By Frank Scarpelli, Managing Partner - Sparc Partners
While it is well understood that talent plays a fundamental role in value creation, what distinguishes top-performing portfolio companies is how they leverage leadership strategy as a dynamic lever for transformation, adaptability, and execution speed. According to the LCap 2024 Leadership Capital Report1, firms that continuously recalibrate leadership structures in response to shifting business conditions achieve 2.3 times higher returns than those that treat leadership as a static component.
Strategic leadership is about more than just assembling the right team—it’s about creating an adaptive decision-making framework that evolves with market shifts and operational demands. Top-performing portfolio companies ensure their leadership teams remain aligned with changing business needs by fostering seamless communication between deal teams, operating partners, and company leadership.
Several key factors distinguish high-performing portfolio companies:
We reached out to Lauren Gambardella, a recognized leader in Private Equity talent strategy at Arsenal Capital Partners, and she highlighted the importance of continuously aligning leadership with business evolution:
"Exceptional value creation isn’t just about having great talent—it’s about ensuring leadership can anticipate, adapt, and execute in step with changing business objectives. By equipping our teams and portfolio companies with the right expertise, leadership, and culture, we create resilience and competitive advantage."
She added:
"We achieve this by embedding leadership strategy directly into business outcomes. Leadership development, culture, and organizational design must evolve in real-time to maximize financial and operational performance."
Leadership strategy isn’t just about who is in place—it’s also about when and how they are introduced. Portfolio companies that strategically stagger executive appointments based on value creation priorities consistently outperform those that make simultaneous or delayed hires.
As illustrated above, companies in the top quartile take a strategic approach to leadership changes, aligning executive hires with investment milestones. In contrast, bottom-quartile companies often mismanage timing, leading to slower returns.
Another key factor? Right-sizing leadership teams. Overly lean teams lack essential capabilities, while overly expansive ones can create inefficiencies. Spencer Stuart’s research highlights the importance of building "talent ecosystems"—integrated leadership teams that collectively drive operational improvements rather than filling roles in isolation.
The hold period demands a forward-thinking approach to succession planning. "We review top team effectiveness and succession plans annually to ensure we have the right leaders in place at each stage of the company’s evolution," notes Ms. Gambardella. Russell Reynolds’ research reinforces this, showing that effective succession planning programs maintain active development pipelines while continuously reassessing leadership needs against value creation milestones.
Effective talent acquisition during the hold period requires a systematic and proactive approach. Lauren Gambardella shares Arsenal Capital Partners' proven framework for successful executive recruitment:
"When there is a need to recruit new leaders externally, we focus on clearly defining the leadership need, engaging the right search partners, thoughtfully integrating and onboarding new hires to set them up for value-add quick wins, and ensuring the deal team and portfolio company executives are aligned in fostering transparent and candid conversations."
This methodical approach ensures that leadership strategy remains flexible and continuously aligned with value creation initiatives, reducing ramp-up time and maximizing impact.
A dynamic leadership development strategy during the hold period serves multiple critical functions:
Companies that invest in structured, adaptive leadership development programs typically execute value-creation initiatives faster and demonstrate stronger operational performance. These programs work best when aligned with evolving business objectives and tailored to address emerging capability gaps.
Matthew Eley of Elite Search Partners highlights a critical dimension of portfolio talent strategy:
"CHROs & Chief Talent Officers play a pivotal role in the PE ecosystem—not only in talent attraction but also in retention. During the hold period, keeping top talent in place is fundamental to driving value creation and ensuring year-over-year growth."
Portfolio companies with strategically positioned HR leadership demonstrate higher retention rates and more successful execution of value-creation initiatives. The LCap Leadership Capital Report confirms that companies with adaptive HR leadership achieve significantly higher multiples during their hold period.
The value of dedicated talent functions extends far beyond recruitment. As Mr. Eley explains:
"Chief Talent Officers are key to ensuring portfolios achieve their strategic growth objectives. They streamline the talent attraction process through thorough tracking systems, market mapping processes, and effective due diligence."
These specialized roles help mitigate suboptimal hiring decisions regarding financial and operational costs and ensure continuous alignment with value-creation objectives. “Having a Chief Talent Officer in place mitigates risk and ensures optimal efficiency in talent attraction,” Mr. Eley emphasizes.
As PE firms refine their value creation playbooks, leadership agility has emerged as a key differentiator. Success in the hold period requires a holistic, forward-looking approach—combining:
The evidence is clear: Portfolio companies that treat leadership strategy as an active, evolving component of value creation—rather than a static necessity—consistently outperform their peers.
This blog is the second installment in our series on human capital pre- and post-acquisition. If you missed the first discussion on optimizing talent strategy during the acquisition phase, you can read it here
About the Author
Frank Scarpelli is a trusted advisor to the private capital sector, bringing decades of experience in driving growth and transformation for organizations of all sizes, from SMBs to enterprise-level companies. With a strong focus on private equity, venture capital, and family offices, Frank aligns human capital and technology strategies to support the full deal lifecycle, from due diligence and acquisition to growth and exit.
Want to explore how leadership strategy can enhance portfolio performance? Let’s start a conversation. Connect with me at frank@sparcpartners.com
About Sparc Partners:
About Sparc Partners: Sparc Partners provides tailored executive search, leadership consulting, and a full spectrum of advisory services. We work closely with organizations in the Private Capital sector, including Private Equity (PE), Venture Capital (VC), Mergers & Acquisitions (M&A), and Family Offices. Need guidance on building a more adaptive leadership strategy for your portfolio? Connect with our team at Sparc Partners.
Footnotes:
1 - Lcap 2024 Leadership Capital Report: LCap Leadership Capital Report 24
