The size of a private equity fund and how many assets they have in their portfolio certainly informs their potential usage of external executive search partners to identify C-suite talent.
Added to that, different funds take different approaches. Some have internal talent capabilities, retention plans and succession planning, while others look outside.
Talent search for different sized PE funds
In my experience, firms with only a few assets don’t derive as much benefit from partnering with an external search firm on a retained search basis. Since you’re likely to be doing fewer deals each year than larger firms, your talent requirements in those assets is less, this means it’s generally not to your advantage to manage a single individual recruitment supplier or source, and if you’re looking for talent externally, contingent search or looking to your network might be better options for you.
Mid-market firms typically have an operations capability to manage assets that are invested in, and there’s a value to having an operations function because mid-market firms aren’t large enough to have a dedicated consulting function across all the areas of capability that an asset might need support on. The operations function can perform a blended mix of what your business needs versus where it gets it from. This makes partnering with an executive search firm a good way to find C-suite talent from across the market.
The bigger your private equity fund, for example if you have a consulting function in a large cap fund, the more difficult it is to manage talent search yourself. You need more formal PSL arrangements and alignment on terms, and partnering with an executive search firm supports you in finding the best available C-suite talent.
The only drawback is that you might find yourself partnering with multiple firms who specialise in different areas, so your consulting function has a number of different external partners to liaise with.
Why executive search is more important now than ever in PE
Leadership advisor, Mike Myatt, says, “When I look across portfolio investments with PE clients, it’s quite easy to determine what separates the overperforming investments from the underperforming ones - the people. Even if a certain industry, segment or vertical is struggling, great talent will overcome those hurdles and outperform the competitor set.
If you think about why you make investments, whether that’s to expand into different markets, broaden the product suite or target new clients and opportunities, change is ever-present.
Managing all that takes a C-suite of top, high-performing talent with the requisite experience needed to deal with the complexities and challenges of maximising returns over shorter, more dynamic timeframes. You can no longer rely on who you know in the industry. You have to look externally - and know where to look - to recruit a C-suite that can drive revenue growth.
Competitive advantage comes from your talent, so it simply makes sense, especially in the high-pressure world of private equity, to get the best there is. And that means partnering with search firms who can connect you with the best there is.
The talent shortage in private equity
We’re in the midst of a PE talent shortage, brought about partly by a boom in acquisitions and fundraising, and partly by young talent being drawn out of the industry and into the likes of Big Tech and startups.
Laurence Ashby, leader of Hanover’s PE practice - says “Everyone is hiring, so we’re finding it’s becoming ever more candidate-scarce. So geographical reach and access to top diverse talent is vital to the success of any search”
So, what can private equity firms do to build their C-suite team with the right people?
Hiring the right C-suite talent
Firstly, it’s about where and how you look for suitable candidates. Expecting to be able to find the right people yourself is a thing of the past. You need search experts who may have existing relationships with high-performing C-suite talent, and who know where to look for candidates who will help drive your growth.
And in an environment where you might need to make quick decisions, you also need to ensure that you have an optimised hiring process. Again, you can work with an executive search firm to create a smooth and efficient process (if you don’t have one already) that will give candidates a positive impression of your firm, offer open communication and enable you to make decisions quickly.
Finally, an attractive package is paramount. With C-suite candidates in high demand, you have to offer something better than your competitors. It’s not just about remuneration - senior executives typically want growth opportunities, a strong culture and flexibility. It’s important to build all that into your offer.
If you’d like to discuss recruiting C-suite candidates to your private equity firm, contact me today and let’s set up time for a call.
