Four Groups has developed a new model for understanding and predicting relationships and team dynamics called 4G. One of the areas of application for 4G is management due diligence and ongoing portfolio management within the private equity industry.

1. 4G Management Due
Diligence
Linking Behaviour to Bottom Line Performance
Management Due Diligence
Four Groups has developed a new model for understanding and predicting relationships and team dynamics called
4G. One of the areas of application for 4G is management due diligence and ongoing portfolio management within
the private equity industry.
The Problem With the focus on gathering informa- small change in team composition can
tion on key individuals, these methods significantly change the dynamics and
There have been a number of studies fail to quantify other key intangible fac- effectiveness of a management team.
that have pinpointed quality of the tors such as the quality of relationship
senior management team as the most and communication within the man- The key variables, when looking at
important variable in the relative or agement team, the quality of relation- relationships that impact team per-
success of a private equity invest- ships and communication with the GP formance include;
ment1. Arguably the effectiveness of and the cultural suitability to the task
the management team is even more i.e. does the management team have a • Relationships with investors
important in current times. However, suitable cultural outlook to execute the • Performance under stress
despite the maturity of the private required strategy. • Internal relationships and dynamics
equity industry in the UK, General • Cultural suitability to the proposed
Partners (GPs) are still relying on insuf- Assessing the strength of the manage- strategy
ficient or incomplete data and gut feel- ment team is a notoriously imprecise
ing to make a decision to back a partic- and time-consuming task. This is exac- 4G supports the existing management
ular management team. erbated by the unique variables and assessment and due diligence process
complexities of each transaction mean- by providing systematic information in
Quality of management refers not just ing that there is no simple formula for these key areas. By understanding the
to the abilities or experience of team success. Indeed, a team that may have underlying relationships within the
members but to the team’s ability to performed well in the past may strug- management team, 4G makes it is pos-
effectively collaborate and work gle given new strategies or priorities. sible to take more informed decisions
together. For private equity, GPs need Likewise, assembling a team of highly based around traditionally intangible
to know the potential and quality of capable and experienced ‘stars’ is also variables. 4G also provides information
team dynamics prior to investing. no guarantee of success. Even with regarding any likely areas of tension or
highly talented individuals, without interpersonal conflict and abilities to
Underlying this is the fact that existing positive relationship dynamics, the function under stress. By informing any
methods of conducting management results could be less than the sum of potential problems, steps can taken to
due diligence such as rigorous refer- the parts. There is further complexity mitigate against these outcomes
ence checking, aptitude testing and when one takes into account the evolv- before any difficulties or problems
dissecting past performance are notori- ing relationship between the manage- emerge.
ously poor indicators of future success. ment team and the GPs. In short, a

2. Management Due Diligence
Pre Deal 4G helps accelerate the process of on-
boarding and understanding the inter-
4G sheds light on the following issues; nal dynamics of the board room, mean-
ing that relationships become produc-
• Understand the cohesiveness of key tive quicker than would normally be
relationships within the executive team the case.
• Underlying relationship strengths and
weaknesses The Process
• How to improve existing relationships
• Underlying cultural attitudes and suit- 4G can be deployed very quickly,
ability to particular strategies requiring an hour or so to complete an
• Understanding the likely implications online questionnaire. This is then fol-
of any culture or strategy change lowed up with a 30 minute feedback
• A team’s ability to adapt and be flexi- session to confirm the results. Given
ble the time constraints in such situations,
• Likely causes of stress or tension with- Four Groups would aim to deliver
in the team results within 48 hours of the first brief-
ing.
Post Deal
Reports are delivered in hard copy and
Once a deal has been completed, 4G clients are also able to take advantage
can also be used to help develop and of the 4G Visual Team Builder software
optimise the ongoing relationship that allows for the dynamic modelling
between GP and the management of relationships and interactions within
team. Particularly during times of stress the team, enabling GPs to answer
or change, this relationship is likely to “what if” questions prior to taking any
come under pressure. 4G provides the action.
explicit insight and strategies on how
best to manage these key relation-
ships.
Furthermore, in situations where the
GP is able to appoint a Non-Executive
Director to the board, 4G can provide
key information on the likely impact of
any candidates on existing team mem-
bers. Once a decision has been made,
Four Groups Ltd
5 St. Johns Lane
London
EC1M 4BH, United Kingdom
Tel: +44 (0) 20 7250 4779
Email: contact@fourgroups.com
http://www.fourgroups.com
© 2009 Four Groups Ltd, 5 St. Johns Lane London EC1M 4BH, United Kingdom.
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3. Management Due Diligence
Footnotes
1. Two relevant studies can be found at
the links below
http://fourgroups.com/link/?84
http://fourgroups.com/link/?85
About Four Groups
Four Groups has developed a new
approach called 4G to understanding
behaviour, relationships and culture. 4G
provides its users with insight into per-
sonal characteristics, how relationships
develop within teams and groups and
how culture can be best defined and
managed.
4G provides organisations with infor-
mation on how best to deploy and opti-
mise the performance of their people.
It also enables preventative measures
to be taken which prevent the more
negative aspects of interaction and
group dynamics such as minimising
personal friction and reducing misun-
derstanding between colleagues.
4G represents a systematic approach to
managing previously intangible aspects
of organisational life. The methodology
is easily replicable and can be imple-
mented quickly and efficiently.