July 17, 2026
The data on mid-level leadership and financial performance is compelling. Private equity has every reason to pay attention.
The private equity industry’s approach to executive talent has developed considerably over the past decade. Talent partners are now embedded at most large and mid-market funds. Human capital sits alongside financial and commercial diligence. The understanding that great C-suite leadership is foundational to value creation is well established, well resourced, and well earned.
This piece is about the conversation that runs alongside it.
Within every portfolio company, there is a tier of leadership that operates between the executive team and the workforce: the people responsible for running teams, implementing new processes, driving commercial change, and sustaining operational momentum through the full arc of the hold period. These are the directors, managers, and team leaders who translate a board-level strategy into what actually happens on the ground, week by week. The evidence suggests this layer carries more financial weight than its profile in the talent conversation would indicate.
In 2023, McKinsey published research examining the financial performance of organisations sorted by the quality of their middle management. The finding was direct: organisations able to tap the potential of their middle managers deliver multiple times the total shareholder return of those with average or below-average managers over a five-year period. The authors described strong mid-level leadership not as a nice-to-have, but as a business imperative.
That is a directly relevant timeframe for a typical buyout. Average hold periods have extended to five to seven years across most markets, and the trend has been running longer, not shorter. If the quality of mid-level leadership is a material predictor of total shareholder return over five years, that is not a background HR consideration. It is a value creation variable.
Research from Gallup adds a further dimension: managers account for roughly 70% of the variance in team engagement. Engagement, in turn, drives the operational outcomes that matter during a PE hold: productivity, retention, customer performance, and the organisational capacity to absorb and execute change. These are not abstract associations. The same research links the most engaged teams to materially higher productivity and profitability than their least-engaged peers.
Practitioner evidence points in the same direction. Sponsors who identified entrepreneurial mid-level talent, gave them clear mandates, built teams around them, and aligned their incentives to value creation initiatives saw those initiatives land. The combination of clarity, resource, and accountability at the management level turned plans into outcomes.
The PE ownership period is not business as usual. Acquisitions bring structural change: new reporting lines, new performance standards, new strategic priorities, accelerated timelines. Transformation programmes land on the organisation all at once. The executive team sets the direction and holds the investor relationship. But the day-to-day weight of change falls on the layer beneath them.
McKinsey’s work on Power to the Middle makes the point directly. Mid-level managers are uniquely positioned close to the ground but with a crucial connection to company strategy, which is precisely what makes them effective guides through periods of rapid and complex change. They are not passive recipients of strategic direction. In high-performing organisations, they are active translators of it.
This is particularly relevant in businesses that have not previously operated under institutional ownership. Pre-acquisition, mid-level managers in these companies have often built their expertise in a stable environment, with established processes and relatively predictable expectations. PE ownership changes the pace, the ambition, and the accountability framework simultaneously. The managers who adapt and step into an expanded role in that environment can become significant drivers of operational improvement. The ones who are supported, developed, and given the right level of mandate often surprise.
Practitioner surveys and the documented evolution of the PE talent function both point in the same direction: private equity firms are increasingly examining talent impact not just at the CEO level and across the functional C-suite, but straight into middle management. Talent partners at larger funds have progressively expanded their remit to cover organisational design, leadership bench strength, and management capability below the executive tier. The return on that attention, when deployed well, is tangible.
What this looks like in practice is not complex. Sponsors who map mid-level leadership capability during the post-close period, identify the individuals with the appetite and ability to lead change, and invest in developing or strengthening that group during the hold, are building a more capable executing organisation. Every operational initiative that a sponsor backs runs through this layer of the business. Commercial transformation, technology implementation, margin improvement, geographic expansion: none of these is delivered by the board. They are delivered by the managers running the teams that do the work.
The incremental cost of attention here is low relative to the size of the opportunity. These are already salaried leaders within the portfolio company. Activating them does not require the same investment as a senior executive search or a dedicated operating partner engagement. What they often require is clarity of mandate, access to development, and the kind of recognition and incentive alignment that signals their contribution is understood and valued.
None of this diminishes the case for strong executive leadership. Executive leadership remains critical to investment success. A capable CEO who can hold the investor relationship, set strategic direction, and build a coherent executive team is the foundation on which everything else is built. Nothing in the data on mid-level management changes that.
The McKinsey and Gallup data cited above both point to the same conclusion: the talent ecosystem within a portfolio company extends further down the organisation than it typically receives attention, and the returns to strengthening it are real and measurable. The PE firms with the most sophisticated operational value creation models are already finding this to be true in practice.
Execution-led value creation, now the dominant driver of returns in an environment where financial engineering has diminished as a lever, depends on an organisation that can actually execute. That organisation is built at multiple levels. The executives provide direction. The mid-level leaders provide delivery. Both matter, and the industry’s best investors increasingly recognise that investing in one without attending to the other leaves a meaningful source of value on the table.
The question for sponsors during the hold period is not whether mid-level leadership matters. It does. The question is how much more value might be within reach if it receives the same deliberate attention as the executive tier above it.
