Publicly traded companies and private equity owned ones are so close, yet so far away. A leader that has experienced both delves into the three main differences.
As Indiana Jones said, “It’s not the years that age you, it is the mileage” – as the counter starts to roll up bigger numbers, I get to think of what I have observed in the process - hopefully some of these observations can be of use to you.
Excluding an early attempt at academic life, my professional experience so far has been equally balanced between publicly-traded corporations (mostly GE) and PE-portfolio companies (Pelican). I found both environments to be enriching and great learning grounds, with many similarities and some subtle differences. I would group these differences in 3 buckets.
Publicly traded companies swing “from the microscope to the telescope” – the 12 weeks earnings cycle dictates a lot of the operational rhythms and short-term actions which need, in turn, to be reconciled with a multi-year strategic intent.
On the other hand, a PE-portfolio company tends to use the “binocular” view, setting its eyes on a 4/6 years’ time horizon. Intermediary performance is non-negotiable but it can afford the luxury of missing a quarter while hitting the yearly commitments without being “dinged” for it. Watch out though: this clock-speed is not linear through the ownership cycle and things tend to accelerate exponentially as the fund approaches the exit of its investments.
Publicly traded companies swing “from the microscope to the telescope” – the 12 weeks earnings cycle dictates a lot of the operational rhythms and short-term actions. A PE-portfolio company tends to use the “binocular” view, setting its eyes on a 4/6 years’ time horizon where performance is still non-negotiable but you can afford the luxury of missing a quarter while hitting yearly commitments.
When choosing between the 2 options, in one case you will find the adrenaline of tight timelines and kneejerk operating mechanisms while keeping your eyes on long terms objectives. But maybe you prefer the other environment, where you can stay the course a tad longer, before things inevitably and gradually start to pick up speed.
In my tenure in GE I was always involved in operational roles and my accountability revolved almost exclusively around the P&L/Income statement. I knew a balance sheet existed somewhere and my friends in finance looked at it but, apart from very, very few interactions (inventory, receivables, payables etc), it was out of my sight. Sure enough the very senior executives were running both the P&L and the balance sheet, but as I moved through the ranks, the P&L was my compass.
In a PE-portfolio company the story is different. Because of size and ownership structure, the weight of handling the P&L versus the balance sheet and the overall statutory reporting is a lot more balanced – not quite 50/50 but I’d argue a good 70/30.
I know this might sound nerdy and technical but it does have implications for your day to day. No math wizard here, but I have always found the P&L to be a simple tool to master technically…. additions, subtractions and, at most, a couple of CAGRs will be the most complicated calculations you will come across. On the other hand, a balance sheet is a slightly more technical animal, requiring detailed knowledge (GAAP, tax etc) that has implications depending on how many legal entities you oversee and where they are based. I find the variety enriching but I can understand why some people find managing these aspects “less central” to the mission and core competency of the company - almost a distraction one might argue.
In a publicly owned corporation your accountability tends to revolve almost exclusively around the P&L/Income statement - something that is directly tied to the core competency of the company, whereas in a PE-portfolio company the balance sheet - a slightly more technical animal- takes on more importance.
Good companies focus on people – full stop – here too there are subtle differences in how they go about it as a function of their size and ownership structures.
Large, public companies, in their “microscope to telescope” swings, tend to have more people-independent processes and needs. People tend to rotate a lot, with fast and (ideally…) frictionless handovers facilitated by recurrent, well-oiled practices. The newcomer gets parachuted in the job, makes impact in a relatively short time and then rotates on. In one of my first customer visits, the smart buyer I met was very used to us, GE types. He welcomed me in his office and before I could say a word he took out a stack of business cards from his drawer, probably 4 centimetres high – they were the cards of the colleagues that had had my same role and went to see him in the previous years. With a smile, he asked me how long I’d be around.
This is the “microscope” at work and it might come across as impersonal and rigid, at times giving the sensation that your personal contribution is diluted. In the case of progressive employers, this “microscope” is counterbalanced by the “telescope”. Multiple job rotations allow exposure to various aspects of complex organizations and they fit within a long term development strategy and investment that will eventually make you a well-rounded industry expert.
In one of my first customer visits, the smart buyer I met was very used to us, GE types. He welcomed me in his office and before I could say a word he took out a stack of business cards from his drawer, probably 4 centimeters high – they were the cards of the colleagues that had had my same role and went to see him in the previous years. With a smile, he asked me how long I’d be around.
PE-portfolio companies tend to be in a permanent flux due to frequent bolt-on acquisitions and operational transformations that are key to the value creation objectives of the fund. This permanent motion somewhat limits the possibility of setting up revolving doors and, therefore, the opportunity to create long-ranging rotational programs. The floor shakes a lot, the horizon is close –keep moving! For the very same reasons, domain expertise is key “there and then” and your direct, personal contribution is unmistakable. As lean and mean machines, if you do not do the job, there is no secret coffer of resources that will get it done for you. This creates the ultimate level of accountability and you really learn what running a business feels like. It is hard to convey the sense of self-confidence you gain from this.
Et voila’, these were my 2 cents of wisdom.
Before I let you go to bigger and better things, I have one last observation, valid for all types of organizations. As things gyrate around us faster and faster, in the corporate world and in society, I noticed that the people that cope the best with this merry go round are those that manage to reconcile their extreme opposites. Yes go and graduate in engineering but don’t forget to read good literature. Love the intensity of competitive sports but also enjoy the introspection of a great movie, the rigor of coding and the fun of parties with a few drinks. In a nutshell, keep striving to fill up your existence with as many ingredients as you can – it’s more fun and it gives you a broader base to stand on.
As things gyrate around us faster and faster, in the corporate world and in society, keep striving to fill up your existence with as many ingredients as you can – it’s more fun and it gives you a broader base to stand on. Yes go and graduate in engineering but don’t forget to read good literature. Love the intensity of competitive sports but also enjoy the introspection of a great movie, the rigor of coding and the fun of parties with a few drinks.
Your path and experience will be yours, and as such different from mine – I hope to meet you somewhere at some point so you can tell me what you observed!
About the author: Piero Marigo is the EMEA Managing Director for Pelican Products, the global leader in the design and manufacture of high-performance case solutions, advanced portable lighting systems and temperature controlled packaging. Previously Piero spent 12 years at GE across 4 business units and 3 countries, looking at 6 Sigma-driven productivity in electronics manufacturing, sales of water-treatment systems and P&L management in the Security market. He lives in Barcelona and, when not spending time with his wife and 2 sons, he can be found paddling on his kayak or trying to catch a wave on his SUP.
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February 19, 2021
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