HR Roundtable 11 – People and Talent in Private Equity
On the 23rd of February, we hosted our 11th HR Roundtable, an event that continues to explore and discuss topical subjects and aims to offer support to all those interested.
In this edition, we welcomed Mike Innes, formerly of Graphite Capital and currently a non-executive director with ICR, an industrial repair and inspection group, and Sam Sinclair from NVM to discuss People and Talent in Private Equity. The event was chaired by Cathy Kay, Managing Consultant with a strong record of hiring for PE investments. Here are some of the key takeaways.
- How successful PE firms are approaching the challenges and opportunities on this topic?
Sam shared that since lockdown recruiting into Private Equity firms has been challenging. They justifiably agreed not to run any senior manager searches, which stored up a few projects they needed to be done. Without fail, every search since has had its obstacles, such as candidates dropping out last minute, considerable financial increases in salary demands and talent taken from their portfolio business by competition.
Mike added that the advantage of private equity is the remunerations setting – the equity options, especially for senior managers. Additionally, for many of the younger generations, the organisation’s purpose seems more critical than the financial benefits. Mike then highlighted that people well-suited to a PE portfolio company are comfortable and embrace pace. It’s not good or bad – just a different environment.
- Ensuring the right management team is in place and on board.
Mike highlighted that every situation is unique, but people that can demonstrate the ability to cope with pace, drive and breadth of responsibility in their previous roles are essential. However, assessing this is a challenge in itself—the use of competency-based interviewing and very detailed references supports the decision-making. The aim is to find the right personality, fit and skill, and sometimes it doesn’t work out. The cost failure is more felt in the length of time in finding someone else because the relationship between the company and private equity is shorter.
Sam echoed his point by describing private equity as more suited for people who are “sprint rather than a long-distance runner”. Resilience is the main character trait they emphasised in the recruitment process- as well as integrity, open-mindedness, self-awareness and the ability to drive a winning culture. They also work with a third-party psychologist and due diligence provider and helps build a reasonably accurate picture of the person from different data point. Furthermore, both speakers illustrated the importance of a data-driven culture, and an attendee who was a managing director we appointed for a Private Equity firm explained the key to stakeholder management.
- The dynamics between both parties and how to realise synergies.
Mike highlights that a change of culture often occurs under private equity ownership. There is a lot of pressure on the CFO in terms of dealing with data and information. The CEO is very visible because they interface with banks and investors regularly. Change in the individuals (CFO or CEO) happens if they can’t meet the expectations of the wider group. An interim solution is often sought after until a permanent replacement has been found. Sam added that sometimes it is more to support them with experienced professionals guiding them and hopefully bringing them above the curve.
- How specialist skills, consultants and interim executives are used at different stages – from due diligence through to exit.
Sam highlights that employment of an exit interim CFO is common practice as it gets the company in shipshape and easier to sell. Furthermore, they would use interims, especially finance, at all stages of the lifecycle, depending on the situation.
- We also discussed the need for advisory boards and main boards for investments and the need for sector-specific expertise.
That covers the key point from our 11th edition of the HR Roundtable. Look forward to seeing you in the next HR Roundtable – where we will speak about how to keep talent, as attrition is a challenge many companies face. 20th April at 11am – a virtual event.