How Private Equity Professionals Learn From Experience

The purpose of this study was to explore how private equity professionals with demonstrated expertise reported learning from experience. Interviews with 15 professionals explored: (a) how they described the role of learning from experience in their work, (b) what specific learning behaviors and strategies they reported using to learn from experience in their work, and (c) how the business model or other organizational factors of private equity support or hinder learning from experience. The study’s conceptual framework drew from theories of informal and incidental learning in the workplace (Marsick & Watkins, 1990), the Learning Cycle of experiential learning (Kolb, 1984), and learning intensity in the workplace (Skule, 2004). Qualitative interviews were supported by a semi-structured interview guide, exploration of critical incidents, and questions regarding organizational factors. The study generated three key findings: 1. participants reported gaining expertise largely through learning from direct experience, supplemented by other forms of learning; 2. participants reported a learning process involving concrete experiences, reflective observation, abstract conceptualization, and active experimentation; and 3. participants reported private equity to have several attributes of high learning intensity, with variable levels of support for learning. Analysis of Finding 1 suggested a map of concentric sources of learning sources for private equity professionals, with direct experience at the center, surrounded by the experiences of others in the organization, surrounded further by formal sources of learning. Analysis of Finding 2 suggested an applied learning cycle for private equity professionals involving (a) an investment disappointment or complex transaction; (b) analyzing the experience through individual reflection, discussion with contacts, and written reviews; (c) drawing investment lessons; and (d) applying these lessons to future investments. Analysis of Finding 3 suggested that four aspects of the private equity business model—exposure to a broad network, exposure to high performance demands, significant incentive compensation, and a high degree of variety—support learning from experience. Two other aspects of the business model—the degree of individual autonomy and the visibility of results—may be positive or neutral in supporting learning from experience. Management support for learning may not be a consistent feature of private equity organizations.