Private equity companies’ quick turnaround on acquisitions, from buyer to seller, has forced these firms to boost their use of new technology and take a fresh look at the occupants and roles within the c suite.
In a conversation with Les Berglass, chairman of executive recruiters Berglass + Associates, Joe Ferreira, partner at Goode Partners, and Rich Zannino, managing director of CCMP Capital, described how the PE industry’s firm embrace of Big Data and other new technologies, their flexibility in structuring management teams and their functions and their commitment to speed in everything from strategic planning to supply chain have helped them execute on business plans that call for them to sell their assets three to seven years after acquiring them.
“There’s no ambiguity,” said Zannino, a former Liz Claiborne executive who also served as chief executive officer of Dow Jones & Co. “You buy a company for ‘1’ and you want to sell it for ‘2’ or ‘3’ or ‘4.’ It’s a good day for me if I can help someone avoid a mistake I’ve already made. We’re superactive when we see anything that raises our antenna.”
Ferreira picked up on that thought. “We can’t afford not to be because we’re not going to own the business for 50 years. We’ve got a small period of time to build it. Actually, PE is actually kind of easy. Even in the case of the choice of a ceo — the cash count is going to be lower [than at a public company] and they’re going to make their money on equity, so unless you build value, you’re going to waste a couple of years of your life.”
Zannino cited Big Data as one of the tools that PE firms have taken advantage of. “Retail has always been detail, but it used to be detail through long computer printouts by store, category, gross margin, inventory. Now POS controls everything and it allows you to use the information instantly, to know if you’re understaffed in a store when your conversion rate has fallen below average, or that you might be overstaffed because you don’t have people coming into the store.”
As in elements of retailing outside the PE world, that’s greatly changed the role of the ceo and his or her subordinates, making an understanding of the science of retail as important as the merchant’s sense of the art of retail might have been years ago.
“We’re not looking for quarterbacks but for player-coaches, someone who understands leadership,” Berglass said. “We used to bow down to merchant leaders. They still have a role today, but they also have more partners than ever before.”
Zannino stressed that the ego one would expect from strong leaders be balanced by humility. “If you’re not humble, you won’t know where your own blind spots are and therefore how to fill them,” he said. “If I know my blind spot is on the merchant side, I know I have to get someone superstrong to fill that spot,” he noted. “Now if I devalue what merchants do and think I can do that as well — and there have been nonmerchant ceo’s who’ve thought that and they haven’t lasted very long at their companies — I’m putting the company at risk.”
Berglass pointed out that the heightened need for technical talent in the c suite and the importance of giving a chief marketing officer authority over the entire horizon of omnichannel possibilities in retail had led to substantial changes in his practice. “Just about every search is very situational,” he said. “A functional skill needs to be complemented. Other functions in the C suite are all redefined from an experiential standpoint.”
This has pushed the search for viable candidates outside the industries his company services. “There’s a great need to cross-pollinate,” he said. “Half of the people we placed last year we didn’t know 12 months before. In recruiting, if you’re not looking beyond your industry for talent, you are not serving your clients properly.”
Goode currently owns Villa, a sneaker store based in Philadelphia, and Luxury Optical Holdings, a series of luxury eyewear retailers acquired by Goode and amalgamated by the PE firm.
CCMP owns off-pricer Ollie’s and previously owned Francesca’s and Cabela’s, both of which have since gone public.
The panelists were hard-pressed to think of an area where the push for rapid value creation hadn’t affected roles among companies’ executives.
Zannino, a former chief financial officer at Liz Claiborne, stated: “A great company can go bankrupt based on someone screwing up the standard cfo functions, but what we’re looking for is cfo’s who can be partners to the individual business units in driving performance. That’s where the value is going to come from.”
Berglass remembered someone landing a major job as head of marketing at a retail organization only to learn that the principal role of the job was selecting models for photo shoots.
Now, as Zannino noted, chief marketing officer means controlling the message to the consumer across multiple channels despite the reality of that message often being influenced by consumers and bloggers who can “hijack your social media.”
Even before they close deals, both Ferreira and Zannino develop strategic plans that can be used to unite executives around a plan that’s in place immediately.
“We force it onto one page so there’s no question,” Zannino said, “although sometimes it’s with a very small font.”