John Handley has had a portfolio of non-executive roles since 2005, and is currently Chairman of Keane Brands, Eyoto, RSS Infrastructure, and Lasercomb Dies. He has also lectured for the BVCA for over 15 years. Previously, he led the Midlands teams at LDC and ECI.
How would you describe board meetings in Private Equity-backed businesses?
A lot of rubbish is talked about board meetings. In my observation, most board meetings are not board meetings at all, they’re glorified management meetings.
What’s going wrong?
I think you get the quality of papers, and therefore board meetings, that you deserve. Private Equity board members have a massive influence over both but, in my experience, many are poor at understanding how to run, develop, and drive a board via the board meeting.
This is because many are accountants and hang on to numbers. Also, most have never run a business and don’t know how to effectively influence as a board member. As a result, their input is modest and they end up focusing on the numbers, because that’s what they know how to do. The whole thing is wonderfully circular.
My mentor once said that being a Chairman is like having one foot in the boat and one foot on the jetty — the PE firm being the boat, and the portfolio company being the jetty. It’s great when the boat is tied to the jetty, but the minute the boat pulls away you have a problem. You can jump onto the boat or the jetty, or you end up in the middle and drown.
Navigating that is a real skill and a challenge for the Chairman. However, it’s also a challenge for the Private Equity board members; they must learn to influence without dictating, but most PE houses don’t invest enough time in teaching their people how to do it.
What can PE houses do to change this?
It comes down to training and experience. It’s unusual to see Private Equity professionals receiving much training after a couple of years in the job, so there’s more to be done there.
PE houses are, however, starting to think about what good looks like and are developing guidelines for portfolio companies. They’re also bringing in more seasoned portfolio professionals who know what they’re doing. This is driving more discipline and greater professionalism around how portfolio company boards are set up and managed, for example. We are seeing an improvement, but it’s slow-going so far.
Aside from the skills and experience of the board members, what do you think are the most important drivers of an effective board?
It’s having an agreed plan and a laser-like vision for where you’re trying to get to. Once you have that very clear idea of what you’re trying to achieve, you need to work back from that and develop a plan — selecting the right KPIs, deciding what they need to look like if you’re going to achieve that vision, and working out how best to achieve them. Then you perform, and are accountable, to that vision.
Portfolio company board packs tend to be heavy on data, and most board members consider them too long. Why?
When board packs are too big, it’s because they have too much data, not too many words.
The simple process of writing narrative forces each member of the team to think hard about what they are reporting on — what the metrics are, what they are trying to achieve, and, if they are not hitting their targets, why that is. And when it comes to the metrics, I believe in having more non-financial KPIs than financial ones.
Do you think there is a link between the quality of a board pack and the outcome of an investment?
Yes. Management teams that write good board packs usually comprise talented individuals who ‘get it’. And one thing that is an absolute correlation is that the most talented teams make you the most money.
What is the best piece of advice you have ever received?
Listen first, talk last. Wait and save your impact for the 10% of the meeting in which you need to influence the conversation.
What’s the smartest decision you’ve ever made?
The smartest decision I made was joining LDC. The second was going plural in 2005 at 43 years old — a very early age. I love it because I enjoy taking a talented bunch of people and helping them to see the bigger picture and achieve something special together.
This interview is part of a series researching the Board’s value in Private Equity. To get a copy of the full report, click the button below.