Unlock value with PE portfolio company governance

As competition for capital heats up, private equity leaders know that robust board governance is essential for realizing value in any portfolio company. The ability to align strategy, manage risk, and accelerate growth depends on how well private equity boards of directors work in concert with portfolio company management. This collaboration has become a critical differentiator as firms seek to drive performance and navigate continuous change.

What actionable, value-driving steps can boards take across core governance areas? Here are a few:

For board composition:

• Diversify experience: Bring together directors with a mix of industry backgrounds, functional knowledge, and fresh viewpoints to anticipate change and challenge assumptions.
• Undergo robust onboarding: Implement hyper-targeted onboarding for new directors—particularly those joining private equity boards of directors for the first time—to align expectations and accelerate impact.
• Assess skills: Regularly review and refresh board skill sets to align with shifting portfolio company needs and emerging industry trends.

For board structure:

• Optimize size and roles: Right-size the board for effective decision-making and clarify individual roles, ensuring private equity representatives and independent voices work constructively.
• Ensure committee alignment: Establish committees (e.g., audit, compensation) that match portfolio company priorities, enabling deeper focus on key areas.

For board engagement and strategic oversight:

• Set proactive agendas: Use data and scenario planning to guide board discussions beyond compliance—helping set strategy, identify growth levers, and monitor progress.
• Actively participate: Foster a collaborative culture where private equity boards of directors and portfolio company leadership engage in open dialogue, bringing challenges and opportunities to the table.
• Monitor in real time: Leverage dashboards and analytics for timely, informed decisions that respond to changing markets.

For governance structures and adaptability:

• Establish accountability: Define and document governance processes to delineate board and management responsibilities, ensuring transparency and swift execution.
• Create adaptable frameworks: Build in flexibility to revisit governance structures as the portfolio company evolves, maintaining alignment with private equity goals and market shifts.
• Continuously improve: Regularly assess governance effectiveness, adopting best practices that keep the organization resilient and agile.

Stronger board governance can transform disruption into opportunity. By focusing on these foundational elements, private equity boards and portfolio company leadership can unlock measurable value, paving the way for long-term, sustainable growth.