happens in individual sessions, that even people who felt it would not
deliver value to them have derived huge value from it, in fact, to the point where some of those skeptics end up becoming the biggest users of the coach's time, and really the reason that they do this is because in achieving greater clarity around what they're meant to be doing, how that aligns with the rest of the team and the efforts underway, and the rest of the operational
areas of the business, and their own communication collaboration with one another. It works a lot more smoothly, and as a result, they feel they're achieving their results and sort of achievement against plan a lot faster, and it's actually providing them an accelerant to their own performance individually and as a team, but also ultimately to the business's performance. That's amazing. So let's hypothesize where we've got a team, they're super effective, We've got all the right skills.
Is there any reason to bring in a coach for a team that's already deemed effective? And if so, why so? I think? And it's a great thing to draw an analogy here for a second, which is effective management teams are like high performance athletes, and high performance athletes, even when they are at the peak of their success, are constantly asking the question what should I be doing better or differently? Right? Like, what's the next thing? How do I keep improving? How do I set off that flywheel of
continuous improvement. That's exactly the question that effective managers constantly ask themselves. When that question is asked, I think managers quickly realize that the best person or the most well equipped person to provide an objective view on the individuals and the team is a coach. It's not a board member or a mentor or some other party with some other interest effectively in the the team or the individual or
the company. Right. It is a true outsider who's a trained professional as a coach in the variety of methodologies and assessment tools that we use, who's able to act as a thought partner to these individuals and teams and give them a view in a completely confidential environment of trust to actually help them do their
best work. Yeah, it's it's interesting as we've been talking about coaching as a performance enhancement tool rather than a remedial tool, right, So, like you know, I I've also been contemplating why is it that you know you can have somebody and we've had our clients tell us that you can have somebody within the team that's telling sort of this person who maybe is struggling that they need to be doing X right, they need to be leading better whatever it
is, and for some reason that advice when it comes from somebody internally is not as impactful or as effective, or maybe it just doesn't get through in the same way as when it's coming from an independent party. And I don't necessarily have an answer for this, but I've been thinking about why is that.
Well. I think we all bring our own cognitive biases to each situation, right, and those biases are very much driven And there's a whole body of research on this that these biases are very much driven by the person delivering the feedback. So when we hear, for example, from a peer or even a boss, that we should know do X, y or Z to improve a B or C, we receive it in a particular way that is rife with that cognitive bias, and in a sense, it occludes our hearing.
We don't actually hear what's being said. We hear sort of what we want to hear through the lens of how we perceive that person in our relationship. I think when a coach delivers exactly the same feedback, it's coming from an objective third party who's not only delivering you that feedback, but then is your trusted party with whom you can be vulnerable and you can have an honest discussion about a behavior that you might have or a mannerism that you might have
that might be leading to then an unconstructive situation at work. You're just never going to be able to do that with a boss or a set of peers or a set of direct reports, right, And I think that's where the coach is not only able to get you to hear a piece of feedback and a piece of advice, but also work with you in a very tactical,
practical way to help you interpret that advice. So how do I actually do this in my workplace tomorrow and next week, in the following week, and then hold you accountable for actually trying it, coming back to them and reporting on how that went. Oh this work, This other thing didn't work. Let's change it up, Let's try this other approach. That entire process of iteration is only something that you can go through with a coach. Yeah.
I think also just getting to your point in general, you as the coach. He will have an openness to a coach that you will not have to all these people that you know, right, because you're you're you've already formed a relationship habit with whoever that individual is, right, and so I think that maybe your mind is open. I also think that a coach provides an environment, just thinking about the accountability piece, where it's safe to fail.
Absolutely, that is such a great point. Yeah, so it's like if you if it doesn't if they tell you to try something it doesn't work out, there's no repercussion exactly exactly, whereas a workplace, that's never the sentiment.
Right. We live in a workplace that is defined by constant evaluation and performance reviewing, and that's constructive, but what that's created is a void which is now the space that's being filled by coaching and by coaches that creates an environment where someone actually can ask the self aware and introspective questions of how do I do this thing? Or why do I behave this way? Or how
can I make this better? Yeah? Absolutely, absolutely, And so you know, we've been talking about this in the context of investment, but you know, and we largely have worked with professional services firms. But the work that we're doing for alignment, clarity and collaboration, is it particular to sort
of that type of situation or is it applicable to other industries. It applies across the board, and when you talk to CEOs today, whether it's the conversations we're having or what you read in the research, the single biggest worry that CEOs have is leadership development. Right. They all feel that they're struggling somehow to develop a bench of talent that then can stand the company in good
stead going forward. One of the reasons for this, and there was an article just recently about this in the Financial Times, talked about how the everyday demands of most leaders are in a sense so overwhelming that it leaves no room for that introspective moment of how can I do this differently, And there's no thought partnership, as we said earlier, because you're in an environment which is
fundamentally competitive. I think that, particularly in the age of AI, as we think about how the world is going to change as a result of AI, the biggest change is going to be that what we call soft skills today are going to become hard skills because a lot of the simple technical tasks will be outsourced to the AI, but the skills of managing a team, managing a process, collaborating across borders, or across distributed teams or even among teams
that are all sitting together, all of those tasks fall to leaders, and without individuals having leadership and management skills, companies will just experience reduced productivity. And do you think that, for example today, that's something that business schools
are teaching future business leaders. So I went to business school hundred years ago at this point, but yes, based on some of our conversations with, for example, Professor Amy Edmondson or Professor Madupa Akinola, there are now a number of professors at business schools thinking about topics like in the case of Madupay, stress and anxiety and the impact of that on leaders and teams, right, psychological safety in the case of Amy Edmondson and the impact of that on
organizations and teams. Francis Fry's work where she in fact went into uber to rebuild trust in an organization where trusted really being destroyed. So all of these topics are of paramount importance. As companies grow in scale, it's very different to manage tiny teams that are effectively startups with not a lot to lose, compared to larger, more scaled organizations with a reputation to guard and ensuring that
delivery is as consistent over time is really all about the organization's culture. And if you can't define a culture that is a safe environment of innovation but also acknowledgment of mistakes and a mechanism to teach people to do things differently or better
than how does one progress? And I guess that then circles us back to what we've been talking about today, which is the importance of role clarity, alignment, and collaboration amongst the management teams so that they can take an organization and help build a culture, particularly amongst large organizations that enables people to thrive
absolutely effectively. When you think about most investment firms, they're buying companies that are transitioning from one stay to another, going from small to medium or medium to large, or they're getting ready for some other transaction, or they're acting as aggregators in their industry, whatever that may be. But there's some sort of significant step change that is going to be expected of the company operationally over
this investment period of three to five years. Given that this question of management team effectiveness is all the more important, and increasingly, I think over the last five to ten years, we've seen as the markets and the politics, the geopolitics have become more volatile, companies have had to deal with a set of external inputs that affect their industries and their businesses in all sorts of different ways, and so it's led to a more complex task in terms of managing
teams and organizations and businesses than ever before. And that's here to stay. It seems like, yeah, it's not going away, that's for sure. So if any of our any of our audience members would like to read the article that you wrote, where can they find it. It's on pe hub and it's it's a short piece, under eight hundred words, and it really talks about why this is such an important driver as we've talked about, but also how we do this work and why this work works in a sense.
Great, well, thank you everybody for joining us today and we look forward to to you joining us for the next episode of Coaching for Performance and Wellness. Thank you so much, thanks for listening. Please subscribe wherever you listen and leave us a review. Find your ideal coach at www dot viidmix dot com. Special thanks to our producer Martin Mluski and singer songwriter Doug allen z