Why Every Private Equity Portco CEO Needs a Chief of Staff

The role of a Chief of Staff (CoS) has evolved from its origins in the military and government to become a pivotal position in the corporate world. Initially coined by McKinsey for the U.S. government, the Chief of Staff role has transitioned into the private sector, proving particularly invaluable in private equity portfolio companies (portcos). For CEOs of these portcos, a Chief of Staff can be the linchpin for driving strategic initiatives, ensuring operational efficiency, and facilitating organizational cohesion.

History of the Chief of Staff

The Chief of Staff position has deep roots in military and government contexts, where the role was crucial for managing the operations and administration of top leaders. McKinsey & Company introduced the role in 1952 as a way to streamline and manage a rapidly growing Executive Branch. Since then, several Chiefs of Staff—such as James Baker III—have become legendary for their pragmatic execution of their administration’s goals. The role has since migrated into the corporate arena, where its impact is equally profound, especially within the dynamic environment of private equity.

The Ideal Background for a Chief of Staff

A successful Chief of Staff in a private equity portco typically has a background in consulting. This foundation equips them with a strategic mindset and a broad skill set that are both critical for the dynamic nature of the role. Former consultants bring a rigorous analytical approach, problem-solving skills, and the ability to manage complex projects—attributes that are essential for the high-stakes, fast-paced world of private equity.

Key Attributes of a Successful Chief of Staff

1. Ability to Lead Multiple Projects:

In a private equity portco, the CEO is often juggling numerous high-priority projects, from operational improvements to strategic growth initiatives. A Chief of Staff with a consulting background is adept at managing these projects concurrently, ensuring that each one progresses smoothly and aligns with the company’s overarching goals. Their experience in project management allows them to prioritize effectively, delegate tasks, and keep all stakeholders informed and engaged.

2. Ability to Connect with All Levels of the Organization:

A Chief of Staff must be a versatile communicator, capable of connecting with everyone from the executive team to frontline employees. As James Baker advised one of his successors, “You can focus on the ‘Chief’ or you can focus on the ‘Staff.’ Those who have focused on the ‘Staff’ have done pretty well.” In other words, a good CoS acts as a bridge within the organization to break down silos, foster collaboration. Building open channels of communication with all employees ensures that the CEO’s vision and directives are clearly understood and executed across all levels. Former consultants excel in this area due to their experience in working with diverse teams and stakeholders in a variety of different industries.

3. Ability to Act with Minimal Oversight:

A Chief of Staff needs to operate autonomously, making decisions and executing plans with minimal oversight. This independence is crucial in a private equity portco, where swift and decisive action is often required. A consulting background, combined with real-world experience, prepares a Chief of Staff to take initiative, solve problems on the fly, and keep projects moving forward without needing constant direction from the CEO.

Things to Watch Out For

While the role of a Chief of Staff is critical, it’s important to be discerning when selecting the right candidate. Here are key pitfalls to avoid:

1. Candidates with Only Large Company Experience:

Individuals who have only worked in large corporations may struggle to thrive in the often resource-constrained environment of private equity portcos. They might be accustomed to extensive support structures and slower decision-making processes, which can be a mismatch for the dynamic needs of a portco.

2. Candidates with Consulting Experience Only:

While consulting experience is valuable, it can sometimes be overly academic. Real-world experience in executing strategies and managing operations is crucial for a Chief of Staff. The ideal candidate should have a blend of consulting acumen and hands-on operational experience to effectively navigate the unique challenges of a private equity environment.

3. Candidates That Lack Dynamic Communication Range:

A Chief of Staff must be able to communicate effectively across all levels of the organization, from the shop floor to the leadership team. Candidates who lack the requisite soft skills struggle to build relationships and fail to develop the trust required to drive initiatives forward. That’s why it’s crucial to find someone who can adapt their communication style to suit different audiences and contexts.

How to Successfully Transition from Consulting to a Chief of Staff Role

Transitioning from consulting to a Chief of Staff position in a private equity portco is no easy task. Landing this essential job requires intentionality, discipline and a strategic vision. Here’s some advice on how to present yourself as a qualified candidate for a CoS position:

1. Showcase Any and All Private Equity Experience:

Highlight any private equity-related projects you have worked on, even if they were brief or project-specific. Emphasize your understanding of the private equity landscape, key challenges, and how you have contributed to value creation in similar contexts.

2. Showcase a Wide Range of Industry Experience and Project Types:

Demonstrate your versatility by outlining the diverse industries and project types you have been involved in. A wide breadth of experience is a salient indication that you can adapt to the various daily challenges a CoS faces and bring innovative solutions to the table.

3. Showcase Any Small Company Experience:

Most lower middle-market and middle-market PE portcos are relatively small compared to clients of major consulting firms. Any experience you have with small companies, whether through consulting or previous roles, can be a significant advantage as it shows you are comfortable in lean environments and can thrive with limited resources.

4. Don’t Overplay Any of Your Experience:

Be honest about your experiences and avoid overstating your role in transactions or specific outcomes. For example, don’t claim extensive transaction experience if you have not directly worked in private equity or investment banking. Authenticity is key, and exaggerating your experience can quickly backfire.

5. Be Humble and Network with Everyone You Can:

Building a strong network is crucial. Reach out to professionals in the private equity space, attend industry events, and seek mentorship from experienced Chiefs of Staff. Being humble and willing to learn from others will help you gain valuable insights and opportunities in the field.

Compensation Ranges

The compensation for a Chief of Staff can vary widely based on the size of the company, industry, and geographical location. However, in the private equity space, the role is highly valued, and compensation typically reflects this. According to industry data, the annual salary for a Chief of Staff in a private equity portco can range from $150,000 to $300,000, with the potential for bonuses and equity stakes that significantly enhance total compensation.

Conclusion

For CEOs of private equity portfolio companies, a Chief of Staff is more than just an aide—they are a strategic partner who can amplify the CEO’s effectiveness and drive the company towards its goals. With a strong background in consulting, a Chief of Staff brings invaluable skills in project management, organizational communication, and the ability to act with minimal oversight. Investing in a talented Chief of Staff is not just beneficial; it is essential for any private equity portco aiming for success.