Leveraging Portfolio Talent At L Catterton

February 7, 2024 – In the ever-evolving landscape of private equity, the strategic deployment of talent stands out as a pivotal factor in achieving sustained growth and optimizing returns. As a middle market PE firm with $34 billion in assets under management, L Catterton is a distinguished player in the PE sector. They’ve positioned talent at the core of their investment philosophy, effectively utilizing it to fulfill their thesis-driven strategy and achieve operational excellence.

Karen Gordon, an expert on talent and a managing partner of portfolio operations at L Catterton, is a seasoned operator with a proven track record of success. In her role, she has a unique perspective on how the firm strategically leverages talent at the portfolio level to drive growth and optimize returns.

Prior to joining L Catterton, Ms. Gordon was a managing director at Providence Equity Partners where she collaborated closely with portfolio companies to enhance topline growth. She additionally served as a senior partner and managing director at The Boston Consulting Group where she helped clients to identify growth opportunities and drive large-scale transformations.

In the following discussion, Ms. Gordon unpacks the process of aligning talent with investment theses, emphasizing the need for continuous assessment and adaptation. She also sheds light on the evolution of L Catterton’s talent strategy and how executive search firms have become more strategically aligned with the firm’s talent process.

Karen, how does L Catterton leverage talent to achieve growth and optimize returns?

We think about talent at every stage of the deal. As thesis-driven investors, our directive is to constantly assess whether the talent we have in place is capable of delivering optimized returns, using the thesis as a north star. Early in the process, we will refine the thesis in partnership with the talent involved and shape the talent strategy together. If we’re further along in the process, this might not be an option. As we progress through our hold period, we constantly assess whether changes or additions need to be made to our team.

What does this look like in practice?

We start by identifying the critical roles and take a disciplined approach to role definition and setting those roles up for success. Having that framework in place makes it much easier to assure we have the right talent in the right places. This process continues throughout the lifecycle of a deal in partnership with our CEOs and our boards. Talent is not stagnant; people are dynamic and necessitate assessment and reassessment. You always need to know who the high performers are and where their potential lies. Having a real time understanding of those factors allows us to enable leaders in all key roles, not just at the executive level.

“Talent is not stagnant; people are dynamic and necessitate assessment and reassessment.”

How do you assess talent below the executive level?

During the deal process we only have so much access to the broader team. Luckily our approach as thesis-driven, operationally centric investors lends itself well to building trusted relationships with the executives in our portfolio companies. Post close, we start from a philosophy that says great leaders build great teams, A players attract A players. We do not have the ability to assess an entire organization, but we count on the great leaders at the top to have a clear perspective on their teams’ strengths and weaknesses and on those trusted relationships to ensure that we are getting the right visibility into what is required to build a strong organization and what actions we need to take in support.

Speak more to the talent diligence process in a proprietary deal. 

In a proprietary deal we often have longer time horizons and more access, significantly increasing our ability to conduct talent diligence. We have a team of functional experts, our portfolio operations team, who are brought in to meet with management teams and assess organizational capabilities on a functionally specific basis. As an example, one of our digital team members might sit down not just with the CMO and CEO, but also with the VP of growth, VP of retention, and maybe with the head of analytics. This helps us understand individual and team capabilities on a deeper level.

“I think we’re going see more investment in talent enablement in this industry as success in this environment depends on driving more operational value and talent is the most important driver of success.”

Have there been significant changes in L Catterton’s talent strategy in recent years?

Our strategy on talent has evolved, quite consciously, over the last six or seven years. We’ve moved from a strategy that was talent selection-centric to a much more holistic approach. Today, our focus is on ensuring talent fit to purpose.  We start from the value creation thesis and ask what is required to deliver. We assess what we have and what we need, looking at the entire organization, rather than assessing talent needs just against a narrow set of roles at the top.  Once we have the right individuals in place, we look at making sure the whole is greater than the sum of the parts. We think about talent enablement to get more from the employees we have in place, recognizing the massive impact culture plays in fully leveraging talent.

How has the way search firms service the PE space evolved in the last decade?

My experience is that search firms have evolved in partnership with us. Ten years ago, search firms were much more transactional: they were brought on to execute a search and they executed it with excellence. Today, the search firms we work with most closely see themselves as partners in our business. They think about deals with us before they even happen, and they come to use with talent ideas. They’re asking us where our pain points are on talent, and they’re bringing us new thinking, not just new people. It’s a symbiotic relationship that empowers us to leverage talent more effectively.

How will the mounds of dry powder sitting on the sidelines be employed this year as it pertains to portfolio talent?

There is a lot of dry powder and capital needs to be put to work. Our business is to do just that, with high returns attached. As prices remain high and interest rates are elevated above where they’ve been in recent years, operators need to move faster and drive more operational value to deliver against our investors’ target returns. I think we’re going see more investment in talent enablement in this industry, as success in this environment depends on driving more operational value and talent is the most important driver of success.

Reprinted with Permission from ExitUp!

Contributed by Scott A. Scanlon, Editor-in-Chief; Dale M. Zupsansky, Executive Editor; Caleb A. Edmundson, Editor-in-Chief, ExitUp; Lily Fauver, Senior Editor – Hunt Scanlon Media