With your portfolio companies, operational excellence is no longer just about financial engineering or market timing. It is increasingly about people, specifically, about leadership and leadership style.
Across Canada, private equity firms managing diverse portfolios face common yet critical challenges: persistent labour shortages, post-pandemic hybrid work transitions, fragile middle management layers, and barriers to scaling operations efficiently. As portfolio companies encounter these realities, the calibre of their leadership teams becomes a defining factor in determining whether growth targets are achieved or missed.
The Canadian Leadership Landscape: Persistent Challenges
A trend across Canadian mid-market businesses is the deepening struggle to retain and develop leadership talent. The “great resignation” and “quiet quitting” phenomena were not temporary blips; they marked a shift in employee expectations toward purpose-driven, people-centric workplaces. Many portfolio companies still rely on operational leaders who were promoted for technical competence but lack the leadership depth needed to inspire, engage, and retain their teams.
Labour shortages exacerbate this issue. When skilled workers are scarce, ineffective leadership compounds turnover risk. Employees today prioritize workplaces that offer strong communication, psychological safety, career development, and authentic connection, all of which are shaped directly by leadership style.
Moreover, the pandemic ushered in a permanent shift to hybrid and remote models, straining traditional “command and control” leadership styles that prioritize visibility over results. Leaders now require skills like trust-building from a distance, navigating ambiguity, fostering engagement without micromanagement, and adapting leadership styles to different team dynamics.
At the same time, many Canadian SMEs, often typical of private equity portfolios, struggle with weak middle management. High-performing individual contributors are promoted into leadership roles without adequate development, resulting in inconsistent management practices, poor delegation, and a culture of “doing” rather than “leading.”
Finally, when it comes to scaling operations, launching new product lines, expanding geographically, or executing roll-up strategies, leadership bottlenecks are often the hidden culprits behind missed KPIs. Without adaptive, accountable, and aligned leadership at every level, strategy execution falters.
Understanding Leadership and Leadership Style: A Strategic Lever
Leadership style refers to the way in which a leader influences, motivates, and directs their team. It encompasses communication methods, decision-making processes, emotional intelligence, conflict resolution approaches, and the ability to empower others.
The most effective portfolio company leaders do not exhibit just one leadership style; they adapt. They possess authentic leadership, remaining true to their values while flexibly adjusting their approach depending on the needs of the team, the situation, and the business lifecycle stage.
Modern leadership demands a shift away from rigid hierarchical models toward styles that are:
- Coaching-oriented: Developing team capability rather than controlling execution.
- Empathetic and emotionally intelligent: Understanding employee motivations, fears, and aspirations.
- Inclusive and trust-building: Creating environments where innovation and collaboration thrive.
- Accountability-driven: Setting clear expectations and following through, balancing support with challenge.
An unexamined leadership style can inadvertently drive disengagement, foster confusion, and lower operational efficiency. Conversely, intentionally cultivated leadership styles can become powerful force multipliers, accelerating growth, reducing turnover, and boosting company valuations.
Strategic Implications for Private Equity Firms
Private equity leaders increasingly recognize that talent risk is investment risk. Strong leadership at the portfolio company level directly influences EBITDA growth, scalability, and exit multiples.
Thus, assessing and developing leadership capability and leadership style should be integral to value creation plans, alongside operational improvements and financial restructuring.
Common strategies employed by high-performing PE firms include:
- Leadership assessments (e.g., 360 feedback, DiSC profiles, SuccessFinder behavioural assessments) early in ownership.
- Executive coaching for CEOs, CFOs, and functional heads to enhance adaptive leadership styles.
- Targeted leadership development programs aimed at building middle management bench strength.
- Embedding leadership accountability frameworks aligned with portfolio company KPIs.
The Opportunity: Embedding Leadership Excellence Early
By embedding leadership development early in the investment lifecycle, PE sponsors can de-risk human capital issues and create a “leadership flywheel” that drives cultural resilience, operational momentum, and strategic agility.
This proactive approach to leadership and leadership style is not simply “soft” — it is a concrete value creation lever that shows up in measurable financial outcomes: higher retention rates, faster time-to-productivity for new hires, stronger employee engagement scores, and ultimately, higher exit valuations.
Next Steps
Leadership is no longer a “nice to have.” In the Canadian private equity environment, it is mission-critical. Leadership style directly impacts whether a portfolio company can attract talent, engage teams, scale operations, and achieve an attractive exit.
Private equity firms seeking to maximize the performance of their portfolio companies must view leadership development not as an HR initiative but as a board-level strategic priority.
Contact us to learn from our Private Equity experience.