This skill may bring about gender balance in PE industry
Women are underrepresented in the leadership ranks in the private equity industry. With their very low numbers, the question as to how they can win top seats in private equity firms and become influencers in the industry remains paramount. While the given solutions to the problem hinge on either changing the industry culture to bring in more women or letting women change to fulfill the role, Forbes contributor and management consultant Stephanie Marton believes the solution can be found in the natural evolution of the business model used in the private equity industry.
The traditional business model employed by the private equity industry which relies on financial engineering has left women out of the leadership ranks of private equity companies. The report said that senior female employees comprise less than 10% of the industry which has led to having like-minded leaders at the helm. Such like-mindedness is considered a weak point, acknowledged by even private equity leaders.
However, Marton said fundamental changes are being made in the traditional model in the last few decades. Instead of relying only on financial engineering, it now leans on operational improvement to generate returns. To succeed in the world of private equity necessitates improving the top line growth of the companies in their portfolio as well as that of earnings before interest and taxes margins.
Marton says this shift also requires a change in the private equity skill sets in order to be able to succeed. She writes, "Private equity general partners will need to be as skilled in working with portfolio company management as they are in sourcing and negotiating deals, and PE teams will increasingly include operational experts as well as deal tycoons. I argue that the focus on operational improvement will diversify the talent pool drawn to PE with the potential to even out the gender balance in the industry."