I'm interested in learning more about the 'portfolio operations' or 'operating partner/principal' role at PE firms, which I understand is growing rapidly due to both broader industry growth and increased focus on operating intervention to drive returns. The role/structure/seniority seems to vary significantly by firm, but general responsibilities include due diligence, value-creation plan, driving value-creation initiatives, board representation, managing external consultant engagements, post-deal M&A activity, and more.
Obviously this role is subordinate to the investment team in seniority, responsibility, and compensation (some have even gone as far as to call them 'second-class citizens'), but to me it looks like an interesting role with solid comp, access to some carry, and a potential springboard to a C-level role either at a PortCo or externally.
Heidrick & Struggles released their 2022 North American Private Equity Operating Professional Compensation Survey, which shows that an operating partner/managing director at a $3-5bn fund can expect to earn over $1M cash comp annually + $6M in carry (and goes up from there with fund size). Again, this obviously pales in comparison to the deal team but when you consider the much lower risk and (I'm guessing) more manageable lifestyle/hours, it sounds pretty darn good to me. Even the level below operating partner, referred to here as 'operating principal' or 'operating executive', earns around $600k cash comp + $2-4M carry at a $3-5bn fund. Not exactly peanuts!
For the reasons outlined above, the portfolio ops role seems underrated to me. I was hoping someone here with more knowledge/experience could offer their two cents as there's not a ton of information out there. I'm also interested in knowing the most common background for these roles. For those hired directly to operating partner roles, I imagine that's almost exclusively CEOs and people with P&L responsibility + deep industry experience. For the levels below operating partner, perhaps MBB consultants or former investment professionals?
I don’t think it matters that much, given there’re a lot of PE firms that don’t separate the investment side from the operating side. So for these firms, some of the Associates on the investment side also have to do a lot of the due diligence and operational improvement work for portfolio firms.
I work in PE Ops / value creation. It’s legit. Not treated at all like a second class citizen at my firm, though it is culture dependent.
Could you speak to how someone gets into this role at the junior or senior levels? And is it possible to advance from junior to senior roles within your team? I imagine most senior folks will have heavy industry experience, so you must hit a ceiling if you try to work your way up, no?
Joined as a VP after several years in consulting followed by a few more as an operator. There is no defined track to get into it, though MBB is probably the easiest track.
Within PE Ops, there are really two tracks. The first is the generalist track, where you may be called upon to do any number of tasks, manage third parties and oversee (but not perform yourself) key strategic initiatives. Promotion tracks are kind of opaque. Some firms don’t hire until principal level, others VP, some may have an associate or two on staff. Wide variance.
The second track is the one you see at larger firms with larger ops teams (vista, insight, LLR, Apollo, SGE). This is the specialist track. You will be hired as a demand generation specialist, product management SME, etc. You can be hired as low as associate level and progress through the ranks.
One common misconception about PE Ops roles is that they are leading the commercial due diligence pre-investment. Save for a few notable exceptions (Insight Onsite team in growth space), this is usually not the case -- due diligence is almost always ran by investment teams - senior PE ops folks might advise on some specific deliverables in the value creation plan to underwrite the investment case, but it is rather a low touch involvement pre-investment. Their main role is to work with PortCos post-investment, which could be exciting and well-regarded within PE shops, but it is very different from investing.
I’m a VP Operator at a UMM firm. Target profile for VP Operators was 10+ years experience with real industry work followed by or preceded by time at a consulting firm or a strong F100 leadership development program.
Look for people who got their hands dirty but also had reps in strategy/value creation and/or seeing a lot of different situations to apply knowledge. Pure consulting backgrounds are discounted because of the perception they lack experience in owning outcomes and knowing what it takes to create change over the long-term.
Operating Partners are all ex-CEOs or high level C-Suite with a mindset biased toward investing.
We don’t hire junior level operators because it’s too hard to develop the requisite skills in-house due to a lack of reps as well as getting them the exposure needed to master the soft skills for influencing portco executives.
My long-term goal post MBA is to either try to reach a PE portco C-suite position / executive-in-residence and have side investments / side businesses.
Same here! Are you in PE ops currently?
Not yet. Plan to try to enter the PE portco space ~5-7 years post MBA after getting more work experience in certain roles.
Very firm specific. Might be a grass is greener situation but I find the work our ops team does more interesting than the deal side. Deals all blend together after awhile
Can you expand on this a bit? Interested in this...
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