What does the Corporate Operating Partner do and how is the role created?
This post is an excerpt from our latest article, The New Role of the "Corporate Operating Partner" and Why 2018 Will Be Its Breakout Year by Lancor Partner, Chris Conti.
There are a variety of ways to utilize the Corporate Operating Partner. In some cases, the mandate may be rather narrow and defined through either a function or a particular business unit or geography; in other cases, the mandate can be quite broad and unstructured. In the latter case, it requires a great deal of forethought and planning to ensure that the person can be successful.
We have seen models that resemble a SWAT team created to fix things related to strategy, process and cost improvement, shared services, and governance issues. Sometimes they serve as an internal replacement to what would have typically been done by external strategy consulting firms. We have seen situations where this capability might report into a head of strategy, the CFO, the Chief Administrative Officer, or some other business unit President. Naturally the most desired reporting line is directly back into the CEO of the company. It is that executive level sponsorship which creates the environment for success.
One interesting way to create this role is to have the candidate and the CEO jointly write their own “Activist letter” to the Board of Directors. Of course, it requires trust and transparency because no sacred cows should be spared. Typically, the recommendations made by an Activist are all things that existing management know should be up for discussion. Formalize the role as an integral part of crafting the mandate and put it up for debate with the broader Board of Directors. In actuality, going through an exercise like this will shine a light on those who truly embrace their fiduciary duty to the company versus those whose self-interest dominates their thinking.
Keep in mind that these roles are only ever meant to be temporary in nature. There would be a finish line at which time all parties are clear in understanding that the mandate has ended. The Corporate Operating Partner should not be under the belief that they have an open-ended time frame within which to deliver results. Operating Partners work inside the Private Equity context because PE typically looks to exit an investment around a five year time horizon. Thus, every quarter is critical. The Corporate Operating Partner must work with the same sense of urgency. This also removes any perception that this person is a rival to the management team.
Once the role is set, the Corporate Operating Partner must take advantage of all possible tactics to mitigate the risk of failure. This is a multi-dimensional examination of not only the business itself but also of the interpersonal relationships that are required to achieve success. As one of our private equity clients remarked, “Deals happen because the terms are right, and the negotiation was well executed. But on the operational side, progress is only made through influence born out of mutual respect for one another. Human relationships matter at the portfolio company.” The same applies in the publicly traded context.
Get out on the road and meet the people. The action does not typically occur at HQ; it occurs out in the field where the business meets its clients and customers. Pitch your transformation plan to the rank and file on whose participation you will rely. Create advocates for your plan and the desired outcomes with the people who can most readily translate plans into action. Walk them through your vision for how you expect to monitor progress and measure success. These important elements should not come as a surprise nor should they be last minute developments.
All that being said, the rules of engagement need to be succinctly laid out to the business’ managers: The Corporate Operating Partner is their best friend until he/she concludes that they need to be their biggest enemy, i.e. they have concluded that the manager is part of the problem. This is where the sponsorship and support of the CEO become critical. PE Operating Partners are successful because they are a representation of the ownership of the company. Their power is assumed. In the Corporate Operating Partner context, the power is derived from the CEO. Thus, there must be a visual show of support in order to make this engagement successful.
Ultimately, internal executives are the best advocates for the transformation. Their storytelling opens doors to other parts of the business. When the role starts to string together some wins, the team will be pulled into the situations where it can do the most good, which will continue to perpetuate its place within the enterprise until it finally reaches its agreed upon goal.
We've answered this question and more in our latest article - The New Role of the "Corporate Operating Partner" and Why 2018 Will Be Its Breakout Year". Click below to download and read the full article.
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