While working in private equity, I started to notice a phenomenon: within a portfolio of investments, the ones that received the most attention, energy, effort, and mindshare, were always the worst performing companies. The worst performing companies were more likely to miss budget, disappoint customers, and make errors of strategic judgment (or some combination). The management teams at these companies required significantly more direct involvement, and on some occasions, had to be replaced. It was a lot. Sometimes these intensive efforts would continue for years. And unfortunately, all of the extra effort, time, and energy seemed to rarely turn a significantly underperforming investment into a great one. Most of the time, it was about fighting to protect the initial investment.

(more…)