As private equity firms continue to evolve, the portfolio operations function has become increasingly crucial for creating value across a variety of investment strategies. Yet despite its growing importance, there’s no one-size-fits-all blueprint for building a successful portfolio operations team. Every fund must tailor its approach based on strategy, size, culture, and investment philosophy.
At The Barton Partnership, we’re in market every day with the talent driving this evolution, from placing the first operations hire at an emerging fund to helping mature platforms scale their teams. And while we can’t prescribe a universal playbook, we can share the common themes and candidate expectations that consistently surface in our work.
Interest in these roles remains strong, particularly among operators at larger funds who see greater opportunity for impact at newer or more entrepreneurial sponsors. In the past year, the majority of principal-level candidates we’ve engaged have expressed interest in the opportunity to be the first hire, which usually offers greater ownership, clarity of remit, and direct access to decision-makers.
Below, we outline the two key dimensions firms must consider—internal team structure and portfolio-facing scope—and the critical questions to answer before going to market. Think of it as an assessment framework: a checklist that helps sponsors attract, retain, and empower the right talent to lead value creation across their portfolios.
Internal Team Operations
The first step in creating a successful portfolio operations team is aligning on internal factors regarding the firm’s structure, culture, and strategy.
1. Title & Compensation Alignment
When structuring a portfolio operations team, aligning titles and compensation is crucial. Inconsistent compensation, such as differences in carried interest or base pay compared to deal teams, can demotivate the portfolio operations team and create a sense of inequality, and ultimately can lead to negative market perceptions. A properly structured compensation plan helps retain top talent and ensures that the portfolio operations team is fully integrated into the firm’s success.
2. Hiring Structure
Another key aspect is whether to hire candidates as permanent W2 employees or on a 1099 basis. While 1099 contractors offer flexibility, the perceived instability raises concerns for candidates about long-term commitment and benefits, particularly around carried interest. Permanent hires, on the other hand, signal greater stability and integration. Firms must clearly communicate the hiring structure, compensation, and carried interest distribution upfront to avoid confusion and maintain stability within the team.
3. Involvement in Investment Decision Making & Value Creation Strategy
For top-tier candidates, the opportunity to influence strategy before the deal closes is critical. Ideally, portfolio operations leaders should be brought into early-stage deal discussions, particularly in developing value creation plans (VCPs). This early involvement aligns expectations and allows operations to hit the ground running once the deal is finalized, enhancing the team's ability to create value from day one.
4. Measuring Success
It’s important to define how success will be measured for the portfolio operations team. Metrics like EBITDA growth, margin improvement, or revenue expansion are common, but these should be standardized across the team as much as possible and tied to performance incentives. Clear success metrics ensure that the team stays focused on the firm’s objectives and is rewarded for achieving them.
5. Office & Travel Expectations
Portfolio operations professionals often work closely with portfolio company management teams and spend significant time on-site. While in-person time is essential, most candidates now expect flexibility, including some degree of remote work. Hybrid models that balance fieldwork with flexibility are increasingly preferred and can be a differentiator in attracting and retaining talent.
External Portfolio Company Factors
Once internal considerations are addressed, firms must turn their attention to how the portfolio operations team interacts with portfolio companies, to effectively integrate into the operational fabric of the portfolio.
1. Specialist vs. Generalist vs. Blended Approach
Firms must decide whether to adopt a functional, generalist or blended model for their portfolio operations team. A specialist or functional approach involves hiring subject matter experts in areas like HR, IT, or supply chain, while a generalist approach favors ‘athletes’ who can flex across a variety of operational areas. The right approach often depends on the firm’s investment strategy and the capabilities needed across the portfolio. Functional specialists may support more portfolio companies but with narrower scope, while generalists may provide more hands-on support within fewer companies.
2. Coverage Expectations
The number of portfolio companies each team member oversees varies significantly. Some firms assign one operations professional per portfolio company; others expect broader coverage. In many firms, it’s common to see individuals supporting 2-4 companies. This range strikes a balance between in-depth engagement and variety of exposure. Coverage expectations should also account for whether the team is composed of specialists or generalists, as this will affect bandwidth and focus. A more specialist setup will often mean seeing a wider variety of companies.
3. Clarity of Role Messaging
Effective communication is key when introducing portfolio operations professionals into the portfolio companies. The portfolio operations function must be clearly defined to both the deal team and the portfolio company management teams. Having a clear understanding of how portfolio operations professionals will contribute ensures that everyone is aligned on expectations. It also helps manage potential friction points, such as how and when the team is brought in to provide support.
4. Push vs. Pull Approach
Firms must also determine whether the portfolio operations team will engage through a "push" or "pull" model. In a push model, portfolio operations professionals proactively engage with management teams to offer their expertise, sometimes to the frustration of management. In a pull model, they are brought in at the request of management. While a push approach can foster stronger alignment and earlier intervention, a pull approach can preserve autonomy and ensure engagement happens only when needed. The best-performing teams often strike a balance between the two, adapting to the requirements of each company and management team.
5. Billing to Portfolio
Firms also need to clarify how portfolio operations services will be billed to portfolio companies. When portfolio operations professionals are required to bill back their hours, it can feel more like consulting than an integrated function. While this structure is typically more affordable than hiring external consultants, it can still create tension if portfolio company management feels the costs are too high. Transparent and fair billing arrangements help ensure that the portfolio operations team is seen as a valuable resource rather than an external cost center.
Conclusion
Building an effective portfolio operations function in private equity requires thoughtful planning,internal alignment, and a clear-eyed understanding of what success looks like for your fund. By addressing both internal fund considerations and portfolio-facing factors, firms can create a team structure that fosters collaboration, drives value creation, and ensures long-term success. Whether through aligning compensation and titles, defining clear success metrics, or providing the right level of flexibility and support to portfolio companies, firms can build a portfolio operations function that is both impactful and sustainable. Ultimately, a well-structured portfolio operations team will help private equity firms maximize the value of their investments and achieve superior returns.
