5 Strategies for Winning High Impact Leaders in a Tight Talent Market
April 15, 2022 – Companies of all types are dealing with talent shortfalls across the spectrum. But private equity firms, in particular, are navigating a perfect storm of landing high impact talent in arguably the tightest labor market seen in decades. Hiring key leaders has never been more critical for many high growth portfolio companies, yet a spike in competition for talent is making it harder to do than ever before. “The good news is we see several strategies for adjusting the search and recruiting processes for portfolio companies that help to mitigate the leadership labor crunch,” said Bespoke Partners’ Eric Walczykowski and Ross Kinnaird in a new report. “We work with private equity-backed software companies, and the competition for seasoned leadership is fierce. It is only getting more competitive as the red-hot private equity industry gets even hotter.”
In the study, Bespoke Partners outlined five strategies for mitigating the leadership talent crunch. Among them: Know the end before you begin; consider step-ups; ensuring transparency about the opportunity for the candidate; embracing the virtual enterprise; and streamlining the process. Let’s take a closer look:
Strategy No. 1: Know the End Before you Begin
The best deals make human capital central to the investment thesis. “In fact, some of the best deals we see involve planning leadership transformation long before the deal is even done,” said Mr. Kinnaird. “We call this ‘no surprises’ human capital due diligence because it should take place during due diligence for a prospective portfolio company,” he said.
How exactly will leadership achieve growth and the investment thesis? “Our private equity clients using this strategy navigate the tight labor market because they have much more time to analyze company leadership needs and plan how to address them,” said Mr. Walczykowski. “Buying that time mitigates the urgency to address leadership needs right after a deal closes, when options are limited, and the tight market creates long search times. By making human capital planning a core part of due diligence, you open up a wealth of options that can cut the risk of making leadership mistakes,” he noted.
Strategy No. 2: Consider Step-Ups
Bespoke Partners noted that the natural first step when recruiting leadership into portfolio companies is to turn to the seasoned veterans who have done it before. “But when each of those veterans has a dozen attractive offers to choose from, your short-list of choices can run out very quickly,” said Mr. Kinnaird. “We see our clients overcoming this problem by considering high-potential step-up candidates. Perhaps a senior operations executive is ready to take the reins as CEO. Maybe a VP of FP&A has the skills to become CFO.”
“We’ve seen some very successful CEO step-ups in recent years,” said Brian Waivada, head of Bespoke Partners’ dedicated CEO
and board member search practice. “Most recently we have seen executives with extensive experience in go-to-market disciplines graduating to the CEO role and performing exceptionally well. A proven go-to-market leader with the skills for the top job can be an excellent choice to raise to the next level,” he said.
Strategy No. 3: Transparency
One symptom of a tight labor market is that compensation levels rise sharply, said Mr. Walczykowski. “A related symptom is that candidates frequently turn down offers because they have so many options,” he noted. “While this bargaining power is great for candidates, it can cause portfolio companies to lose precious time pursuing candidates only to be turned down after a bidding war. The simple way to mitigate prolonged but unsuccessful recruiting attempts is to make sure there is transparency about the opportunity for the candidate.”
Strategy No. 4: Embrace the Virtual Enterprise
The COVID-19 pandemic led many companies to adopt remote working practices as mostly “virtual” enterprises. The software companies Bespoke Partners works with can operate with employees working anywhere and in any time zone. “The pool of candidates available for a given opportunity gets much larger when you are no longer constrained by geography and relocation,” said Mr. Kinnaird. “At the same time, the ability to work remotely has become an attractive benefit for many candidates. Companies that embrace the virtual enterprise approach or a hybrid working model have an automatic advantage in landing and keeping top talent.”
Strategy No. 5: Streamline the Process
Industry data indicates that searches on average are taking longer because of the tight market, according to the Bespoke Partners’ report. But data-driven assessments like the firm’s FIT Profile shorten the process by surfacing the best candidates much earlier and allowing the attention to focus very quickly on them. “That means less time spent on interviewing candidates who are not really a fit. The entire process is accelerated. The interview process itself can be streamlined. Instead of the traditional, sequential interview cycle, adopt more efficient approaches such as conducting group interviews via video conferencing,” said Mr. Kinnaird. “In case it’s not clear from these five strategies, we are big believers in treating talent recruiting like the process it is,” said Mr. Walczykowski.
Serving the PE Sector
Bespoke Partners is an executive search and leadership advisory firm dedicated to partnering with top private equity firms, including Francisco Partners, Clearlake Capital, WCAS, Insight Partners, GI Partners, General Atlantic, CVC Capital Partners and TA Associates, among scores of others, to recruit software talent and assess and evaluate teams at every stage of the investment lifecycle, from growth equity to buyout.
The search firm has completed over 600 searches since its inception a decade ago. Its expertise includes all C-level searches across multiple functional domains, including financial officers, HR and people, marketing and technology, as well as board of directors and internal private equity operating partner searches. The firm’s expanding leadership advisory platform includes organizational due diligence as well as executive assessment and coaching.