The post-Rolodex era

Managing a private equity firm's contacts means more than keeping track of names and phone numbers. These days, contact management systems span deal flow tracking, portfolio management and investor relations. By Art Janik, Associate Editor

Back in the old days, a partner looking to call a client or an investor could simply swivel through a Rolodex and pick out a yellowed note card containing a name, phone number and a few scribbled notations. But the physical Rolodex has long since been antiquated. And at private equity firms, whose businesses rely on keeping in touch with so many people, even a Microsoft Outlook contact database won't suffice.

These days, the buzz is all about customer relationship management (CRM), which is a bit broader than just tracking phone numbers and addresses. A CRM system spans the entire pipeline of a private equity firm, from initial due diligence all the way through fundraising and investor relations. Not only are contacts centralized in one location, but interactions with those contacts are recorded on a real-time basis.

?One of the issues is to manage prospective clients and allow the capture of additional data, not just straightforward contacts,? says Tom Kerr, a vice president and manager at investment advisory giant Hamilton Lane. ?You can also capture information such as fund type and size. There are many different classifications you can put into your query. This functionality allows you to also capture potential opportunities or business lines.?

Of course, implementing a new technology is never a one-swoop process. Below are some points to keep in mind when considering a switch to a sophisticated contact management system.

Even in the smallest of firms, communications breakdowns occur, and a partner will find himself speaking with someone on the phone with no knowledge that perhaps a colleague has already held a similar conversation not 10 minutes ago. CRM systems that operate on a centralized database allow users to record conversations and other sorts of interactions for others to refer to . Advanced programs these days also allow these contact windows to display all sorts of data and even links to other resources associated with the contact.

For example, an LP's contact window may have a person's name and phone number, their capital contributions to date, a link to an auditor and perhaps other firms in which the LP is invested.

?When an investor calls to see what their capital balance is, or if it's the middle of fundraising, any type of data point about them should be at the fingertips in one place in order to have an intelligent conversation with the caller,?says one major CRM vendor. ?When the phone rings, you have everything you need on the fly. You click on a name, and you see what investors are associated with that contact, if someone had a board meeting with them, etc.?

Another issue when centralizing a firm's contact-database is the relationship between the front and back office. Though theoretically, everyone at the firm should have access to the same contact information, the deal professionals tend to be more territorial, since they often compete with each other for the glory and the windfall of landing the winning deals. ?They don't want to share their information with everyone else. They are all type-A personalities, the rainmakers at the firms,? says the CRM vendor.

Another reason for their reluctance may also be that ?perhaps they already have a manila folder process that has always worked for them for the last 10 years and they have no reason to change to a database format,? the vendor continues. ?The front office is tough to change. Asking to toss out a system that works well is asking for failure before the product is in the door. It's not the fault of the technology. Most software programs are only as good as their input.?

There's also the question of accessibility: to what extent can anyone at the firm actively add and edit contact information? After all, just because the technology is there doesn't mean the procedures magically fall into-place. One sloppy slip of the mouse button, and a contact may be inadvertently sent to the trash bin. Sometimes, a firm may assign an admin person through which all changes must be funneled in order to prevent any dire changes to the master database.

In addition, what people can put into the database is just as important as what people can take out. Aside from the obvious security measures that would prevent a departing GP from snatching a database full of contacts and taking them to a new firm, many CRM systems will allow an administrator to block out information down to the individual field. For example, an LP contact may be available for everyone to see, but a nickname may be restricted to certain individuals. And the larger the firm and the more branches it has, the more need there is for compartmentalization of information so that the appropriate people are viewing the appropriate data.

In general, having a well developed CRM not only addresses the logistical aspects of contact management, but it also helps a firm appear more unified. Large firms that have many employees, some of which don't always talk to each other, still want to present the appearance of being a single entity. And if a partner needs to know if any of his colleagues had any interaction with a portfolio company manager, it's all at his or her fingertips ? no more making phone calls and running around the office to try to find out information from multiple individuals.