In the private equity (PE) world, the success of a portfolio company hinges on finding the right talent for its specific growth stage. Each stage has unique talent requirements. By tailoring talent acquisition strategies to the company’s growth stage, PE firms can better support their portfolio companies’ successes.
This conversation was a key part of a recent PE forum discussion, ‘Creating Value and Growth for Funds and Portfolio Companies Through Talent.’ Blue Rock’s founder and HR/PE practice leader, Ruben Moreno, moderated the panel with Vikram Mahidhar, operating partner at Apollo Global Management. Together, they shared insights on value creation, data, and people strategy. According to Mahidhar, “Stage absolutely matters; the needs are different” when it comes to identifying talent for PE companies. As he puts it, the ‘questions’ being asked are different throughout each stage, so the talent needs will vary, too.
Let’s take a look at the four primary stages of a company and which skills are most important for PE firms to prioritize when hiring for their acquired companies.
Attributes for Startups
Key Skills: innovation, versatility, fearlessness
The skills necessary for a startup tend to focus on the ‘big feelings’ of passion, creativity, risk-taking, and agility. A panel of young entrepreneurs surveyed by Forbes agrees. As one says, “Build a team that isn’t afraid to attack those problems and isn’t discouraged if they fail.”
Look for talent that is deeply invested in the organization’s mission, its products or services, and its offered solutions. It’s often a toss-up whether it’s better to hire industry experts or people with external perspectives. The best teams are likely to have a balance of both. These people need to be flexible, quick-thinking, and versatile enough to tackle the many challenges that can arise with a proactive and problem-solving approach. From leadership down, these individuals should thrive on risk-taking and self-motivation with a relentless determination to pursue excellence without needing an established structure.
You’re looking for the dreamers and doers here – the ones ready to make their own rules and drive their destiny.
Attributes for the Growth Stage
Key Skills: identification of high-performing talent, scalability, process improvement
Once a company is past the initial startup stage, it moves into a growth phase. When a portfolio company is in this stage, focus on hiring talent with a track record of improvements and growth. You’re looking for leaders who know how to get the company over the bump and into a more stable condition.
At this point, ‘soft’ skills start to become more significant, whereas technical, specialized skills tend to be prioritized in the startup stage. Soft skills here include traits like coachability, emotional intelligence, and motivation. The requirements go beyond pure passion to consider how well these people can work with each other, and how well leaders can motivate and support their growing teams. The mission to scale successfully and seamlessly ties into these traits, too. Consider how well your new hires will be able to adapt as things change – or even drive change themselves.
The groundwork for the team is already set at this point, and if you have a strategy in place, there’s no rush to hire rapidly. Instead, take this moment to lay a foundation for the company’s maturity, focusing on sustainable growth and hiring people at all levels who fit with the established culture and the planned goals.
Attributes for Mature Companies
Key Skills: stability, efficiency, innovation
Big change isn’t on the horizon, at least in theory, once a company reaches the mature stage. However, resting on one’s laurels isn’t recommended. In many ways, as in the start-up phase, mature companies need to have an eye for innovation to keep abreast of the changing marketplace and consumer and customer expectations. PE firms should be seeking leaders who are experienced in the balancing act of keeping things steady and boosting efficiency and productivity while also navigating change management. These leaders should still be willing and able to seek feedback and improve as things evolve but in a slower evolutionary timeframe.
While different companies will have various priorities, depending on niche and unique needs, a handful of targets – as suggested by HubSpot – are good common threads to consider when looking at the track records of prospective leaders for mature companies, as follows:
- Profit maximization: Leaders who can optimize operations and implement efficiency measures.
- Market share retention: Leaders who can stay well-versed in the market, keep ahead of the curve and ensure continued value creation and quality delivery for customers.
- Product/ service innovation: Leaders with a vision for creating new offerings within the current mandate to meet evolving customer needs and preferences.
- Customer experience: Leaders with a background in CX, specifically enhancing loyalty, experience, and retention to retain and grow market share and brand loyalty.
Attributes for Transformation and Turnaround
Key Skills: specialized expertise and vision, transformative thinking, calculated risk-taking
Unlike the other three more definable stages, a ‘transformation’ stage can happen at any time. It is triggered, no matter what stage the company is a, by a need for a serious overhaul of some kind. PE firms, particularly ones that specialize in ‘distressed’ companies, will need a smart and timely strategy to bring in talent to turn things around, address key problems, and get back to creating real value.
“Very few people are trained as a good chief transformation officer,” Mahidhar noted in his panel. The first question often involves whether to draw from the internal pool (someone who knows the internal dynamics and ‘where the bodies are buried,’ as Mahidhar put it) or bring in someone external with a totally fresh perspective. The demands of each transformation, as well as available talent at the time, will likely dictate this answer.
Which other traits are helpful for transformative leadership? It depends on who you ask. Experts at Georgetown, for instance, list self-awareness, authenticity, collaboration, interdependence skills, and humility as key traits for transformational leadership success. A similar list from Marymount also recommends traits like collaboration and authentic emotional intelligence, along with idealized influence (trust and respect), creativity, motivation, adaptability, and consideration.
The commonality among all these stages is a set of leaders who are visionary and bold, but who also know to ensure the human side of things, i.e., collaboration, mutual respect, and trust, comes first. The Private Equity practice at Blue Rock Human Capital is here to help identify and recruit those leaders for portfolio companies at any stage – contact us to learn more!
About the Author
Ruben Moreno is a Founding Member of Blue Rock Human Capital and leads the Blue Rock Human Resources and Private Equity Executive Search practices. He specializes in Chief HR Officers, Human Capital Partners, Presidents, and other top C-suite leadership positions across a variety of industry verticals. With over 15 years of previous experience in corporate America, Ruben is a subject matter expert and national thought leader in executive recruitment.