PE – CEOs & Cultural Fit (the most underestimated risk in middle-market CEO recruiting)

When we hire CEOs in PE, culture fit is one of the most underestimated challenges in. Even if the CEO has the right PE grade “functional skills” and operational expertise, if they clash with the company’s culture or fail to align with the team’s dynamics, it’s a recipe for disaster.

Fundamentally, culture is about shared values and behaviors, and a CEO has to embody those values while also being able to evolve them when necessary. Culture is what you hire for and what you fire for. Culture is how people act when nobody is looking. Ultimately, culture is a magnet for great talent (and the right people) and a filter for the wrong ones.

Here’s how top PE firms evaluate cultural alignment more rigorously:

• Understand the existing culture: go beyond the mission statement. Look at how decisions are made, how conflict is handled, and what behaviors are rewarded. Is it collaborative or individualist? Fast-moving or methodical?
• Probe for alignment: don’t rely on generic leadership questions. Ask for specific examples (e.g., “How did you handle delivering bad news?” or “How have you fostered innovation?”)
• Involve the team: have the candidate meet key leaders and team members. Observe how they listen, ask questions, and adapt communication styles. These are signals of true fit
• Know when culture must evolve: sometimes the right CEO brings necessary change. It’s not just about fitting the culture – it’s about leading it where it needs to go (in middle market PE: effective team, execution, accountability, operational rigor, profitable growth)
• The first step is to deeply understand the existing culture of the company. This isn’t just about what’s written in a mission statement or on a website. It’s about how decisions are made, how conflict is handled, and what behaviors are rewarded or punished. For example, is the company highly collaborative, or does it thrive on individual accountability? Does it value speed and risk-taking, or is it more methodical and cautious? These nuances are critical

When assessing a CEO candidate, you need to probe for alignment with these cultural traits. This goes beyond asking generic questions about leadership style. You need to dig into specific examples of how they’ve handled situations in the past. For instance, if the company values transparency, ask the candidate about a time they had to deliver bad news to their team or board. If the company thrives on innovation, ask how they’ve fostered creativity in their previous roles.

Another key is to involve the broader team in the evaluation process. This doesn’t mean letting the team make the decision, but it does mean getting their input. Have the candidate spend time with key leaders and even frontline employees. Watch how they interact. Do they listen? Do they ask insightful questions? Do they adapt their communication style based on who they’re speaking with? These are all signals of whether they’ll be able to integrate into the culture.

Finally, you have to be honest about whether the culture itself needs to change. Sometimes, a disconnect isn’t a bad thing—it’s a sign that the company needs to evolve. For example, when Steve Jobs returned to Apple, he recognized that the company’s operational culture was broken. He brought in Tim Cook, who was an operational genius, to fix it. That cultural shift was necessary for Apple’s success. So, when you’re evaluating a CEO, it’s not just about whether they fit the current culture, but also whether they can lead the culture in the direction it needs to go.

Peter Drucker once said “culture eats strategy for breakfast” – even the best strategic plans will fail if the underlying culture doesn’t support execution. Culture shapes behaviors, decisions, and motivation—so it has a more persistent impact than any top-down plan. You can’t outperform a culture that resists change – great PE-grade CEOs must align strategy with the values, habits, and incentives that define how work actually gets done.