What PE-Backed Manufacturers Must Prioritize to Stay Competitive

Private equity–backed manufacturers are closing out 2025 in a world that looks markedly different from the one they entered in January. Markets that once felt predictable are now shaped by constantly shifting regulations, evolving cost pressures, tightening labor pools, and increasingly digital operating requirements. While conditions varied across sub-sectors—from industrials to energy-adjacent manufacturing—the common thread this year has been volatility: not the destructive kind, but the kind that quietly exposes leadership gaps.

As firms prepare for 2026, leadership excellence is emerging as the main competitive differentiator. Not operational discipline alone. Not cost-cutting alone. Not digital investment alone. Leadership.

Across our work with PE sponsors and operating partners, one theme repeats: value is leaking or accelerating based on the strength of the C-suite. And in many cases, challenges that appear operational, structural, or macroeconomic are in fact rooted in hiring decisions made too quickly or with misaligned criteria.

This blog outlines the four leadership-related priorities PE-owned manufacturers must address as they enter 2026, and how these priorities, taken together, reveal the blueprint for the ideal executive profile for the year ahead.

Operational Agility Must Replace Operational Muscle Memory

If 2025 taught PE-backed manufacturers anything, it’s that experience is not the same thing as adaptability.

Throughout the year, many middle-market companies navigated fluctuating demand patterns, shifting supplier relationships, and sudden changes in cost structures. While this volatility was not always destructive, it did expose leadership teams that were overly reliant on historical playbooks. In review after review, operating partners repeatedly identified the same issue: executives who were skilled, experienced, and reliable, but not agile.

This shift isn’t imagined. The World Economic Forum has continued to emphasize adaptive capacity as a defining capability for next-generation manufacturing competitiveness, noting that "future-ready manufacturing leaders must be able to reconfigure operations quickly in response to disruption."

Operational agility no longer means “being good in a crisis.” It means designing operations, talent structures, supply chains, and capital deployment strategies with built-in flex points. The executives who excel in 2026 will be the ones who can:

• Rethink long-standing production assumptions
• Rebalance global and domestic sourcing with minimal friction
• Identify operational leverage points before stress exposes them

This is precisely the kind of thinking explored in our article on energy-intensive manufacturing:The Talent Bottleneck in Energy-Intensive Manufacturing, where we detail why agility—not experience alone—determines which manufacturers outperform during industry inflection points.

For 2026, PE firms should evaluate candidates not on the depth of their operational background alone, but on their ability to demonstrate pattern recognition, scenario planning, and proactive redesign of operational pathways.

Digital Competence Isn’t Optional. But It Must Be Practical, Not Theoretical

Across PE-backed manufacturing this year, 2025’s most repeated frustration was simple: digital initiatives stalled not because of technology gaps, but leadership gaps.

Many companies invested in sensors, automation, or process intelligence tools, yet struggled to extract meaningful ROI. This held true even when the technology itself was sound. The real obstacles were misaligned expectations, lack of cross-functional readiness, or leaders who understood digital transformation conceptually but couldn’t translate that understanding into operational or commercial outcomes.

This aligns with trends observed by the National Association of Manufacturers, which reported that manufacturers increasingly view data-driven decision-making as a core component of competitiveness. While the data exists, few organizations have leadership teams who know how to turn it into action.

Digital fluency is not about hiring a technologist. It’s about hiring a leader who can:

• Understand which digital investments actually move EBITDA
• Lead change-management when implementing new systems
• Communicate digital objectives clearly to nontechnical teams
• Balance automation with workforce engagement

Our earlier blog,From Data-Poor to Digitally Fluent, outlined the profile of these leaders in detail: executives who do not chase technology, but instead translate it into commercial, operational, and financial outcomes.

In 2026, PE-backed manufacturers cannot afford leaders who sit on either extreme: those who see digital transformation as purely an IT issue, or those who treat it as a silver bullet. The manufacturing executives who excel will land squarely in the middle: pragmatic, ROI-focused digital decision-makers who can bring an organization with them.

Workforce Strategy Must Advance Beyond Labor Availability

One of the less-discussed realities of 2025 was the quiet increase in workforce friction across the manufacturing sector. It didn’t always make headlines, but it created hidden drag on output, culture, retention, and cost. Executives frequently misdiagnosed these issues as simple labor tightness when, in reality, the root cause was leadership.

According to the U.S. Chamber of Commerce, manufacturers continue to face elevated workforce constraints, with job openings consistently outpacing available workers across multiple skilled trades. But workforce strategy is no longer simply a matter of hiring or retaining—it’s about how leadership aligns efficiency, technology, engagement, and operational design.

We explore this directly in When Automation Meets Attrition, where we outline why the most effective manufacturing leaders understand the nuance between “leaning out labor” and “optimizing labor.”

In 2026, the workforce challenges PE-backed manufacturers must prepare for are not purely numerical; they are structural and cultural. Effective executives will need to:

• Understand how technology changes workforce expectations
• Build trust during periods of operational restructuring
• Re-skill and re-deploy workers as automation expands
• Address cultural fractures early, not after retention drops

Workforce strategy is now leadership strategy. And PE firms that misdiagnose the root cause as labor shortage rather than leadership approach will enter 2026 at a disadvantage.

Regulatory Responsiveness Must Become a Leadership Competency

Across 2025, regulatory changes affected sectors differently, but nearly all manufacturers experienced some combination of policy volatility, permitting delays, environmental compliance adjustments, tax changes, or new incentives. While specific impacts vary, industry-wide reporting consistently shows that regulatory unpredictability is now a material operational and financial consideration.

For example, PwC has noted that manufacturers increasingly cite policy uncertainty as a core external pressure shaping strategic decisions. While such reports stop short of predicting specific regulatory scenarios, they underscore that leadership teams must be capable of adjusting plans quickly and communicating implications clearly.

This is the foundation of our upcoming article, Leading Through Regulatory Whiplash, where we examine why PE-backed manufacturers need leaders who possess regulatory fluency, not because they are policy experts, but because they can anticipate consequences, adjust operational plans, and communicate the business case to internal and external stakeholders.

Entering 2026, the leaders who excel will be those who treat regulatory shifts as strategic variables, not surprise disruptions.

The Ideal Executive for 2026: A Blueprint for PE-Backed Manufacturing

Taken together, these four priorities paint a clear picture of the ideal manufacturing executive for 2026. This leader is not defined by any single attribute: technical depth, operational expertise, financial acumen, or digital sophistication alone. Instead, they represent a synthesis of capabilities shaped by the realities of 2025 and the demands of 2026.

This is an executive who views volatility not as an obstacle but as a navigational input: someone who can meet ambiguity with clarity, mobilize cross-functional teams through periods of change, and rethink long-standing assumptions about how value is created. They are fluent in digital concepts but grounded in operational practicality. They understand workforce dynamics not as a cost center but as a strategic lever. And they have the situational awareness to interpret regulatory shifts in ways that keep the company ahead rather than reacting from behind.

In practice, this leadership profile is rare but not unattainable. It requires PE firms to move beyond resume scanning or buzzwords and instead build a search process that identifies demonstrated adaptability, evidence of transformation, and the capacity to lead through uncertainty.

PE-backed manufacturers that upgrade their leadership criteria now—before 2026 begins—will enter the new year with a measurable strategic advantage.

Ready to build the leadership team that will define your results in 2026?

The right executive hire doesn’t just fill a role. They set a trajectory.

If your portfolio company is preparing for major initiatives in 2026, from digital transformation to operational redesign to workforce restructuring, now is the moment to secure the leadership required to win.

Connect with Kersten Talent Capital today to ensure your next executive hire is the right one.