The private equity (PE) industry is changing dramatically, including how firms approach talent acquisition and leadership effectiveness amidst longer hold periods. As PE firms strive to create sustained value within their operations over extended durations, new strategies and priorities are emerging.

Our team recently participated in Hunt Scanlon’s “PE Operating Partners Talent Forum: Designing a New Talent Playbook for Growth” Conferenceopens in a new window in New York. With over 350 PE professionals and executive search experts, we talked about the obstacles and strategies shaping today’s hiring challenges. Let’s explore the key takeaways from this conference together.

The Changing World of Private Equity

Pre-COVID vs. Post-COVID

Before the onset of COVID-19, private equity firms were thriving with abundant business opportunities. But the post-pandemic landscape shifted dramatically. The market tightened, and large takeovers are now less common. With rising interest rates, debt has become pricier, leaving PE firms with about $2 trillion in what we call dry powder (uninvested cash).

In response, the focus has shifted from mere financial engineering to innovative strategies such as consolidating multiple companies within the same industry through platform or roll-up deals. This strategy extends the holding period to roughly seven years–much longer than the usual four, aiming to maximize returns in this fiercely competitive market.

New Focus Areas: Culture and Talent

With longer investment periods and more competition, PE firms have now shifted their focus to company culture, talent, and leadership. Investors and management now agree that strong leadership is crucial for success. Without it, you simply won’t make it.

While traditionally, leadership and hiring focused on CEOs and CFOs, today’s spotlight on culture and talent is centered on the Chief Human Resource Officer (CHRO) and Chief Talent Officer (CTO). These roles are vital in the industry, and every private equity firm should have a human capital partner to support operational and portfolio leaders.

The Rise of Operating Partners

The longer investment horizon also increases the need and importance of a new role: long-term operating partners. These partners integrate operations and finances of merging companies. Plus, they manage human capital management and cultural alignment.

According to PwCopens in a new window, the operating partner’s role is crucial for driving value creation after an acquisition. They are now deeply involved in executing the original deal plan and ensuring operational enhancements last over the long investment period.

Hiring for PE Knowledge and Experience

What do PE firms seek in leadership and talent in this changing landscape? The world of private equity is vastly different from traditional corporations and small businesses, requiring leaders with specific experience and skills. PE firms seek individuals with industry know-how and experience in the fast-paced PE world. Candidates must often look for new opportunities once a company is sold, but the potential for ownership in a sale and the high-stakes environment can be very attractive.

Some important qualities for candidates in today’s PE hiring environment:

• Technical Skills: Mastery of industry details
• PE Experience: Understanding the unique demands and pace of the PE field
• Personal Traits: Resilience, drive, humility, and intelligence

Develop a Talent Playbook

A successful talent strategy in PE hinges on aligning value creation with talent management. The Talent Playbook, a key topic at the Hunt Scanlon conference, emphasizes an approach that revolves around plan, process, and people:

• Planning: Create a plan that aligns the firm’s value creation goals with its talent strategy.
• Process: Ensure critical people and processes are in place and aligned.
• People: Regularly assess skills, map out critical roles, and focus on HR.

A recent Harvard Business Review articleopens in a new window highlights the importance of developing a comprehensive talent strategy beyond traditional roles, incorporating leadership development, succession planning, and diverse skill sets to drive innovation and growth.

Partner with a Human Capital Expert

In the competitive private equity world, many PE firms are increasingly turning to specialized human capital experts to help identify and onboard top-tier leadership talent. Human capital firms, like The Forum Group, excel in pinpointing individuals who not only possess the requisite technical acumen but also embody the personal attributes crucial for thriving in this dynamic sector. With a deep understanding of the industry’s nuances, we provide invaluable guidance on addressing critical talent challenges, including succession planning and performance management, thereby enhancing organizational resilience and leadership stability.

Tips for Hiring in the PE World Today

• Prioritize Culture and Fit: Ensure candidates align with the firm’s values.
• Focus on Experience: Look for candidates with relevant industry experience and a track record in the PE environment.
• Invest in Succession Planning: Develop a robust succession plan to ensure continuity and leadership stability.
• Emphasize Personal Qualities: Seek out candidates with grit, humility, and adaptability – qualities essential for thriving in the PE world.
• Engage with Experts: Partner with firms like The Forum Group, which has a proven track record in recruiting top-tier talent for PE firms.

Navigating the challenges of PE hiring can be challenging. But if you highlight strong leadership and find top-notch candidates, your firm can rise to the top. It’s about delivering value to investors beyond just money. With the PE sector constantly changing and growing, smart hiring is critical to keeping your firm competitive and thriving in the long run.

Have questions? Reach outopens in a new window to one of our PE search firm experts. We are here to help