Q&A: Heidrick & Struggles’ Amanda Worthington

As demand for CEOs and CFOs with private equity experience outstrips supply, firms will need to think differently to attract top talent, says Heidrick & Struggles’ Amanda Worthington.

Amanda Worthington
Amanda Worthington: “The traditional ‘slash-and-burn’ CEO is no longer the best fit”

Is the current economic environment impacting the types of skills and experience that PE firms are looking for in portfolio company CEOs and CFOs?

Private equity firms traditionally preferred CFOs with significant PE and CFO experience, but that is now shifting. Heidrick & Struggles’ 2022 Private Equity-backed Chief Financial Officer Compensation Survey found that the proportion of respondents with more than 15 years of experience as a CFO or lead finance officer has fallen from 34 percent to 30 percent over the last two years, and nearly two-thirds of respondents have less than 10 years of experience at PE-backed companies.

Additionally, the traditional ‘slash-and-burn’ CEO is no longer the best fit. Today, we are looking for CEOs with go-to-market, marketing and commercial experience, CEOs who are flexible and creative, future-ready leaders who are agile, and CEOs with a proven track record. We are looking for proven and dynamic profit and loss managers who understand the cost base of a business and who can optimise resources to reflect both diminishing demand and the challenged margin and operating base of these businesses.

What compensation trends are you seeing among C-suite roles at PE-backed businesses?

According to Heidrick & Struggles’ survey, on a firmwide comparison, total reported median cash compensation is higher for CFOs at companies owned by buyout firms than growth firms.

Floors on equity are really common now, especially on compensation for CEOs and CFOs who want a minimum equity on their compensation to even consider going into these roles and are asking for an insurance policy when they take on this risk of turning around companies. This is significant, because we have not seen a floor on equity since the Great Recession.

Also, thoughtful private equity funds are resetting their executive leadership team’s equity to reflect the risks that the CEO can control and the things they can’t control.

How much demand is there for C-suite talent with PE experience? And how can portfolio companies gain an edge in recruiting such talent?

Demand for private equity experience is far outpacing the availability. It is going to require funds to think differently, take chances and find unique ways to mitigate risk. The best funds are putting a former proven PE operator onto their board, giving them an executive chairman title, and allowing them to spend 10 to 20 hours a week onboarding and preparing a first-time CEO in private equity.

To net the best talent, PE funds need to bring portfolio companies the resources that they desperately need, invest in operating partners with functional capability, consider putting independent directors on the board to act as sparring partners or commercial leverage on behalf of their executive leadership teams, and have a thoughtful approach with their executive teams.