The concept of CEO Alpha and its impact on company performance

CEO Alpha refers to the extra performance that a company gains from CEO outperformance. This is because CEOs make significant decisions that influence the company's strategy, resource allocation, M&A, and hiring. It has been empirically shown to exist in the public realm, with top-performing CEOs outperforming their industry peers and creating substantial value. While CEO Alpha has not been closely studied in the private realm, there is a growing recognition of its importance. Private equity CEOs face unique challenges, such as the need for short and medium-term performance, different board dynamics, and varying operating models. Therefore, building CEO capabilities becomes crucial for private equity firms and institutional investors to unlock CEO Alpha.