Management Team Alignment in Private Equity
A private equity deal can often bring together highly experienced executives. These are leaders who were highly successful in their previous roles and bring something to the table the portfolio company needs. Then the deal closes, and now they’re expected to operate as one cohesive management team.
Leaders may have different expectations about how decisions should be made, who owns them and when others should be involved. They may also differ in how they approach communication, conflict and the amount of information that needs to be brought into the room.
The challenge is bringing those different leadership styles, experiences and expectations together in a way that allows the team to operate effectively.
Why Experienced Leaders Can Struggle as a New Team
Management teams in private equity-backed companies often come together through an acquisition or a period of significant change. Some executives were already with the company, while others were brought in by the sponsor. They may have different histories with the business and different roles in its future.
Research on team dynamics offers a useful way to understand what can happen when those perspectives come together. Researchers have found that groups can develop “faultlines,” or divisions that emerge when characteristics of individual members line up in ways that create subgroups. These divisions can contribute to conflict within the group. Lau & Murnighan, 1998
In a portfolio company, those divisions can form around tenure, function, experience or the role someone played in the transaction. Over time, they can influence how leaders relate to one another and how the team operates.
The Problem Is Often the Team, Not the Individual
When a leadership team struggles, the first question is often whether the company has the right people. The better question to ask is whether the team has developed the relationships and working habits needed to operate effectively together.
What happens when those people have to rely on one another? Do they trust each other enough to be candid when something isn’t working?
Problems with trust can be easy to dismiss as personality differences or isolated disagreements. Over time, they can affect how openly leaders communicate, how willing they are to challenge one another and how reliably they follow through on decisions.
Research supports the connection between trust and team performance. A meta-analysis of 112 studies involving 7,763 teams found that teams with higher levels of trust tended to perform better. The relationship was stronger in teams where members depended heavily on one another to complete their work. De Jong, Dirks & Gillespie, 2016
Leaders need to believe their colleagues will raise concerns, keep commitments, respect decisions and speak openly when something is not working.
What Management Team Alignment Looks Like
An aligned management team has established how it will work together before those expectations are tested under pressure.
Leaders know who has decision-making authority and when a decision requires input from the full team. They can challenge one another without turning disagreement into personal conflict. They raise concerns in the room, share information early and understand how the CEO, management team, board and operating partner will work together.
The team also knows what happens after a decision is made. Leaders may disagree during the discussion, but they leave knowing what they are responsible for and support the direction outside the room.
That consistency at the top carries through the organization. Employees see how senior leaders handle disagreement, respond to pressure and hold one another accountable. Those behaviors shape how others approach communication, decision-making and conflict.
Alignment also requires the team to periodically examine how well it is working together. A 2024 meta-analysis found that team reflexivity, or the process of reflecting on and adapting how a team works, is associated with team performance. The research also found that psychological safety can help create the conditions for that reflection. Booms, De Jong & Schippers, 2024
For management teams, that means being willing to ask: What is working? Where are we getting stuck? What needs to change?
How Team Effectiveness Consulting helps
Team Effectiveness Consulting gives a newly formed or changing management team a structured way to understand how it works together and address the issues affecting its performance.
CMA Global starts by understanding the team as it operates today. Consultants use structured interviews and diagnostic assessments to identify patterns, surface concerns and understand where the team may be getting stuck.
From there, the work focuses on helping the team develop a shared understanding of how it needs to operate. That may involve clarifying roles and decision-making, improving how leaders address conflict, strengthening communication or building greater trust across the team.
The process also gives leaders a way to examine their own impact on the team. Each executive brings established habits and approaches to leadership. Understanding how those habits affect the rest of the team can help leaders make intentional changes in how they work together.
The result is greater clarity about how the team operates, how its members depend on one another and what they need to do to move forward together.
Building a Management Team That Can Execute the Plan
A value creation plan places significant demands on the people leading a portfolio company. How effectively those leaders work together can influence how well the organization carries it out.
For PE-backed companies, Team Effectiveness Consulting can be particularly useful after an acquisition, during a leadership transition or when new executives join an established management team. These moments can change the dynamics at the top of the organization and create a need to establish new expectations.
When leaders have the clarity and trust to work together, they are better positioned to carry out the value creation plan.
Frequently Asked Questions
What is management team alignment in private equity?
Management team alignment in private equity is the process of helping portfolio company executives establish shared expectations for decision-making, communication, conflict and leadership. It helps experienced executives function as one management team.
How do you align a management team after a private equity acquisition?
Management team alignment after a private equity acquisition starts with understanding how the team currently operates. Leaders can then clarify decision-making authority, establish expectations for communication and conflict, and develop shared ways of working that fit the company’s new structure and goals.
Why do private equity portfolio company management teams struggle to work together?
Portfolio company management teams often include leaders who came from different organizations or joined the company at different points in the deal. Each leader brings different expectations about decision-making, communication and conflict. Those differences can create friction when executives have to operate as one team.
What causes dysfunction in a private equity portfolio company management team?
Dysfunction can develop when leaders have unclear decision rights, different expectations about communication, unresolved conflict or limited trust. Changes in leadership, ownership, board involvement and organizational structure can make these issues more visible.
How does team effectiveness affect value creation in private equity?
An effective management team can make decisions, address disagreements and coordinate action more consistently. Team effectiveness supports the leaders responsible for carrying out the value creation plan.
When should a PE firm use Team Effectiveness Consulting?
Team Effectiveness Consulting can be useful after an acquisition, during a leadership transition, when new executives join the management team or when recurring team issues begin affecting decisions and execution.
