Keeping a Watchful Eye on Your Investments

Abstract

In this tough economic environment, private equity investors and other institutional investors are scrambling for solutions to prevent their portfolios from declining in value. Private equity board members have to do more than just ensure proper financial reporting and attend board meetings of their portfolio companies. They need to be sensitive to early warning signs of business failure and to focus on leading indicators of people and operating performance rather than just financial performance, which is a lagging indicator. Directors need to create a culture of open discussion and to feel free to ask questions about business strategy and context, critical performance metrics, continuous improvement processes, performance targets, and overall parameters of business success.