3 Essential Traits Every Private Equity Operating Partner Must Have

Number One: A Coaching Mentality

Many operating partners remain stuck in operating mode. This is especially common in the lower middle market, where operating partners are often ex-CXOs transitioning to working directly with private equity firms. The role of an operating partner is akin to a board role but with additional responsibilities at the private equity level.

However, if you remain stuck in operator mode, you risk alienating the CXOs within the portfolio companies. This approach can significantly affect the exit multiple potential because the expertise remains with you, instead of empowering others. This undermines the effective role of an operating partner and forces you to essentially function as a CXO in a portfolio company.

Operating partners need to hone the skill of coaching. They must develop their people, improve how they operate, and ensure responsibilities are effectively managed by the portfolio company’s executives.

Number Two: Documented Playbooks

The best operating partners have exceptional playbooks. Over my seven and a half years of role selection, the most effective executives I’ve worked with are those who have documented playbooks they can deploy into portfolio companies. These playbooks are designed to guide C-suite executives in their implementation.

For example, if it’s a financial reporting playbook, the operating partner supports the CFO in executing it. If it’s an operational improvement playbook, the CLO receives support to implement it. These playbooks drive EBITDA improvements, enhance baseline fundamentals, and boost exit multiples by reducing key person risk—whether from the private equity firm or the C-suite team. Processes become embedded into the business, creating long-term stability and growth.

Number Three: Staying Out of the Limelight

Transitioning from CXO to operating partner means stepping away from the spotlight. It’s no longer about what you’ve done or achieved. Instead, your role is about implementing processes and improvements in the business and training executives to drive these changes. Success becomes about making the executives in your portfolio companies shine.

In a private equity podcast, I interviewed Jeffrey Stark, who transitioned from chief executive (four times over in private equity-backed exits) to operating partner. He described his role as being about making the chief executive look as good as possible. His mentor had taught him that his role involved:

• Preparing the chief executive for board meetings, ensuring they can handle tough questions effectively.
• Anticipating challenges and coaching the chief executive through them.
• Supporting the chief executive without stepping into the limelight.

Jeffrey’s role was to make the executive’s success the focus. Think of the coach who guided Mike Tyson to his first world title. Most people remember Tyson’s victory, but few remember the coach behind it. That’s the essence of being an operating partner—empowering others to achieve exceptional results.

If you’re an operating partner exploring new opportunities within a private equity setting, please reach out to us at Raw Selection. We handle numerous appointments every year and would love to assist you in securing your next step.