Key Takeaways:

  • Pragmatism, a real-world approach rooted in understanding business realities and market dynamics, is one of PE-CXO’s Nine Dimensions of Governance Fit® that enables executive success.
  • A pragmatic approach in private equity necessitates a balanced blend of proactivity and patience, acknowledging the need for rapid decisions while emphasizing a focus on long-term growth over short-term wins.
  • Executives can foster a more pragmatic environment and better align with their sponsor through improved understanding of sponsor pressures and a collaborative, data-driven approach.

PE-CXO’s recent report, The Top 50 Private Equity Firms for Executives of 2024, revealed that an overwhelming 92% of executives would not return to work for a sponsor who failed to demonstrate pragmatism.

Pragmatism is a defining trait of successful sponsor-executive partnerships in private equity. Characterized by engaging in a real-world manner rooted in understanding current business and market dynamics, pragmatism is essential to success in PE. A sponsor’s ability to align their goals with tangible realities, transcending theoretical frameworks and avoiding the pitfalls of “living in spreadsheets,” is one of PE-CXO’s Nine Dimensions of Governance Fit® that enables executive success.

What Does a Pragmatic Sponsor Look Like? 

Pragmatism is a multifaceted attribute. A sponsor who demonstrates strong pragmatism works to ensure their spreadsheet models accommodate the people and market dynamics of a growing business.

Effective sponsors also recognize their limitations on operational knowledge and where they should rely on the expertise of the management team. This approach does not imply a constant deferral to management or a reluctance to set ambitious goals. Instead, it signifies a commitment to vigilant monitoring of market dynamics throughout the hold period, allowing flexibility in response to developments.

The firm understands what they are good at and where they need functional expertise to achieve results. They balance this very well.”

— Anonymous CRO, PE-CXO Top 50 Survey

Other key aspects of a pragmatic sponsor approach include:

  • A balanced appetite for risk. Calculated risks are sometimes necessary to ...