For the past couple of years, many private equity firms and portfolio companies have been operating in somewhat of a holding pattern.
Deal activity slowed. Growth expectations moderated. Organizations shifted from acceleration mode into preservation mode. None of that is inherently problematic. Smart leaders adapt to the environment they’re given.
The challenge is that while the market paused, many leadership systems did not evolve.
A leadership team that was “good enough” to maintain the business may not be the same team that’s prepared to transform it. A decision-making process that worked during a slower period may not be sufficient when growth expectations return. Organizational structures built to preserve stability often struggle when speed, integration, and execution suddenly become priorities again.
Now, deal flow appears to be picking up. Expectations are rising. Timelines are compressing.
That means many organizations are about to discover whether their leadership capability kept pace with what the next chapter requires. And they may discover it faster than they would like.
The reason is simple: leadership gaps rarely reveal themselves when conditions are calm. They show up when the pace accelerates.
A CEO who has not had to make difficult talent decisions for two years suddenly faces them all at once. An executive team that has avoided hard conversations finds itself under pressure to align around a new value creation plan. Leaders who have been successful operating within their functional silos are suddenly expected to work across the enterprise in ways they never have before.
The business hasn’t necessarily changed overnight.
The demands of the business have.
This is one reason we’re seeing increased interest in executive assessment, organizational diagnostics, and leadership team alignment work. Firms are recognizing that before they can determine what needs to change, they need a clear picture of where they actually stand today.
The most effective organizations won’t wait for execution problems to reveal capability gaps. They’ll proactively evaluate whether their leadership team, decision-making processes, and organizational design are ready for the next phase of growth.
Because when the market speeds up, leadership capability doesn’t have time to catch up.
It gets exposed.
This piece was written by Dr. Sandy Fiaschetti, founder and managing partner of Lodestone. An I-O psychologist by training, she works at the intersection of I-O psychology and private equity, helping firms and portfolio companies figure out whether their leadership can actually deliver on the value creation plan. Want to talk leadership strategy with her directly? Visit us here.
