In many firms, money is tied to successful exits via carried interest. I know there are large funds that can pay exorbitant salaries because their 2% management fee results in more than what’s needed, but my experience is that this isn’t the norm in mid-market.

I think in addition to linking motivation to exits via carry, the carry needs to be material. I wrote a couple of posts a few months ago about calculating carry and the fact is, often founding partners leave others with too little to be motivated. If my 2 bedroom downtown apartment is going to return more in a depressed market than my expected carried interest, then it’s hardly an incentive.

Again, I realise this isn’t such an issue in larger funds, but under say $200m, you see founder avarice getting in the way of incentivising staff.

In my experience, the problem is not the proliferation of meetings…multiple perspectives generally create a better outcome. Rather, I believe that the problem is lack of purpose and focus. Any meeting without a single, focused objective and a discussion point outline agenda simply turns into a free-for-all led by the most dominant personalities and/or the “food-chain” positioning of the participants.

I suggest that meetings should be about somebody needing something [helpful]from the group in order to get their responsibilities accomplished. The needy person drives the meeting and defines the agenda. Relegate the informational broadcasts (i.e., including status updates without any issues needing the group to resolve) to email and team-building to Happy Hour.

To your question, I think that Analyst has appropriately described (in the final sentence) why PE has become what it is today (i.e., as a natural evolution of the manner in which many PE shops have been founded and staffed). But, that’s not the way is has to be by definition. And, given the current economic difficulties and its impact on the investee, it is quite possible that the current state may not be the best recipe for success in the future (i.e., if not, as from now).

But I don’t think that its just the personalities or the backgrounds. Rather, I suggest that it is fundamentally the motivations and the drivers for success. Change the rules for achieving success (i.e., successful exits to which all the real money is tied) and watch how new economic realities will change the behaviors and personalities of the typical PE shop, including adventurous people.

I would wager it has more to do with the people than the firm’s aims itself. Venture capitalists are generally a breed apart from private equiteers, even though they are both ‘looking to make great investments’ and ‘looking to make existing investments better’. Indeed, the typical private equiteer is a conventional overperformer – top grades, top schools (Harvard MBA…etc), top experience (Goldman’s or Bain), but rarely taking any wide steps away from a path that’s been trodden on thousands of times before?