This post is going to get a little weird because it’s going to do two things at once.
- Discuss an interesting, if dated, survey [1] I found on the sometimes tense relationship between CEOs and PE operating partners (and other senior advisors like executives in residence) [2].
- Demonstrate how it makes great use of tension questions to make the report more interesting and reveal the drama in what could be an otherwise dry subject.
The former should interest executives of VC/PE-backed companies who want to work better with their advisors and, of course, to such advisors themselves. The latter should interest all marketers, but particularly those responsible for the periodic PR market studies [2] that many companies produce (e.g., Collibra’s Data Intelligence Index, Atomico’s State of European Tech, or Pigment’s Office of the CFO Report).
I love these studies because you can get not a two-fer, but a three-fer, in terms of benefits:
- Thought leadership, via leading discussion of emerging ideas (e.g., ask CFOs about their AI strategy)
- Increased market awareness, via promotion of the survey report
- Stronger positioning. For example, Collibra’s index supports their migration from data governance (their historical roots) to a broader and more modern positioning in data intelligence.
And that’s not to mention the MQLs if you use your report as gated asset. Or any proprietary insights you gather from questions where you don’t publish the answers. Goosebumps. I love these things.
This report starts with some gem quotes that cut to the heart of the problem:
Most CEOs have little/no prior experience with this type of relationship. At the extreme, there can be mistrust, miscommunication, competitiveness, and misalignment — all of which distract from the value creation agenda.
Friction between CEOs and operating partners might be an unavoidable human condition. This relationship is unlike any other in the business world. It would be interesting to ask CEOs to draw where the operating partner fits within the context of their organization chart. We all know they are likely to draw the Board above them and all employees below them. But where would they draw the operating partner …As a sub-component of the Board above them? As a peer? As an independent advisor working for them?
But the real strength of this report is its use of tension questions, where you ask two groups about the same issue and then spotlight tensions between them. We don’t have to go far to find one:
They asked both CEOs and operating partners about operating partner NPS. They then compared CEO actuals with operating partner expectations and, bang, right at the outset, we have a gap you could drive a truck through. 39% of CEOs are detractors whereas operating partners expected only 3% detractors. Operating partners think they have a respectable NPS of 41, whereas CEOs report a dismal, actual NPS of -3.
Conclusion: operating partners have no idea what CEOs think of them. That’s a tension question at work.
But we’ve only just started the bus. Let’s back it up over the operating partners by looking at value added.
About 70% of operating partners think they add “significant value” through their work, while only 20% of CEOs do. Zero percent of operating partners think they add only “little value,” but nearly 30% of CEOs do. Brutal as this survey is, they forgot a category that might have made it worse: negative value-add. The minimum value-add from a helper isn’t zero. It’s negative. Some would-be help actually slows you down.
Note that these tension questions are not manipulative or loaded. They’re fair questions that simply shine a bright light on an actual tension. That’s what makes them great.
Now, let’s twist the knife by looking at the cost/benefit of operating partners.
Around half of CEOs think that operating partners don’t bring enough value to offset their perceived cost. Ten times more operating partners than CEOs think that operating partners bring 10x+ their cost in value.
I’m ready to re-title this report: The Blissful Ignorance of Operating Partners.
They then move on to open-ended questions and verbatim responses. These are an important part of all surveys, but particularly so with tension surveys. We’ve identifed one or more massive gaps. Now, what do we want to do about them?
Here, they ask the CEOs:
What one suggestion would you make to operating partners/senior advisors to help them be more effective in creating value for your business?
And we get some great answers:
Focus on building a relationship of trust with the CEO, not dispensing advice being the deal partner’s operations spy.
Prioritize what actually creates value and listen to what management wants your help with.
They should be a resource to the CEO, not the board.
As someone who works as an advisor, I’d note that you don’t always get a choice in deciding whether the CEO or the board is your customer. For example, in my work with Balderton, I position myself as “a free service brought to you by Balderton Capital,” hopefully clearly communicating that while Balderton is paying me, I am working for you. That said, Balderton is paying me, so if you tell me you plan to destroy the company I may need to mention that to them.
These relationships can be inherently complex. They are simpler on the control-oriented PE side [4], where it’s not, “I work for one of the many investors,” but instead, “I work for the owners.” If you want to eliminate this complexity entirely, you can hire advisors directly, which many early-stage VC companies do [5]. That said, VC/PE advisors are often high caliber, fully booked, and expensive, so working through your investors may be the only way to access the ones you want.
Back to the survey, they then took some verbatims from companies with a good relationships between the CEO and the operating partner. Quotes:
Trust is essential. There are no “go arounds,” no undermining the leadership team.
Operating partners and the CEO talk candidly about the rules of engagement and communication protocols — including what not to do.
Every conversation is confidential and to be kept between the CEO and the operating partner (not shared with the Board or the management team).
Finally, they give the operating partners a chance to tell their side of the working-better-together story. Quotes:
Work collaboratively with the operating partners. [Theres is] zero payback in defending that you are already doing it right.
That we are there to help create equity value, which is in all our interests, and therefore a partnership approach is key — on both sides.
Trust us to have the discretion to keep certain conversations and information privileged.
As an advisor, I think the last point is key and if a CEO is concerned, an explicit conversation can usually help.
As a marketer, I loved this survey. It picked a great topic and executed against it well, with some awesome tension question and well-chosen verbatims. I can only guess why they didn’t run it annually and I personally wish they did — half the fun with this type of survey is watching how things change over time.
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Notes
[1] This thing is not easy to find online. You can find some old references to it, but Blue Ridge Partners seems to have archived it off their website. Perhaps they felt it was outdated, or maybe they stirred the pot too hard. Since there is no copyright notice of any kind in the report, I’ve uploaded it here (highlighting mine), so you can see it.
[2] It’s dated (2018) but my hunch is the core issues haven’t changed that much.
[3] I don’t know what else to call them. They are definitionally market research, but they aren’t run with the primary intent of learning more about the market. They are typically run by PR/comms for purely marketing reasons. New insights can be a by-product, but they’re not the primary point.
[4] The side of PE where they buy a controlling stake of the company and which, I believe, is the primary focus of this report.
[5] Often done with equity compensation via a YC FAST advisor agreement to simplify the process.
