A well-executed leadership change at a portfolio company correlates with a 90 percent higher likelihood of hitting three-year performance goals, according to McKinsey. Heidrick & Struggles research shows PE executives already recognise this, citing leadership as their top value creation priority 60 percent more often than efficiency or growth, and 90 percent more often than bolt-on acquisitions.
The firms generating those outcomes are doing something specific. They treat leadership as a continuous part of value creation rather than a one-time hiring decision at the start of the hold period.
That matters because a leadership team that worked exceptionally well at £20m revenue can begin to struggle once the company doubles in size, enters new markets, or faces more operational complexity. Decision-making slows. Founders who once sat at the centre of every conversation become bottlenecks. Functional leaders start pulling in slightly different directions. None of this usually appears overnight, but over time it affects execution.
This is one of the reasons leadership conversations are becoming much more central to value creation in private equity.
The strongest firms are no longer treating leadership as something to revisit only when performance dips or tension becomes visible. They are spending more time thinking about how leadership teams evolve through growth, what capabilities will be needed at the next stage, and how alignment is maintained as pressure increases.
That shift matters because strategy rarely fails in PowerPoint. It fails in execution.
And execution is ultimately a leadership question.
The first 100 days
The first 100 days are often where these dynamics become visible. There is usually strong momentum early on. The investment thesis is clear, priorities are defined, and expectations are high.
But alignment is not simply about agreeing on objectives.
It is about how decisions get made when conditions change. How conflict gets handled inside the leadership team. Whether accountability remains clear as the business grows. Whether leaders continue operating as one team once pressure increases.
The strongest portfolio environments create space for those conversations early, before friction becomes costly.
Learning across the portfolio
Increasingly, firms are also recognising that some of the most valuable leadership insight already exists within their own portfolio.
A CEO leading international expansion for the first time can often learn more from another portfolio leader who has already gone through that journey than from a generic growth playbook. The same applies to leadership hiring, organisational design, succession planning, or integrating acquisitions. Many of the challenges repeat themselves across businesses, even when the sectors are different.
Hg Capital has built one of the clearest public examples of this through Hive, its portfolio community connecting 2,750+ senior executives across 60+ companies, supported by more than 120 events a year. The model treats portfolio learning as infrastructure rather than informal networking.
The firms doing this well are becoming much more intentional about creating networks between portfolio leaders, not just relationships between investors and management teams.
That matters because scaling a business can become isolating very quickly. Leaders are expected to move faster, make bigger decisions, and manage increasing complexity, often while building teams around them in real time. Creating opportunities for shared learning across the portfolio reduces some of that isolation and accelerates judgment.
Over time, those leadership networks become part of the value creation model itself.
Leadership capability as the business scales
More firms are recognising that leadership capability needs to evolve alongside the business, not after problems emerge.
Historically, leadership discussions often focused on identifying gaps or replacing underperformance. Increasingly, the focus is shifting toward how firms actively strengthen leadership capability throughout the investment lifecycle.
Not because something is broken, but because the demands on leadership continue to change as businesses scale.
By the time a company reaches exit, buyers are evaluating much more than financial performance. They are looking at whether the leadership team can sustain growth, whether decision-making scales beyond a small number of individuals, and whether the organisation feels resilient enough to handle the next phase of ownership.
A strong leadership team changes the quality of that conversation.
Leadership as part of value creation
Ultimately, the firms that continue to stand out are rarely the ones relying on strategy alone. They combine operational discipline with leadership depth, strong networks, and an understanding that organisational effectiveness compounds over time.
Because in private equity, value is rarely created by the plan itself.
It is created by the people responsible for executing it.
The firms that handle these conversations well tend to address them earlier, before leadership friction starts slowing execution. That is where thoughtful leadership support can make a measurable difference.
At People Edge, we work with investors and portfolio leaders to strengthen leadership capability, alignment, and organisational effectiveness as businesses scale.
If these are conversations happening across your portfolio, we would be glad to discuss how other firms are approaching them and where leadership support can create the greatest impact.