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When Growth Stalls

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When Growth Stalls

The Blind Spots Driving Stalled Growth in PE Portfolio Companies

Private equity firms are good at spotting underperformance. What’s harder is understanding why some portfolio companies remain stuck, even after serious intervention.

From the outside, a typical work in progress inspires confidence. Leadership has been adjusted, capital deployed, and improvements (courtesy of both internal teams and consultants) are underway. But somehow, the work doesn’t deliver the goods. And between slowing growth and increasing frustration, value starts to tremble.

That’s when the predictable excuses are trotted out. Execution, leadership, resistance to change, tech that didn’t deliver and, of course the economy.

Could it be there’s something else at play?

Happily, my colleague Lorraine and I weren’t the only ones puzzled. We unearthed research published by McKinsey and Company, Harvard Business Review, Deloitte, Gartner, and Accenture that surfaced the same conclusions (I’ve added links at the bottom for the wonks among us). Across the board, these firms reject employee resistance, change fatigue, and technology gaps as primary causes of failure. Instead, they point to unclear value creation, complexity, outcome confusion, and weak linkage between effort and ROI.

Our thesis is that the devil is in the value prop. Simply put, portfolio companies stalling out seem to have a hard time making meaningful value explicit and transferable.

It’s not a performance problem

In many stalled companies, teams are no longer solving the same problem, even when they think they are.

Work gets done, money is made, customers are served. But the organization no longer shares a consistent understanding of what matters most, and to whom. Not because people are indecisive, but because different groups are acting on different interpretations of what matters most.

From inside the business, these differences can feel manageable – a pebble in the shoe that annoys but doesn’t impede progress. But from the customer’s perspective, and especially under diligence or exit pressure, the pebble starts to draw undue attention. Performance might appear acceptable through traditional indicators, but confidence in the business value slips away, undermining expected growth.

Why intervention often fails to change outcomes

What’s striking is that even the large consulting firms now acknowledge parts of these patterns, though not in these terms.

In the research from McKinsey & Company, Harvard Business Review, Deloitte, Gartner, and Accenture, the blame is increasingly shifting away from the traditional view that employee resistance, change fatigue, or insufficient technology is the cause.

Instead, they point to unclear value creation, unnecessary complexity, weak linkage between effort and outcome, and poor visibility into what is actually driving results.

That reframes failure as a problem of coordination and value clarity rather than motivation or tools. These firms are naming a new phenomenon. But they often don’t have effective solutions to uncover the causes.

Their conclusions can manifest as gaps, but for insiders, it feels more like quicksand that used to be solid, coherent systems.

Certainly, smart insiders know how to dodge the quicksand. But when the insiders step away or lose influence, progress slows. The quicksand starts to swallow people and progress.

Undocumented success, not systems

Many portfolio companies that appear stalled are not broken. They are living an undocumented existence… there’s no map or user’s manual. Hence the sense of quicksand, without a safe haven of aligned understanding.

This is where familiar remedies disappoint. Cost actions, re-orgs, new reporting layers, added oversight all address visible structure. Making things work better only works when you can see what’s going on.

How to spot the quicksand

When a portfolio company fails to gain traction, the question is not only who is underperforming, but whether the organization still shares a common understanding of what it’s trying to accomplish and how choices should be made.

Here’s how to spot the quicksand.

Decisions keep getting garbled, misinterpreted or mis-executed. Lack of clarity around ‘what problem are we trying to solve’ means that decisions aren’t grounded in a common culture. They mean different things to different parts of the organization.

Leadership changes don’t move the needle. Understanding the root of what’s undermining the value problem isn’t the single responsibility of one person. It’s the collective responsibility to see the problem from multiple perspectives. The problem isn’t capability – it’s that tolerance to see the problem from all perspectives diminishes as pressure increases.  Listening to all perspectives to see the reality is essential.

Consultants aren’t moving the needle. This isn’t an argument against consulting. It’s an acknowledgment of limits. Most consulting tools are designed to improve companies that already function as systems. Stalled companies in PE portfolios often require work uncovering the invisible, unstated processes that are being used in lieu of documented systems.

A useful diagnostic

Stalled growth usually shows up in numbers.

  • Customer churn starts to climb,
  • Gross margin quietly erodes,
  • Expected year-over-year growth is missed,
  • The success rate for winning new work declines.

When someone asks why these signals are lighting up, the room goes quiet. Explanations fragment. Attention turns quickly to a single function or a single leader. Sales gets blamed. Operations is told to tighten up. A department is asked to “fix it.”

The rate of decline doesn’t change.

Stalled growth lives not in the metric itself, but in the inability to explain it coherently. Not in underperformance, but in the absence of shared understanding about what is actually breaking and where.

Surface that confusion, and you have likely found the quicksand.

Attribution