Due Diligence: Assessing a Company’s Change-Readiness

By: Grant W. Levitan

Human Capital Leader, Melissa Mounce, Baird Capital

This is the second and final part of our interview with Melissa Mounce who is human capital leader, Baird Capital, an RHR client. Read part 1.

RHR International works with Melissa Mounce, human capital leader, Baird Capital, which has made venture capital, growth equity, and private equity investments in more than 300 portfolio companies with a focus on healthcare, industrial solutions, and technology and services.

Because human capital has such a profound effect on a portfolio company’s potential and success, Melissa partners with investment team colleagues and their companies across its portfolios to build talent strategies and teams to drive value and growth.

She is recognized as much for her pragmatic business acumen as her ability to effectively influence organizations and improve business performance by appropriately optimizing talent.

At a variety of high-profile companies, Melissa has been a global business strategist, emerging market business developer, business process management consultant, global operations/outsourcing leader, and talent management leader.  

Melissa currently serves on the board of directors of R2i, a Baird Capital portfolio company, and  the advisory board for ASCEND, a group created to attract and retain women at Baird. She has an MBA from Northern Illinois University and has participated in International/Global Studies at Université Stendhal (Grenoble III).

RHR International’s senior partner Grant Levitan spoke with Melissa about Baird’s approach to the various forms of due diligence, the four pillars that most affect change readiness, and the impact executives’ and their companies’ change readiness has on overall organizational effectiveness.

Grant: What are the various forms of due diligence that you routinely engage in when investing in portfolio companies?

Melissa: In addition to human capital due diligence, we perform extensive due diligence in areas such as market, financial, and legal. However, we do believe a company’s human capital is one of the most important factors that impact its ability to achieve its true potential and ultimate success. As a result, we believe our firm goes well beyond the typical human capital due diligence in effort to ensure the company has the talent required to reach our goals. This resonates with our investment colleagues who have a heavy financial focus.

The question we want to address is, does the existing team have the skillsets, expertise, and experience required to apply the new and improved strategies that will take the company to the next level? Their readiness and capabilities may indicate the executive team requires development or new talent, all of which will have a measurable, quantifiable effect on everything from timelines to budgets and the bottom line.

Grant: How does Baird assess the executives’ and the company’s change readiness, both of which are integral to the overall organizational effectiveness?

Melissa: We assess their change readiness, using one-on-one interviews and a standard framework to determine the company’s maturity in various areas. Once we confirm the foundation is in place, we need to identify gaps so we know what we need to shore up before overlaying new initiatives.

Grant: How does Baird assess the four pillars that most impact change readiness: organizational structure, talent, operating culture, and change readiness itself?

Melissa: Baird creates customized templates and questions for each pillar. In one-on-one interviews with various executives and employees, we’re looking for consistent answers to identical questions from the various individuals. If we don’t get consensus, we know there is a fundamental disconnect in how the company, its culture, maturity level, and operational effectiveness are perceived internally.

Grant: How much manpower and time are required to conduct these organizational assessments?

Melissa: Typically, I partner with a consultant to conduct the 45- to 60-minute, one-on-one, on-site interviews, which generally take one (and up to two) full days. Because we want them to answer the questions as candidly as possible, we don’t share the interview questions with the subjects ahead of time.

People being assessed tend to be very forthcoming, cooperative, and informative because they appreciate the fact that a private equity firm is interested and taking the time to really understand their organization. They want to be heard! 

These interviews create a sense of respect and inclusiveness. The executives and leadership teams become a part of the process and recognize that we customize our approach and business models rather than simply replicating what we do company to company. 

Grant: From your perspective, what is the biggest payoff with organizational assessments? 

Melissa: The organizational assessments help determine the company's current capabilities and tell us how we need to develop and position the company for future success.

Baird’s goal is the creation of immediate growth and value. But, prior to any investment, our due diligence depends on organizational assessments to provide clarity on the actual state of the company. The organizational assessments may indicate inadequate foundations that require shoring up to support our initiatives. Unless Baird gives the leadership, infrastructure, systems, and processes the attention they warrant, we’ll face inadequate traction and progress down the road. 

Immediate gratification is rare, and the reality is that Baird often devotes significant dollars and many months to closing the foundational gaps and carefully positioning a company for the future.

We’d like to thank Melissa for taking the time to sit with us and talk in such depth.

This interview appeared on the Baird Capital website.

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