Welcome back to the Alt Goes Mainstream podcast.

Today’s podcast takes us into the importance of ownership and equity, and how the world’s largest private equity firm (source: PEI 300) has helped create a culture of ownership within its portfolio companies and more broadly across the industry.

With the backdrop of KKR’s studio in New York and the firm fresh off the heels of celebrating its 50th Anniversary, we sat down with KKR’s Global Co-Head of Private Equity Pete Stavros for a live conversation during AGM’s RIA Field Trip to discuss how culture can be a competitive advantage and how it defines much of what KKR does both internally and with its portfolio companies.

Pete has not only been a leading private equity investor at one of the industry’s largest firms, but he’s also been a pioneer in one of the industry’s most important initiatives: enabling employees of private equity-backed companies to share in ownership of the companies where they work.

The firm’s Broad-Based Employee Ownership has delivered on its promise in many ways, with KKR’s recent 14x (and $4.75B) exit on CoolIT providing all 650 CoolIT employees with cash payouts that ranged from approximately one year to more than eight years of annual pay, which, as Pete noted in our conversation, was “life-changing for many employees.”

Pete and I had a fascinating conversation about the culture of ownership at KKR, the evolution of the firm’s private equity platform, why it’s so important to make employees owners, and how it’s created a ripple effect in the industry. We covered:

KKR’s “we not I” culture.
Why the most important trend in private equity going forward will be a shift from “balance sheet and income statement arbitrage to total cultural transformation.”
Why and how culture is an advantage — and how KKR sustains its competitive advantage.
The power of a scaled platform and why the division of labor is important as firms grow.
What Pete means by “persistence in process.”
How can companies encourage people to act like owners, and why is it so important for employee retention and productivity?
How can sharing equity ownership be used as a tool to change culture?
The impact the private equity industry can have through its ability to cascade change.

Bio

Pete Stavros (NewYork) joined KKR in 2005 and is Co-Head of Global Private Equity. This includes oversight of assets across Europe, Asia and the Americas and traditional large and mid-cap private equity, core and growth equity. Prior to this role, Pete served as Co-Head of the Americas Private Equity platform. He is a member of several investment committees at KKR. As an investor, Pete has helped lead a number of successful investments across sectors and sizes, including HCA Healthcare, Nielsen, Gardner Denver / Ingersoll Rand, Capsugel, Capital Safety, Hyperion, Flow Control Group, Charter Next Generation, Minnesota Rubber and Plastics, Geostabilization International, Crosby Group and CHI Overhead Doors. Prior to becoming Co-Head of Americas Private Equity, Pete led the Industrials industry team where he pioneered an innovative employee engagement and ownership model. This approach has been successfully implemented at more than 90 KKR companies and has positively impacted more than 200,000 workers. Pete is the Founder and Chairman of Ownership Works, a non-profit focused on building a worker ownership movement globally and enhancing the financial resiliency of the workforce. The goal of Ownership Works is to create more than $20 billion of wealth for working families over the next decade. Pete is also the Founder and Chairman of Expanding ESOPs, an organization focused on dramatically expanding the number of Employee Stock Ownership Plans (ESOPs) in corporate America. Prior to joining KKR, Pete was an investor with GTCR Golder Rauner, where he was an investor in the healthcare sector. He holds a B.S. in Chemistry, magna cum laude, from Duke University and an M.B.A. with high distinction, Baker Scholar, from Harvard Business School.

Thanks, Pete, for sharing your wisdom, expertise, and passion on private equity and making everyone an owner.

Show Notes

00:00 Live From AGM Field Trip at KKR Studio In NYC

00:29 A Message From Ultimus Fund Solutions

02:00 Meet Pete Stavros

02:09 The Story of Joining KKR

02:33 From Interviews To NYC

03:08 All About Collaboration

03:02 A No Star Culture

04:03 How Culture Is Sustained

04:43 Ritz-Carlton Analogy

05:23 No Star Culture

05:29 Culture Shapes Investing

05:54 Platform Resources Edge

06:24 Capital Markets Bench

06:41 Macro And Ops Experts

06:52 Making Resources Work

07:52 Consistency And Process

08:40 Evolving Value Creation

08:46 Gardner Denver / Ingersoll Rand Case

09:25 Value Engineering Method

10:09 Warehouse Teardown

10:54 Customer Feedback Loop

11:25 Sixty Million In Savings

11:50 Culture As The Next Frontier

12:16 Defining Transformation

12:27 Workforce Crisis Stats

13:08 Problems Are Global

14:28 Underwriting Culture Risk

15:12 Leadership Makes It Work

16:00 Ownership Done Right

17:06 BBEO Origins

19:10 Early Mistakes Learned

19:30 Scaling To 85 Companies

19:59 CoolIT Exit Results

20:48 Closing The Wealth Loop

21:12 Financial Literacy Journey

21:45 Truck Loan Lesson

23:39 Building Resilience Stack

24:15 Exit Support Package

24:37 Industry Adoption

25:40 Ownership Works Launch

27:04 Street Loan Cautionary Tale

28:00 Why Share The Playbook

30:02 Taking Ownership Global

30:56 International Rollout

31:31 Local Culture Differences

32:15 State Of Private Equity

32:40 Is Software Dead

33:09 KKR Software Approach

34:26 AI At Portfolio Scale

34:55 One Hundred Thirty Tests

35:35 Buying The Fear Trade

35:49 Accounting Is Not Dead

37:08 Closing Thoughts

A Word from Our Sponsor, Ultimus

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Learn more at ultimusfundsolutions.com or email info@ultimusfundsolu...

KKR’s Pete Stavros - a culture of ownership - live from AGM’s RIA Field Trip

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KKR’s Pete Stavros - a culture of ownership - live from AGM’s RIA Field Trip