Effective leadership changes always contribute to improved business results but are especially critical to venture capitalist and and angel investors who seek a high return of their investments within 3-5 years. They simply don’t have the time and depth of leadership talent in most early stage companies to recover from a new leader who doesn’t build effective partnerships, gets the right people in place, and executes key strategies that move their business from start-up to sustainability. To quote Larry Bossidy, “At the end of the day you bet on people, not strategies”.
This point was brought home to me by a recent conversation I had with the President of an angel investing organization. He said that most, if not all, of the angel investments that fail are due to leadership rather than strategy failures.
A book named Lessons from Private Equity Any Company Can Usewas written by Bain & Company partners Orit Gadlesh and Hugh MacArthur and published by Harvard Business Press this year. Their thesis is that private equity firms are increasing the value of their investments by unlocking the full potential of their investments rather than by financial engineering alone. They recommend the following principles; 1) define the full potential of your company, 2) develop a blueprint for change, 3) accelerate performance, 4) harness the talent, 5) make equity sweat, and 6) foster a results-oriented mind-set.
I believe these principles can be applied to increasing any organization’s return-on-investment on building human capital assets that include the knowledge, skills, and capabilities of the leadership team and will discuss the application of each of these principles to building human capital and effective leadership changes through practical and proven processes and action steps that have been successful for my clients in future blog posts. I welcome your thoughts and suggestions to this discussion.