What’s Next for Talent Management in Private Equity? 5 Takeaways from PE Talent Experts
The Private Equity industry has been one of the most resilient business sectors throughout the pandemic. But as the US economy emerges, the PE sector is facing some new challenges, especially in talent management.
I recently hosted a virtual expert panel discussion on what is next for talent management within the private equity space as we exit the pandemic. We had more than 200 attendees with an A-list set of panelists that included, Courtney Hagen, Chief Talent Officer at Littlejohn & Co., Steve Maxwell, Senior Vice President at Audax Group, and Mike Anderson, Operating Partner at OneRock Capital Partners.
We kicked off our discussion with the launch of a new study Summit Leadership Partners conducted titled, “Post-Pandemic: What’s Next for Talent Management in Private Equity?” which surveyed 200 private equity portfolio company CEOs on the current state of their businesses’ human capital management practices, DEI strategies, and succession planning.
Some of the top findings from the report that guided our panel discussion include:
- There are concerns about not meeting talent goals: 83% of portfolio company CEOs do not feel their company is on a good path meeting their talent goals (biggest challenges: promoting culture remotely, developing leadership bench strength, retaining key talent).
- There are signs of major management team burnout: 78% of portfolio company CEOs are concerned about burnout and well-being among their senior management team.
- Max exodus of talent could be coming soon & executives are not confident in current succession plans: 97% of portfolio company CEOs have weaknesses in succession plans.
- Executives view DEI as important, but few agree on how to properly execute DEI strategies: 95% of portfolio company CEOs say DEI is a focus area, but only 44% have a formal strategy.
- Managing a remote work culture could be tied to burnout: Management teams with a risk/concern of burnout see promoting culture remotely as a bigger challenge than management teams with no concern of burnout (54% vs. 34%).
With these new report findings in mind, my panelists and I took a deeper dive into how PE investors and portfolio company leaders can best navigate these new shifts in the talent landscape now as we exit the pandemic. Let’s take a look:
More Transparency Around Talent Retention
At a moment when CEOs are worried about meeting their talent goals and are concerned about management team burnout, keeping top talent on the job is a top priority. Courtney Hagen, Chief Talent Officer at Littlejohn & Co., said that she’s seeing a lot more transparency in the conversations that successful companies are having around talent retention.
“Companies that are doing it well are having very transparent conversations with people about their careers, about their needs, about their compensation, about what it’s going to take to keep them and retain them in these companies,” Courtney said.
Shortage of Hourly Workers – Higher Wages Here to Stay?
More companies are looking to hire, but now they’re having trouble finding enough people to fill the jobs. Especially if your company needs to hire hourly workers, whether that’s warehouse staff, drivers, technicians, or other entry-level positions, you might find that your usual labor force is re-evaluating their career options and demanding higher wages.
“At a macro level, workers are questioning what work they want to do,” said Steve Maxwell, SVP at Audax Group. “People are re-evaluating their career paths, and it’s had a significant impact.”
Companies may have to prepare for a “New Normal” of higher hourly wages.
“There’s no magic bullet; you’ve got to pay these hourly workers better than what you’ve been paying them,” Steve said. “There’s a pretty significant gap in a lot of states between minimum wage and what’s considered a living wage.”
Supporting the Management Team Through Remote Work
The shift to remote work and work-from-home has been challenging for many companies’ management teams who are used to having the benefits of in-person collaboration and culture-building. There is an opportunity here to help management teams work more effectively, and management teams are looking to re-evaluate their operations to suit the constraints of remote work.
“Teams are asking themselves, what is a good use of our time, how are going to make good decisions together?” said Mike Anderson, Operating Partner at OneRock Capital Partners. “COVID really surfaced a lot of these issues. There is an opportunity and an energy here to get better about that.”
State of Succession Planning
Succession planning has been knocked off its heels by the pandemic, with impacts on recruitment, early retirements, high potential talent pipelines, and more. Sometimes succession planning can be used as part of a larger conversation around talent management, especially with assessing and grooming high-potential talent not just for future leadership roles, but for improvement in their current role.
“There are opportunities here to do assessment and performance coaching,” said Mike Anderson. “You can move the needle in the short-term and do it under the banner of succession planning. We also believe it can help create a higher multiple for the exit, if you can point to having a deeper bench, people like the CMO and CTO, if you’ve taken measures to coach and prepare these people.”
Diversity, Equity & Inclusion: More Progress Is Needed
DEI has come to the forefront of the national conversation more than ever because of the 2020 racial justice movement. There is room for improvement on diversity in the private equity world; Summit’s recent survey data found that a combined 69% of CEOs said they are not where they want to be on DEI.
Our talent experts mentioned a few key strategies for DEI, such as using a DEI road map and framework to share with their portfolio companies, providing access to hiring tools and networks of broader pools of talent, and requiring diverse candidates when working with search firms. Another key to DEI is to keep the conversation going throughout the organization and have the CEO take ownership at the top. Diversity is an ongoing journey, not a perfect plan set in stone.
“What you really need to do is engage with your employees and have them co-create this with you,” Courtney Hagen said. “We’ve seen great results when the CEO takes ownership and establishes a subgroup of people who are transparent and honest and who keep having conversations at every town hall.”
No matter what industry you’re in as a PE investor or portfolio company CEO, talent is at the top of everyone’s minds. Companies are dealing with massive challenges in recruitment of hourly workers, retention of high-potential talent, promoting Diversity, Equity & Inclusion, and managing succession planning for C-level executives. The post-pandemic era is presenting big opportunities for organizations that can be proactive and agile in adapting to the new landscape of talent.
If you’d like to learn more about the latest trends in talent management, and hear great insights and thought-provoking Q&A with our expert panelists, check out the recording: Post-Pandemic: What’s Next for Talent Management in Private Equity and click here to request a copy of the full whitepaper.