Maximize ROI in Portfolio Companies: Culture Drives Profitability

Historically, many private equity companies turned their investments around fairly quickly, usually within three-to-four years. Today, however, that hold time is increasing to seven years or longer. It’s more important than ever to maximize these investments.

According to more than 20 years of research by Denison Consulting, best-in-class organizational culture and leadership practices directly link to performance metrics such as return on investment, sales growth, quality, innovation, and customer satisfaction. High-performance cultures are defined by strong performance in each of these areas:

Strategy

It’s important that there’s a clear vision for the company and that vision links specifically to goals for departments and individuals.

Operations

For an organization to operate efficiently there must be coordination and integration across business units and agreement on best practices and procedures. Anything less creates chaos and results in lost efficiencies, productivity, and money.

People

Do your people possess the skills necessary to achieve results? If not, is there a training plan in place? Employee engagement is critical; staff must be able to collaborate and understand how they’re making a difference in the success of the company. It’s important that they feel heard.

Customer

This comes down to customer focus. Are you able to understand/anticipate customer needs proactively? How agile is the organization?

Based on our experience, here are a few tips for building a high performance culture:

1. Create a common and shared understanding within the organization.
2. Translate how business goals link with expectations for individual/team goals and behavior.
3. Provide clear objectives, parameters, and resources for cultural integration teams and/or key leaders.
4. Create metrics and provide specific feedback on how the organization is progressing toward meeting its goals.
5. Honor tradition. Pioneer change. (There may be cultural elements you want to retain—elements that made the organization appealing to you as an acquisition.)

These best practices can help an organization thrive. For more information, please contact Steve Gravenkemper at 248.223.3699.

This article is based on a presentation given by Steve Gravenkemper as part of a panel discussion at the 41Great Lakes ACG Capital Connection.