Owners vs. Operators: A Career Choice

One of the fundamental separations in the business world is between the owner and the operator. Owners have a fundamental role of identifying and valuing business opportunities, as well as setting a firm’s fundamental direction. Operators develop a strategy for achieving that direction, and ensure its execution. This is the separation that exists, for instance, in most public companies between the roles of the Board of Directors and the CEO. This distinction is of particularly relevance in job hunting because having one or the other as an aspiration should, in theory at least, influence a person’s career path.

This simple but powerful observation was courtesy of David Wong, a former colleague and fellow Georgetown alum who now works as an Analyst at a mid-market private equity firm in Boston. As I continue to explore career opportunities that will build off my experience as a management consultant but move me closer to my goal of working with small and medium businesses, I called David to get his perspective on whether working in private equity would a step in the right direction. His candid advice was powerful, clear, and refreshingly candid, something which can frankly be difficult to gain during a career search (after all, it is difficult to be impartial on something so personal).

Private Equity is About Being an Owner:

Private Equity is fundamentally about being the owner of a company. It requires being able to identify companies with promise to either be grown in size and value, or which could be restructured to release additional value from the existing business.

From David’s perspective, private equity is much more often a destination than a path to anything. Whereas consulting and investment banking are highly transient industries, with analysts and associates spending two or three years then departing for other opportunities, investing jobs tend to be long-term commitments to a particular business mindset.

Someone who moves into private equity (buyouts, to be more precise) looks at companies with proven business models and how to gain further value from them. While she might decide she wants to focus instead on identifying promising new business models and technologies, and therefore move into venture capital, she would still be doing so with an owners mindset. Similarly, she might decide that rather than worrying about individual companies, but instead on valuable industries, sectors, and types of investments, she might move to a hedge fund, but she would still be thinking like an owner.

David suggested that you could not take someone from any one of these careers and put them at the helm of a company or at the head of its strategy group and expect that he could be successful. Identifying the opportunity and actually executing against it requires fundamentally different skills and attitudes.

Career Paths for Operators:

David suggested that if my goal was to be a successful operator of a small / medium company, private equity would be only marginally helpful. While it would expose me to high growth businesses and how those companies achieve their success, my fundamental job would not be to understand how to replicate those successes on my own in the future.

As David pointed out, there is a fairly clear path from consulting into an operating role in a larger business. Many consultants move their way up the ranks of their firms until they discover a client who finds their advice indispensable and hires them to run an internal functional area (e.g. marketing, strategy, or operations).

What our conversation left fundamentally unanswered was how someone could best position himself for an operating role in a small or medium business.

The challenge for someone in strategy consulting is twofold. First, with only a few years experience, he is still inadequately experienced to run much of anything or be dropped into a COO-type position and be successful. Second, because consulting firms charge hefty prices for the privilege of their advice, clients are rarely small or medium businesses, limiting the networking and “watch-and-learn” opportunities.

Two ideal career path options for a strategy consultant with an eye towards being an effective operator would therefore seem to be either take an operating role directly (either literally in operations or in product development, sales, or marketing) in an industry of particular interest, or continue in an advisory position (as a consultant, either in a professional services firm or perhaps internally in a company with an internal strategy group).

Helpful Clarity, but Further Questions:

Whether anyone else will find the above helpful is of course an open question. I certainly found it to provide helpful structure to a question that is difficult to navigate.

It leaves open some deep questions for personal reflection. At the end of the day, do I want to be an operator or an owner? Does the challenge posed to an entrepreneur bridge both? Do any of the careers I described above (e.g. investing, industry operating roles, or strategy advisory) really prepare someone to be an entrepreneur, or does it all just come down to trial and error of starting a few companies and seeing what works?