Private Equity Sector Demand for Talent Reaching Record Pace
May 23, 2023 – Historically, priorities for hiring senior leadership were strongly focused on an individual’s technical (hard) skills, as well as focusing on candidates with direct industry and functional experience. This formula proved to be successful for many executive hires, but certainly not all, according to Russell Boyle, a partner and co-head of the U.S. financial officers practice for Odgers Berndtson. “Under these requirements, we saw too many losses, and sponsors and search firms were challenged over time to become more analytical to understand what truly works (and doesn’t work) when hiring individuals to successfully lead companies,” he said. “My personal belief is that while a tried and true playbook may have worked well in the past, today’s market landscape has grown in complexity and competition, and out-of-the-box thinking is now critical to drive results in a company. Today, we are seeing a significant increase in non-competes, counter offers, and overall demand for outstanding candidates and this has made the marketplace more competitive than ever.”
Mr. Boyle notes that we have all seen that COVID already has had a lasting impacting on the workforce. “From my view, I’ve seen a paradigm shift where companies are seeing an increased value in assessing candidates that may lack some of the industry experience, but can demonstrate that they have the ability to successfully drive and lead businesses,” he said. “I have seen numerous examples where a C-suite leader looks good on paper – checking all the boxes for what is believed to be the “right” background for an open role. They have run businesses the same size or larger, they know the industry, and appear to have been successful in their previous endeavors.”
However, many of these very executives faltered during the last year, and one must ask why? In speaking with numerous equity sponsors and board members, Mr. Boyle uncovered several critical skills that these leaders lacked during the global pandemic, a time of turmoil and market disruption. The exposure of leaders who were unable to navigate businesses through the recent periods of stress and uncertainty has set the stage for a new set of requirements that PE firms are focusing on when hiring leaders of their partner companies.
The Growing Importance of EQ
During this recent period of market disruption and uncertainly, Odgers Berndtson saw that in many cases, past experiences and successes do not always translate into prosperous future outcomes. “It is critical to recognize changes in market dynamics, and truly understand why an executive may have been successful (or not) based on market conditions,” Mr. Boyle said. “Today, hiring managers should not only be assessing hard skillsets, but also the softer skills of their potential future leaders. It is the soft skills–like communication, teamwork, problem-solving, and critical thinking—that will help an organization assess how well the candidate will be able to steer their company through not only the good times, but potentially the bad.”
Related: Keys to Diversifying Your Workplace
The two soft skills of leadership that have been mentioned more than ever in the past year have been communication and inspiration, according to Mr. Boyle. “It is assumed that all leaders are required to be bright, decisive, strategic, etc. but now more than ever boards, CEO’s, and sponsors are looking for ways to assess how a leader will communicate and inspire with their teams,” he said. “During the interview and referencing process there has been an increased emphasis on how leaders showed up for their teams during the pandemic and how their teams respond throughout remote working, decreased travel, and infrequent face-to-face meetings. Hiring personnel also are working to uncover how quickly their leadership adapted to a new environment and how they are anticipating handling potential changes in the future.”
Russell Boyle is a partner and co-head of the U.S. financial officers practice for Odgers Berndtson, and is based in the New York office. With almost three decades of recruiting and leadership consulting experience, Mr. Boyle is an industry leader in CFO, senior management, and board recruiting, and leadership assessment
Testing and heightened interviewing techniques are playing a critical role in helping organizations with this new type of assessment. Odgers Berndtson has invested in increased training for its search consultants, including new questions and points of discussion for candidates, as well as questions geared toward official and back channel references that are structured to uncover what soft skills a candidate has demonstrated during their career. “In today’s market, it is essential that organizations obtain views from a variety of sources to truly understand how a leader has not only demonstrated success in the past, but also is well positioned to successfully navigate different types of market landscapes in the future,” said Mr. Boyle. “Furthermore, there are some key immediate term decisions that many organizations are currently grappling with, such as long-term policies around potential remote or hybrid working, and the future of office and real estate footprints. Views on these critical topics that are still in up for discussion should be an essential part of the dialogue taking place with executive level candidates.”
Building a Strong Supporting Team
In today’s extremely competitive market for talent, effective leaders must clearly demonstrate their ability to build and retain the right team, according to Mr. Boyle. “Employees have become very comfortable working remotely and many believe this is the wave of the future,” he said. “I have observed first-hand that it may work for some employees and functional positions, but it certainly does not work for all. The pandemic has opened a whole new thought process around work and what constitutes as the right work / life balance. The best leaders are listening to understand the needs and flexibility preference of their employees, while maintaining an eye on what is needed to best serve their customers and achieve established business goals and targets.”
Related: Data’s Impact on Executive Search
Workforce dynamics may be evolving, however, Mr. Boyle explains that equity sponsors still have an obligation to their LP’s to achieve their forecasted goals – and this comes through hard, focused work. “It is more critical than ever that company leaders maintain the drive and sense of urgency that has always been synonymous with success in the private equity world,” he says. “Once again, communication and inspiration from all functional leaders should be a trademark for executives. Leaders today are required to be more hands on and they need strong supporting players that can help them execute under compressed / aggressive timelines. Furthermore, the current tight job market is highlighting the growing importance of both retention and attraction of candidates, both of which are very front of mind for organizations today.”
Cross-Functional Expertise
Another trend Odgers Berndtson is seeing is increased demand from hiring leaders to attract candidates that can demonstrate cross-functional expertise. Mr. Boyle explains that the best CEO’s, presidents, and general managers have often been exposed to several different functional areas within an organization.
“Leaders that have worked across the organization have an increased understanding of what to look for during times of trouble and how to react to it in a more expedient manner,” Mr. Boyle said. “Exposure to different functional areas also demonstrates an individual’s ability to adapt to different roles, which may allow the person to step in if necessary or effectively guide other leaders to improve their stature in the organization. CFO’s are a prime example of a function that is looked upon by the equity sponsor as the eyes and ears into a partner company. Today’s CFO must have a strong working knowledge of all the major functional areas based on the importance of their relationship with the equity sponsor. A private equity CFO is such a significant role that we built an entire practice around this singular function so that we could identify every equity backed CFO in the market, and have a true understanding of their track record, and the attributes needed for success.”
Concluding Remarks
“When it comes to assessing, choosing, and hiring talent, however, there will be a new normal,” Mr. Boyle said. “This will include an emphasis on DE&I hiring at all levels and a new skill set as to how to best attract and develop this talent base. A remote workforce in some capacity will remain in effect as leaders determine how to best structure future workforces to meet both the needs and demands of internal employees and external customers. Communication and inspiration this will remain pinnacle requirements for individuals in leadership roles. Hard skills will remain important, but soft skills will increasingly be the factors that differentiate a qualified leader from a truly successful leader.”
Related: Executive Recruiters Upping Their Efforts to Help Organizations Achieve Diversity Goals
Contributed by Scott A. Scanlon, Editor-in-Chief; Dale M. Zupsansky, Managing Editor; and Stephen Sawicki, Managing Editor – Hunt Scanlon Media
