Why Middle Management Matters in Today’s PE Backed Portfolio Companies

June 22, 2022 – Middle managers in any organization act as the glue that enables everything to happen. They connect, enable, and provide whatever their teams and first-line managers need to get their work done. But their role, according to executive recruiters and private equity talent leaders, is often overlooked and undervalued.

A fundamental characteristic that PE firms are seeking in leaders of their portfolio organizations is a commitment to the organization’s success, said Tim Russell, managing partner of The Tolan Group (TTG). “Leaders who share the same level of commitment to the portco’s success are more often than not instrumental in accomplishing the growth and scale objectives of the investor,” he said. “PE firms are looking for executives who are leaders in action and not in title only.” Leaders who are attractive to PE investors, he noted, are those who provide direction, affirmation, inspiration, and collaboration. “Without these characteristics, the organization’s objectives risk not being recognized.” And, of course, these leaders are often found in the middle management ranks.

Innovative Approach

Mr. Russell said that leaders who are seen as valuable team members by PE sponsors are those who often take an entrepreneurial approach to their work. “It’s a leader who sees the importance of keeping costs low, growing profits, and expanding market share,” he said. “A leader who keeps an eye on the capital expenditure as if it were their own. One who looks to maximize the output of all involved with an unsatiable desire for doing things better. PE firms want those who are innovative in their positions and passionate about the role they play in the company.”

Clintech Health to Launch this Summer

The Tolan Group has announced leadership changes to allow the firm to exponentially grow and scale. Effective July 1, founder Tim Tolan will move to executive chairman. Kaye Johnson, managing partner, will assume executive duties as CEO, including leading the day-to-day operations, finance, and strategy for the firm. Ms. Johnson joined The Tolan Group in 2015 and previously was responsible for all client delivery and operations.

Last year, The Tolan Group tripled its executive search business and continues to grow rapidly in its core market – healthcare tech, healthcare services, and behavioral health for private equity clients. The firm in headquartered in St. Augustine, FL, with remote employees based in nine cities. Managing partners Tim Russell and Rachel Gauthier will be responsible for all new business and client delivery respectively, reporting to Ms. Johnson.

Last November, the search firm hired Dave Stillmunkes to build and lead a new contract staffing division focused on providing clinical staff to long-term care facilities, assisted living and skilled nursing facilities, and retirement homes. The new staffing division also hired Bradley Ash to build and lead its health tech service line to provide technical talent to healthcare tech vendors, providers and other healthcare organizations that require contract or temp-to-hire talent resources. The Tolan Group is spinning out that division as a separate company later this summer. Aptly named Clintech Health, it will be led by Mr. Stillmunkes.

Ms. Johnson and Mr. Stillmunkes will report directly to Mr. Tolan.

Though there are many characteristics that make up a good leader, Mr. Russell thinks one that is being highly sought these days is the ability to manage during a crisis. “Leaders who are able to clearly communicate and assure their staff during uncertain times are leaders who add great value to PE sponsors,” he said. “In times of uncertainty, next steps need to be clearly articulated and assurances need to be definitively given to the staff,” he said. Leaders who are invisible or elusive during times of crisis, he added, are seen as weak and unreliable. “Leaders with determination and resolve during uncertain times offer a level of assurance sought by investors.”

Middle Management’s Role

Middle management generally plays a crucial role in an organization’s success primarily because of where they sit in the hierarchy, according to Mr. Russell. “Middle managers often have the ear of the executive suite and that of the frontline staff,” he said. “A clear understanding of what the executive suite’s goals and objectives are, is only one part of the equation. The other part is understanding the goals and objectives and being able to communicate and direct the actions and activities of the staff in order to accomplish those objectives. If a middle manager fails to clearly commit to the executive suite’s game plan, inefficiencies and waste can occur,” he said.

Mr. Russell explained that if a middle manager sees their role as a ‘conduit’ from the executive office, nothing is lost in translation. “Should a middle manager take it upon themselves to ‘interpret’ the desires and goals of the executive team rather than implement them, that too can lead to organizational chaos and prolonged success,” he said. “It is so important that there is a cohesive, collaborative relationship between middle management and senior leadership.” The influence and proximity that the middle manager has to the frontline staff can be an asset or can lead to the undoing of an organization, said Mr. Russell.

Cohesion and clarity between middle management and senior leadership is also essential. “There can be no mixed messaging,” said Mr. Russell. “Mixed messages create instability and concerns among team members which can ultimately affect organizational success. Inconsistent managers have been a source of turnover in companies, and this can rise in times of crisis. A toxic middle manager or an inconsistent middle manager can be the undoing of an organization because of the effect it has on the frontline staff. Turnover, resulting from people feeling disconnected, underappreciated, or confused can often be the result. Synergy between the executive team and middle managers isn’t just a novel concept, it is a mandate.”

Just as frontline staff needs to feel appreciated, so do middle managers, according to Mr. Russell. “It’s important to middle management that they have a voice and that their ideas are heard even if at the end of the day they aren’t the ones that are implemented,” he said. “Should a middle manager feel undervalued or underappreciated by their senior direct report, there could be attrition in the middle management ranks as well. Some PE firms endure unnecessary hardship with middle managers far too long. They hang on to people fearing attrition through loyalty resignations. If there is a toxic element within middle management, it tends to have permeating effects in other areas of the company. Should conflicts arise with a middle manager it’s in the company’s best interest and the PE sponsor’s best interest to rectify the situation quickly in whatever manner possible. In the event a move has to be made with a middle manager, clear communication and transparency goes a long way in assuring the rest of the staff that there’s still a commitment to company objectives and accomplishment.”

Hear Firsthand What PE Leaders Want in Leaders

All of this will be explored in tomorrow for an interactive webinar conducted with The Tolan Group and supported by Hunt Scanlon Media. The focus will be on “The Importance of Middle Management in Portfolio Companies.” The search firm will examine how the executive search industry can complement the growth strategy for PE-backed portfolio companies. It is a great opportunity to hear first-hand from some of the key players in private equity, including Robbie Allen, CEO at One GI; Melanie Brensinger, GP at Anagenesis Capital Partners; and Lindsey Webb, head of talent acquisition at E78 Partners. They will share valuable insights into what is happening and why middle management teams are now more important than ever to their organizations.

“Given the panelists that will be on the podcast, attendees will be able to hear firsthand what is important to general partners, executive teams and talent acquisition leaders,” said Mr. Russell. “The brain trust on this podcast will provide perspectives from three distinct points of view. Understanding what a private equity firm is looking for in a leader and understanding what a senior level leader is looking for in a middle manager can help round out job descriptions for recruiters and can help define roles and expectations for hiring entities. Hearing directly from the panelists will provide a clear understanding of not just the role that a middle manager plays but also how important that role is to the overall success of the organization and the private equity investors investment.”

Topics to be discussed during the webinar include:

• Why solid leadership at the mid-management level is so important: Do they help or hinder the growth, scale, and exit strategy of senior management?
• The synergy between the executive team and middle management: Middle managers have close proximity to the individual contributor. Are there mixed messages being communicated to the divisions?
• Conflict resolution between senior and mid-level managers: How are differing views expressed and enforced within the organization? If needed, how are adjustments made?
• PE Sponsor accountability: Should middle managers have a seat in the accountability meetings?
• Diversity among middle management: Is it more or as important to have diversity among middle management roles vs. executive management roles?

Attendance is free. Register today!

Contributed by Scott A. Scanlon, Editor-in-Chief; Dale M. Zupsansky, Managing Editor; and Stephen Sawicki, Managing Editor – Hunt Scanlon Media