Patricia M. Cloherty, Chairman and CEO of DeltaPrivateEquityPartners, says that her strongest leadership competency is a combination of knowledgeable straightforwardness, enthusiasm and good sense of humor mixed in.
1. What is your strongest leadership competency?
Well, over the years in my profession I think that my most valuable trait has been ability to deal totally straight forward, totally honestly, that saves everybody's time, gets the job done, and I combine that with a great deal of enthusiasm with the business in which I am, which is venture capital and private equity and in which I has been for 38 years now. I find that the combination of knowledgeable-straight-dealing with enthusiasm and a little sense of humor mixed in makes us go a long way. That makes work fun and I don't mean that frivolously. It makes it much more likely that you will succeed in the challenging task of financing a growth company and making its parts work together effectively.
2. How do you use this straightforwardness without insulting other people?
Well, I think there is a great value in life to learning how to say "no" respectfully. There is nothing wrong with "no". Let's have just a brief description of the business we're in. I have been for years in business of putting risk capital to work, to create substantial capital values and you do it as a fiduciary with other people's money, and the objective of the business simply is to get higher than average returns on invested capital. Analytical task in looking at a business is whether that business has potential for delivering higher than average returns on invested capital. Some extremely good businesses do not have that capability. So, you have to say "no" but it's not a personal thing. It's not a matter of personal like or dislike it's a fact that you have a particular job to do, you understand what it is but you also understand that the proposal being made to you does not appear to have the potential for delivering what you need for your business, so explain that. The most notable example would be that many businesses in the world in many geographies are family-run and that's wonderful if they can support families through generations. Do they want to have outside investors in the family affairs in the family business forcing liquidity, sale of the business when the family doesn't want to? No, there is no mutuality of interest, so the answer if someone says "Why don't you put 10 millions in our family business" is "not really, we just have different goals, it won't work". That is an obvious example.
3. Do you have to use your ability to say no within the company?
Oh, of course. You know business is all about prudent risk-taking. So, you have to asses what risks are and decide which ones you want to take, and the biggest risk in any business is selection of people. That in the end-of-the-day people are a company, and the key people that you bring in and you choose, that should be risk because when you pick well it is very happy thing, when you don't pick well it is not and it can be poor. But certainly if you have employees and the staff there are always yes or no issues. Can I flight first class? -No. Can I take two extra-week vacations in addition to four I already have? Well, if nobody else gets that the answer is probably no. If there is an extenuating circumstance because your mother is ill, the answer is probably yes. You know it's decision making, business is about making decisions, and you have to have the courage of your convictions. Decisions are easier when you know the business that you are in if you don't know your business well then it's kind of big muddle.
4. How do you discuss critical issues?
That may be one facet of the process. It relates I think to a tendency which I notice here in Russia noticed also on a different degrees of "I win, you lose". I mean in order to get to a decision recognition of a middle ground is important. In our business this negotiation has its starkest expression in valuing a company. One will say it's worth $10 and then another will say it's worth $1 in share, and the real answer is probably it's somewhere around $5, there is a middle ground. I insist on getting to an agreed upon answer because if you can't you really fundamentally disagree. I've been in this business in seven countries so I do see different trades but certainly in the US what can happen you would say "well, we won't price it now; we'll go in and the value will be determined by performance after a year or after two years". That is crazy because then what happens is if you say it will be $10 if our earnings are X and it'll be $1 if our earnings are Y. So then people who are running the business manage the business to a false end it distorts the operation in order to get the outcome to valuation question unresolved on day one.
5. Do you have any examples?
I detest this kind of referral of the issue. You are quiet right maybe some people don't like that approach of insisting of flashing the truth out but it has worked for me for 38 years so I am unlikely to change.
This is in the US years ago. I was financing two scientists, very smart fellows one happen to be Russian, and the US one went out of IBM to build the company and they were working with one of my partners and the deal was not getting closed. I asked "why aren't you closing the deal?" This was a brand new company. One of the scientists said to me "well, your partner Bill thinks that in exchange for your investment that you should have 26.9352487 % of the company and we think that you should have 23.9542789%, they carried the thing out to nine decimal point. I said "fellows, this is a non-existent company, yet to be formed it has one patent you are carrying it out of nine decimal points. It is a purely theoretical position we will take the mid point and we close tomorrow". And we did. They were stuck in this artificial negotiating pasture and that wasn't relevant to a brand new company. And more of this story they turned out to be highly successful and today it's worth a couple of billion.
6. How do you make your team be as keen on business as you are?
You can't require it. Hopefully it is ignited in them as they develop companies at work. Again, we work with entrepreneurial teams and growth companies and to me there is nothing more satisfying than very high quality company that can compete with the best. Certainly I prefer, I'd love it when my colleagues share that enthusiasm because then they are happy. By the way the compensation is all performance based so they do very well in that circumstance. But it's nice to do well and to do good. I mean to have a good company for which you do well. For someone It's preferable to make a lot of money on a piece of garbage. I do think that you get a little crazy overtime in this business because I for example - this will sound very strange - I get jubilant over an improved gross margin. Some people like new houses in first, I like big gross margins. And my team gets a big kick-out of ass and they too are becoming extremely fun of very high gross margins.
