How to Recruit for EBITDA-Focused Leadership Roles

Having placed leaders into roles like this repeatedly, we wrote this to give a practitioner’s view rather than generic advice. Roles defined primarily around EBITDA improvement attract a specific kind of executive and repel another, and firms sometimes discover too late which they hired. The distinction that matters is between executives who improve earnings by building a better business and those who improve them by extracting from an existing one, because the two produce very different companies at exit.

Two Ways to Improve Earnings

Earnings can be improved by growing revenue, improving mix, increasing efficiency, and building capability, or by cutting investment, deferring maintenance, reducing service levels, and squeezing suppliers and staff. Both show up in the same line, and over a short period they can look similar. They produce very different businesses, and a buyer’s diligence will usually distinguish them. Firms recruiting for earnings improvement should be explicit about which they want, because the executives who excel at each are different people and the plan they will execute differs accordingly.

Extraction Has a Reckoning

Improvements achieved by underinvesting have a characteristic pattern: strong early gains, followed by deteriorating service, capability, or asset condition, and a buyer who discovers during diligence that the earnings are not sustainable. This shows up in quality of earnings analysis, customer conversations, and asset inspections. Where a hold period is short and an exit imminent, extraction can occasionally be rational, but firms should make that choice knowingly rather than discovering they hired an executive whose instinct is extraction when the plan required building.

Assess How, Not Just How Much

When candidates describe earnings improvement, the useful questions are about method: what specifically drove the improvement, what was cut and what was invested, what happened to service levels and customer retention, what the business looked like eighteen months later, and what the eventual acquirer concluded. Candidates who can describe the mechanism precisely and account for sustainability are demonstrating a different quality of thinking from those who cite the percentage. Where possible, check with people who saw the business afterwards.

Define What the Plan Requires

Some value creation plans genuinely call for cost discipline in an over-resourced business, and an executive who is squeamish about that will underdeliver. Others call for investment and growth, and an instinctive cost-cutter will damage the asset. The firm should be clear about which it needs before recruiting, and should describe it honestly to candidates. Executives generally know their own inclination, and one who is told the plan requires building when their strength is efficiency will either self-select out or, worse, apply their instinct anyway.

Consider the Exit Buyer

The eventual buyer’s perspective is a useful discipline when defining these roles. A strategic acquirer or another sponsor will assess whether the earnings base is durable, whether the business has been invested in appropriately, and whether the improvement can continue. Recruiting an executive whose approach will produce earnings a buyer discounts is self-defeating, even where it flatters interim reporting. Keeping the exit diligence in view when defining the role tends to produce better hiring decisions than optimising for the next reporting period.

What This Looks Like in Practice

A firm recruiting for earnings improvement defines explicitly whether the plan requires building or efficiency, describes it honestly to candidates, probes precisely how past improvements were achieved and what the business looked like afterwards, and keeps the eventual buyer’s diligence perspective in view when defining the role.

The Mistake Employers Keep Making

The most common mistake is recruiting on the size of past EBITDA improvements without examining how they were achieved. An executive with impressive numbers built on deferred investment and reduced service will reproduce that pattern, which flatters interim reporting and is exposed in exit diligence, where the buyer prices the business on what they believe is sustainable.

Building Versus Extracting Earnings

Building	Extracting
Revenue growth and mix improvement	Price increases without value
Genuine efficiency and process gains	Deferred maintenance and investment
Capability investment	Service level reduction
Durable at exit diligence	Discounted by informed buyers
Compounds over the hold	Deteriorates after initial gains

The Bottom Line

EBITDA-focused roles attract executives who build earnings and executives who extract them, and the two produce very different businesses at exit, so define which the plan requires, describe it honestly to candidates, and assess how past improvements were achieved rather than only their magnitude. Hire for the specific demands of the situation, and the rest of the leadership equation gets easier.

Related Reading

For more, see Recruiting Executives Who Thrive Under PE Ownership, Talent Strategies for Value Creation Plans, Recruiting a Chief Revenue Officer for PE Portfolio Companies.