Limiting assessments to the N-1 top-executives risks miscalculating the capacity of the portfolio company’s organization to drive change. Often overlooked, middle management is the critical link which translates the value creation plan into front-line actions. Winning hearts & minds and maintaining the trust of middle management is critical for any transformation process.
Gaps between management layers caused by differing incentives, poor communications or unclarity of goals can impair the cascading of actions down the organization and the escalation of emerging risks up during implementation – both of which slow execution of the value creation plan. In the worst case, hierarchical gaps are so large and trust so low that middle managers are passive-aggressive and silently boycott senior management and the PE sponsor.
In particular with mid-market buy-outs operating in niche markets, middle managers can have unique experience and subject-matter expertise which is indispensable and can’t be easily replaced. When bench strength is thin, you have to fight the battle with the middle managers you have.
Middle managers often struggle most with the buy-out. They have little influence on setting value growth objectives, but must deliver on them. And, org structure-, reporting line-, and leadership process-changes impact them more than other cohorts.
Finally, middle management performance and collaboration between levels in the organization are hard to assess due to their large numbers, a lack of fact-based transparency and objective KPIs. Performance at the N-2/3 levels is often a black box, even for senior executives.
Ensuring a strong and effective middle management that is aligned on the value creation goals is essential for translating the plan into action.
This article is part of our series on Organizational Excellence.
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