How to Hire Effectively for Portfolio Companies or for Portfolio Ops

Hiring in PE is a lengthy and typically inefficient exercise – lengthy processes, endless debates, misaligned expectations from different interviewers. And despite all that effort, many firms still miss on critical hires.

The core issue is not lack of rigor. It’s misplaced rigor.  Also, most hiring failures don’t come from a lack of experience or missing some line item on a resume, nor a missed or poorly answered question during the interview.

The uncomfortable fact

You can hire a world-class talent and still fail if you mismanage them. Research from Leadership IQ found that 46% of new hires fail within 18 months – and 89% of the time, it’s due to cultural fit issues, not technical incompetence.

This is important to remember: the firm’s (or portfolio company’s) management/leadership quality, role clarity, and context drive most of the outcome. Yet most processes overweight functional experience or subjective Q&A and underweight what actually predicts success.

What actually predicts performance

Decades of industrial-organizational psychology research shows what matters:

  • Cognitive ability – Strongest predictor of job performance (0.51 correlation across all jobs per Schmidt & Hunter’s meta-analysis)
  • Learning agility – This is key to success especially for Operating Partners in PE
  • Conscientiousness – Predicts performance across virtually all jobs
  • Emotional intelligence – Accounts for 58% of performance across all job types (TalentSmart research)
  • Work sessions / Real-work simulations / Executive Presentations (or best of all – consulting/contracting work on actual real-world initiatives that mirror the role) – Among the most predictive methods (0.54 correlation) and beats traditional interviews
  • Genuine Interest / Intrinsic Motivation (aka: Passion) – candidates with passion are 50% more likely to report meeting or exceeding performance expectations than people with no attributes of passion Wiley Online Library; “harmonious passion” or engaging in work because someone loves the work, company or industry predicts positive outcomes
    • Genuine interest in the role – Intrinsic motivation strongly predicts quality of performance Harver and passionate workers are 50% more likely to exceed expectations Wiley Online Library. Seek harmonious passion (they love the work)
  • Cultural fit – Employees who fit well have 76% greater job satisfaction and significantly higher retention (HBR) which directly correlates highly to stronger and often superior performance in the role

Working sessions beat interviews

One or two sessions reveal more than ten traditional interviews:

Portfolio case working session – Work through an actual portfolio challenge together. Not a presentation but a working session. Watch how they listen, structure thinking, challenge assumptions, and adapt in real-time.

Value creation plan critique – Have them review a real IC deck and critique the assumptions. You’ll see their pattern recognition, commercial judgment, and ability to think from both a PE and portfolio management perspective.

Behavioral questions

Past behavior predicts future behavior. Try these:

  • “Tell me about a major mistake you made with a CEO or board. How did you handle it?”
  • “Describe a situation where you had strong conviction but the portfolio CEO  or PE investment team disagreed. How did you approach it?”
  • “What would your former PE investment team or other operating partner team members say it’s like to work with you?”
  • “What’s the last thing you significantly changed your mind about?”

The chemistry test

After your working sessions and structured interviews, ask one question:

Would you like to work with this person and be in the foxhole on your hardest deals?

Chemistry isn’t soft. What does work? Focus on observable interpersonal dynamics during working sessions:

  • Synchronicity – Do you naturally fall into productive rhythms together? Is communication effortless or strained? PubMed
  • Goal alignment – Are they responding to goals in supportive and encouraging ways? PubMed
  • Trust under pressure – Would you trust this person on your hardest portfolio companies or deals when things get difficult?

The “foxhole test” isn’t about whether someone feels comfortable – it’s about whether you observe genuine partnership when solving real problems together.

Use a dinner as a final chemistry check after you’ve already validated competence through structured interviews and working sessions. It can help answer: “Would I want this person representing our firm to CEOs and boards?”. It also helps you see if they will pass the O’Hara Airport Test.

Bottom line from research: “Candidate-organization fit” predicts job commitment and results more reliably than many other factors Academia.edu. Focus less on abstract “culture fit” and more on concrete behaviors: How do they work through problems? How do they communicate with you during the interview, simulation or dinner? How do they communicate under pressure? These predict performance better than gut feelings about fit.

A process that works

  1. Define what you need & what problems you want this role to solve – Be explicit about what success looks like in months 6, 12, and 18
    1. Discuss this specifically upfront with your candidates
  2. Align on 4-5 must-haves – Ensure everyone who is on the interview team is on the same page
  3. Use structured interviews – Same questions, same order, independent scoring
  4. Run 1-2 working simulations/sessions (or negotiate for consulting/contracting upfront) – Test how they actually work
  5. Ask behavioral questions – Focus on traits that predict performance
  6. Assess chemistry – The foxhole / O’Hara airport test
  7. Set clear expectations & move decisively – Timebox to 30-45 days max and communicate the process effectively to the candidates from day one (strong candidates will appreciate and respect the clarity)
    1. 80% of candidates say transparency is a key factor in deciding whether to accept a job PubMed Central
    2. 52% of candidates report declining a job offer due to a subpar hiring process, with 13% citing that the process took too long Uni-mannheim
    3. Gallup research shows that recently hired employees who had an exceptional candidate experience are 2x as likely to strongly agree that their job responsibilities are consistent with what was promised during recruitment and 2.7 times as likely to say their job is as good as or better than expected ResearchGate
    4. Google’s internal research shows that the interview process is one of the biggest drivers of a candidate’s overall satisfaction (and this is the first experience they have in forming a relationship with the company) Wiley Online Library

Bottom line

The PE firms that consistently win do not over-index on elaborate interview processes – they have clear criteria and understand that this is a shared responsibility and even A talent must be managed/led effectively

  • Hiring outcomes are a shared responsibility – a big part is driven by how the PE firm (or portfolio leadership) leads the hired professional post-close:
    • Role clarity, alignment, and ongoing support matter even for highly experienced A talent
    • Success comes from both hiring strong people + managing/leading them well once they start
  • Do not overcomplicate the interview process
    • Test how people actually work (work simulations / or negotiate for consulting upfront)
  • Move decisively when the right person shows up