There’s a great opportunity now for private equity firms to differentiate themselves in their response to the current global economic unpleasantness. (I’m talking about the way we react to investee underperformance.) But, what is the right response? Is it to provide passive guidance and let the entrepreneurs do what they do best? Is it to seize control and implement a strict regime of cost cutting? Or, is it to be as profligate as ever and increase investment to flummox, bewilder and bemuse the competition?

The diplomatic answer is that it’s probably a little of all of the above. But, that’s not what you want to hear and it’s certainly not what I think is helpful.

For my investees, I believe it’s about keeping it simple and focusing on tangible results. In a high-level conceptual sense, it means ditching the bureaucracy, working within the bounds of the existing culture and empowering people to create and share positive outcomes. On a lower-level tactical plane, it means being disciplined about granular financial monitoring, it means attacking problems with pragmatic solutions, it means keeping abreast of opportunities in depressed markets, and it means being honest with oneself about what is essential spending and what is profligacy. 

I’m a strong believer in building great companies first and watching shareholder value grow as a result, not the other way. So, let’s throw the idea of shareholder value out the window for the moment and commit to building great companies, built to last (as Jim Collins would say).