Beyond the PowerPoint: Lee McCabe on Building Real Operating Models in Private Equity

In a recent LinkedIn post, Lee McCabe challenges the prevalent approach to value creation within private equity firms, arguing that many rely on superficial presentations rather than robust operational infrastructure. McCabe contends that the widely adopted “Value Creation Plan” (VCP) often functions as “corporate theatre” – a glossy document designed to appease Limited Partners (LPs) rather than drive tangible change within portfolio companies.

McCabe highlights a common disconnect between the promises made in VCPs and the actual management practices employed post-acquisition. He observes that despite discussions of digital transformation and sales enablement, many firms revert to less systematic methods for managing value creation.

The “Value Creation Plan” (VCP) has become a kind of corporate theatre…..a glossy internal pitch deck designed to impress LPs, not to actually change how portfolio companies run.

According to Lee McCabe, the reality for many portfolio companies involves managing performance through “ad hoc emails, Excel trackers, and quarterly updates.” He posits that the concept of an “ops model” in many PE firms is largely a myth, created to project credibility without possessing genuine execution capability.

The Infrastructure of Real Value Creation

Lee McCabe contrasts the superficial VCP with what he defines as a true operating model, emphasizing its nature as “infrastructure” that dictates daily operations rather than quarterly reviews. He outlines five key components that constitute a functional operating model:

First, McCabe advocates for live dashboards over static reports. He suggests that a unified platform, updated weekly and focusing on a core set of crucial metrics like revenue, CAC, LTV, conversion rate, retention, and cash, provides the real-time visibility necessary to drive actionable insights.

Second, he stresses the importance of cross-portfolio benchmarks. Lee McCabe argues that the value of owning multiple businesses lies in identifying patterns and opportunities for improvement across the portfolio. Standardized data, he contends, is more effective for uncovering these opportunities than relying on external consultants.

A real operating model isn’t a presentation. It’s infrastructure. It’s what happens every Monday morning, not every QBR.

Third, McCabe proposes the implementation of capability pods. These involve hiring dedicated functional experts who can actively assist portfolio companies, moving beyond advisory roles to hands-on execution and system implementation. He likens this to a “shared services for execution” model.

Fourth, Lee McCabe emphasizes the need for a clear cadence and accountability. This includes regular weekly stand-ups and monthly performance reviews with clearly assigned owners, ensuring that operational oversight is consistent and proactive, not merely reactive before board meetings.

Finally, he calls for a shared language of performance. McCabe argues that a unified framework, with a common vocabulary, scorecard, and rhythm, is essential for aligning how success is defined and measured across different portfolio companies.

Observable Differences in Practice

Lee McCabe points to the tangible differences observed in firms that successfully implement such models. He notes that their portfolio dashboards resemble “trading floors,” their operators act with the authority of “GMs,” and their CEOs maintain a clear weekly understanding of their business’s standing.

When you see the few firms that do this well, the difference is obvious. Their portfolio dashboards look like trading floors. Their operators sound like GMs, not consultants.

Without these foundational elements, McCabe concludes, the concept of “value creation” is likely to remain confined to the theoretical realm of PowerPoint presentations, lacking the practical impact needed to genuinely transform portfolio companies.