From Nice-to-Have to Must-Have
Over the last decade or so, Private Equity (PE) firms have been moving away from their roots in financial engineering. Since the great financial crisis, firms have focused more on operational value creation. According to research by PwC and INSEAD, operational improvements accounted for close to half of PE value creation in the 2010s, in contrast to less than 20% in the 80s and 90s. At the same time, value added through financial interventions has gone in the opposite direction, diminishing from 51% to 25%. This creates a problem: The route to value creation (and successful exits) runs through operational improvements that lie beyond the typical skillset of deal partners.
As a result of this change, PE firms have turned to in-house business experts, usually known as Operating Partners (OPs) to unlock portfolio value. “Operations” is used here in its broadest sense, meaning not only the parts of the business that would fall under a COO, but every aspect of a portfolio company’s activities: sales, procurement, HR etc. When this trend emerged, observers questioned whether it would persist. Our experience recruiting OPs and related roles for mid-market PE firms in the Netherlands suggests the trend begun in the 2010s is continuing in the 2020s. But adoption and understanding of the OP role remains uneven, especially in the mid-market. In this post, we share insights from research, conversations with OPs, and our own hiring experience. We outline the state of the market for OPs, and highlight learnings for PE firms looking to hire and candidates considering a future as an OP.
The OP role was pioneered in the US in the 1990s. The most influential of these early OP models came from Clayton, Dubilier & Rice (CD&R) and Bain Capital. They believed that operational improvements would lead to better exit opportunities and make investments less dependent on the state of the market at the time of exit.
Bain Capital, drawing on its roots in Bain & Company, created a model in which OPs were generalist, in-house consultants for portfolio companies. This model suited their investment focus on complex deals like carve-outs that demanded a strategy consultant’s skillset. In contrast, CD&R developed what later became known as an “industrial approach”. Each deal team consisted of a financial partner (with a traditional investment background) and an OP (with industry expertise, usually a former CEO). These pairings collaborated to create investment theses that incorporated levers for value-creation; OPs were then given broad authority over portfolio companies post-acquisition. Despite being central to the business models of prominent PE firms, the trend of in-house operations teams was slow to spread. As late as 2009, major European firms like 3i and CVC Capital Partners were still in the process of setting up operating teams. This has changed considerably. The OP teams in their infancy in the early 2010s are now well-established parts of those firms. Parties investing in PE funds now look for operational expertise when evaluating where to put their money.
This can leave those without dedicated operational talent at a competitive disadvantage, but this is not always the case. Mid-market firms often have different investment strategies to large cap funds and acquire different companies. It has remained true for longer in the mid-market that acquiring and merging several small players could deliver good returns without the need for difficult operational changes. Our conversations with OPs, however, suggest that this is changing. The economic context is not the same and fewer small companies are cheaply available. To thrive in this new context, mid-market firms will have to move in the same direction as the large-caps a generation ago, toward a focus of margin expansion and operational improvements.
The role itself has evolved too. INSEAD’s research identified three main OP models: Senior Executive (OPs who are proven CEOs or chairpersons brought in to guide or lead companies during critical periods), Functional Expert (OPs with deep domain expertise in areas like human capital, tech, or finance to tackle recurring issues), and Generalist (OPs with consulting backgrounds who act as in-house consultants across various issues). All three are present in the Dutch mid-market today, with firms like Rivean favouring former strategy consultants, while others like bd-capital use a Senior Executive model. There is no consensus about which model is best suited to the mid-market and the maturity of OP organisations varies.
Large PE houses now maintain teams of internal consultants and experts. For mid-market firms, the challenge is greater. Already in the INSEAD study, mid-market OPs sometimes struggled to realise impact because they were working simultaneously on too many problems at different portfolio companies. Consequently, even smaller PE firms need teams of OPs, allowing each to focus on one or two companies. In this team context, executives looking to become OPs should ask not only what they can contribute themselves, but also how their contribution fits with a PE firm’s portfolio and existing OP team. For mid-market PE firms, this raises the question of how to maximise the effectiveness of a small OP team, given the expense of hiring former CEOs or strategy consultants. Identifying the right candidate can remove one element of uncertainty – but of course, making that choice is far from easy.
No one spends a career training to be an OP. That means there is no standard profile and finding the right match remains challenging both for PE firms and for candidates. Success requires navigating a delicate combination of experience, personal traits, and cultural fit.
1. Tangible Track Record
As in any role, an effective OP needs to show they can deliver demonstrable, quantifiable results. That doesn’t mean they need direct OP experience, which is rare in the mid-market, but they should be able to articulate why their experiences matches the specific OP role. It’s important, however, not to confuse experience with mere seniority. A 2024 publication by PwC observes that issues can arise with Senior Executive OPs who built their careers under market conditions that no longer apply. Especially in a mid-market context, firms should hire with value in mind; will a big name with a big price tag deliver the best results for the portfolio?
OPs should be able to cite specific improvements that they have realised in the past, whether as executives or as consultants: EBITDA improvements, revenue growth, cost reduction etc. Their industry, function, or regional experience should match the portfolio. If the portfolio is international, the OP needs to be international. If the portfolio is B2C oriented, the OP’s experience should be B2C oriented. Moreover, they need to show that they originated the changes that led to the results they cite and that they bear personal responsibility for delivery; what CD&R call “competitive spirit.”
2. Presence and Personality
One common criticism of OPs is that they are big names, hired mainly for marketing value but who contribute little. Yet there are good reasons to look for seniority in an OP. OPs need to strike a delicate balance in how they work with portfolio company MTs. They must have the presence and authority to be taken seriously as an advisor and coach for portfolio companies’ executives. But at the same time, they shouldn’t dominate them. The OP should be humble enough to give portfolio executives the space to make their own decisions.
This balance is essential for value creation as it allows the OP to move beyond just applying their expertise to the much more valuable work of unlocking leadership potential in portfolio MTs. When it goes wrong, portfolio MTs can feel they are being replaced by OPs or that the OP is a kind of spy for the PE firm. Aligning compensation and incentives can ameliorate these issues, but ultimately an OPs’ success as a coach for portfolio executives lies in the ability to create an atmosphere of trust and openness in this potentially fraught relationship.
3. Cultural Alignment
Trust is a concern not only with portfolio company executives, but also with the deal partners. This is especially true in the mid-market, where firms’ decision-making can be tightly controlled by influential founding partners. Our conversations with OPs suggest this is among the most important factors in the success of OPS in the Dutch mid-market. An effective OP must win the trust of stakeholders within the PE firm as well as the portfolio companies. Even a skilled OP can fail if misaligned in this way. When hiring an OP, a PE firm needs to provide a serious mandate for operational change in the portfolio. If OPs feel that they aren’t listened to or their scope of action is too limited, conflict can quickly arise.
Again, there are differences between firms. Some funds prefer hands-on, deeply integrated involvement, requiring regular presence in operations; others operate with a lighter touch, emphasizing strategic oversight. Evaluating a candidate’s compatibility with the operating partner model – whether highly entrepreneurial or more hands-off – is as crucial as any of the hard skills.
OPs who meet the criteria sketched out above don’t just solve operational problems; they proactively find their own ways to help the portfolio. That is especially true under the Senior Executive Model. One Harvard Business School paper suggests that firms can get more value from deals by involving OPs at an early stage. Our conversations with Dutch OPs likewise emphasised the importance of early involvement. However, to deliver value OP’s need to be able to challenge deal partners effectively. Mid-market firms continue to lag behind large-caps in the degree to which OPs are systematically integrated into deals. Firms must first give OPs a clear and substantive mandate and then select candidates with the confidence and credibility carry out that mandate.
There are good reasons for the rise and persistence of the OP over the last twenty years. According to McKinsey, PE firms that pursue value creation through operations professionals deliver measurably more growth than those who don’t. For mid-market firms especially, a well-selected, well-organised OP team is a competitive differentiator in a market which has not yet seen systematic adoption of OPs. The journey to securing an outstanding Operating Partner demands rigorous evaluation across performance, leadership, and cultural dimensions.
In doing so firms and candidates must steer clear of common pitfalls. When hiring for a role often filled by ex-CEOs and top tier strategy consultants, it can be easy to over focus on getting the best OP rather than the right OP. They also need the right soft skills, as reflected in research by Egon Zehnder, which suggests PE firms undervalue OP-candidates’ capacity to influence and persuade. In the increasingly mature Dutch market for OP talent, firms must not only compete for the best candidates but think carefully about what OP model is relevant for their portfolio and which candidate is right for them. There is no single OP profile.
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