Executives who hone their skills at the helm of private companies tend to be more driven, more bottom line-oriented and have much more flexibility than CEOs at publicly-owned companies who are constrained by their need to balance multiple objectives in a corporate ecosystem. That was the consensus of four panelists who discussed the management challenges at private equity-backed firms during a recent Wharton general management conference.
Illustration: Jayachandran / Mint
Today, private equity is facing “an industry transition from competing on capital (and) financial engineering to competing on value creation and access to the best management talent”, says panelist Elena Botelho, a partner at ghSmart, an executive assessment and talent management consulting firm. “This is driven by the need for these firms to get maximum improvements in their portfolio, especially now that the market is tough.”
Botelho notes that this affects the way CEOs are hired as well as how top executives perform in an era of increasingly common corporate buyouts. “Private equity firms get measured on IRR (internal rate of return), which is highly sensitive to the time they hold an investment, so every extra year means they have to drive more Ebitda (earnings before interest, taxes, depreciation and amortization) improvements,” Botelho says. “Before, if they bought the company, took on leverage and flipped it in two years, especially in an environment where multiples (or) valuation was expanding, it was a lot easier to show attractive IRR. Now, they need to attract the best managers to improve the business.”
According to panelist Mark Brownlee, associate vice-president at Infosys Technologies, CEOs in publicly traded firms necessarily practise business as more of an “art” compared to the top executives at privately-held entities, where expectations and results are uncluttered by the corporate “ecosystem”. In public companies, this ecosystem comprises “their trading partners, shareholders, their public culture and brand and... far too many people to answer to,” Brownlee says.
At the private companies he has worked with, however, executives “don’t care about an ecosystem,” Brownlee notes. “(They) are much more isolated and can make more independent decisions. Management teams can be more like business technologists—they understand the science of running a business. With a public company, you need to be the face of the company, dealing with analysts and (having) constant interaction with the media. (Private) companies are great places to be because that’s where you can work with people practising the science of business.”
Botelho stresses that the panel was discussing private equity-backed firms, not necessarily private companies in general, and that top CEOs at publicly traded firms can be just as nimble and focused on the bottom line as their private counterparts. “Jack Welch is probably one of the best (US) examples,” she says.
London in Beijing
With tens of thousands of live spectators and around-the-clock television coverage, the Beijing Olympics offered an opportunity of a lifetime for athletes and countries to display their athletic prowess. But it also afforded a unique chance for a city such as London, which is the host for the 2012 Olympic Games, to aggressively promote itself as an ideal destination for businesses, students and tourists.
The London in Beijing campaign attempted to refresh London’s image—from its old rooting in royalty and history to a more contemporary and forward-looking spirit—in order to capture the attention of today’s younger global citizens who will make tomorrow’s investment decisions.
In the face of rapid globalization, London is competing, not just with major financial or cultural centres such as New York and Paris, but also with Mumbai, Beijing, Bangalore and Shanghai—or any other city that might claim relevance in the shape of things to come.
David Adam, head of the emerging markets team at the London Development Agency, or LDA, which coordinated the efforts of other city agencies that participated in the campaign, instinctively knew that London’s history as the seat of the throne that ruled the seven seas and its iconic tourist attractions were its strengths—and a limitation too. “People already know what London’s strengths are versus (those of) New York or Paris,” he says, noting that his agency instead focused on London’s “culture and we threw in a little bit of intellectual content because they are the basis by which we want to try and attract people”.
The London Development Agency and its partner agencies spent £3.6 million (about Rs27 crore) on the London in Beijing campaign. As a base, they created London House, a hospitality venue in the Games’ neighbourhood from where they orchestrated seminars for Chinese businesses interested in expansion into London, exhibits, dinners and other networking opportunities for their target audience. The London brass included British Prime Minister Gordon Brown, London mayor Boris Johnson and Olympian Sebastian Coe, who is chairman of London 2012.
Among the agencies the LDA chose to work with to develop its campaign was Mirabilis Advisory Services, a marketing communications firm in New Delhi that had worked on India’s massive branding effort at the 2006 World Economic Forum in Davos, Switzerland. “We were extraordinarily impressed with the way that India used that platform—a moment in which the eyes of the world were watching—to brand itself and to state what its intentions were,” says Adam.
At Davos, the Indian government, along with the Confederation of Indian Industry, or CII, a leading chamber of commerce, had showcased the country’s economic opportunities with a campaign themed India Everywhere. The $4 million (about Rs19 crore) branding effort brought together 22 prominent Indian companies, various government ministries and departments and other organizations. About 110 Indian business leaders and government officials attended the event, participating in at least 200 meetings and speaking in 60 sessions.
For London, the task was different. “The baggage that we have is that everyone thinks (the city) is always going to be there,” Adam says. “Every element of what you understand to be London is probably outdated already… As a tourist, if you think you are coming to London to enjoy the traditional elements, yes, of course, that will play a part in your experience but if you want to ‘dip’ in, it’s like a river—it’s changed again.” Age data on the tourists who visit London gave Adam’s group some insight about what many feel: “People are saying, ‘Well, we can wait; we can go to London at the end point. We’ll go there when we are 50’”. Adam wanted to change that mindset. “We are (trying to attract) a younger group… to come and experience London now”.
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