Private Equity’s New Leadership Playbook: Why Soft Skills Matter More Than Ever
March 10, 2025 – Private equity firms and their portfolio companies are increasingly valuing soft skills such as emotional intelligence, relationship building, and crisis management to navigate shifting market conditions. Traditionally, leadership hiring in this space has prioritized a strong growth-focused mindset, but adaptability and strategic resilience are now just as essential. The results, not leadership style or continuity, were all that mattered. But the economic turmoil of the 2020s—namely inflation, remote work, and supply-chain disruptions—has slowed growth and changed the way people view their jobs, forcing these firms to rethink their approach to hiring and retention, according to a new report from Focus Search Partners, a Vaco company.
“Today, private equity companies are no longer solely focused on growth,” the study said. “Instead, they’re forced to deal with economic uncertainty coupled with a shrinking executive talent pool. And so companies across a range of industries are adjusting to this new reality, adopting new strategies, placing more emphasis on soft skills—like emotional intelligence and relationship building—to quickly adapt to changing situations and organizational differences, and considering executives with the relevant experience from different industries to expand their talent pool.”
After decades of rapid growth, the volatility of the 2020s has led many organizations to reassess how they hire and retain workers. “For private equity firms, this means moving from aggressive hiring strategies to making difficult decisions about downsizing or restructuring,” the Focus Search Partners report said. “Now, firms are identifying what essential roles are required to meet those critical business needs. They’re also evaluating whether they have people who can fill these roles within the company already or they need to hire externally. Either way, this process requires a balancing act between thoughtful planning and clearly identified business priorities.”
Reckoning with the Challenges of Hybrid Work and Returning to the Office
Balancing remote and in-office work is tricky for many firms, especially in private equity, the Focus Search Partners report explained. “Many employees are resistant to returning to the office, and the best candidates aren’t always local,” it said. “This challenge, combined with profit losses, has revived the concept of “boomerang executives,” or leaders who return to their previous employer as local talent pools shrink. During the pandemic, with the rise of remote work, it was common for executives to move closer to their families. Now, they’re reluctant to leave jobs that allow remote or flexible work for one that doesn’t, so firms have gotten more creative with their benefits to attract top executive talent.”
Turning Market Downturns into Hiring Opportunities
Economic downturns create unique opportunities for companies to strengthen their teams, according to a separate report from Talentful. While this strategy has been a hallmark of the tech sector, it’s now gaining traction across all industries, including private equity. Firms are using market disruptions, like layoffs, to scoop up high-performing talent from their competitors. Beyond hiring, there’s also been a renewed focus on retaining and developing existing talent by investing in benefits like executive coaching.
Related: How Talent is Driving Private Equity Success
Building Resilient Teams with Broader Leadership Skills
:Leaders with experience in crisis management are in high demand across industries like technology, consumer products, and healthcare,” Focus Search Partners said. “Bringing a steady presence, good leaders guide their organizations through challenges while staying ahead of the competition.: During Intel’s recent downsizing of nearly 15,000 employees, for instance, leaders had to balance difficult financial decisions with empathy for their workforce. As other companies face similar transitions, the demand for executives who can effectively lead through change will continue to increase. Since the pandemic, private equity firms have also increasingly sought adaptable leaders who thrive in uncertainty, make quick decisions, and help their organizations navigate turbulent markets with confidence.
Elevating Soft Skills
“In the past, private equity firms focused heavily on individualized skillsets and industry-specific knowledge,” the Focus Search Partners report said. “Now, soft skills, like relationship building, emotional intelligence, and conflict resolution, are becoming core parts of the job. Today’s private equity leaders need to be able to handle uncertainty, inspire their teams, and make quick decisions under pressure. It’s all about how well they can deal with new challenges, move the business forward, and keep the workforce engaged despite an uncertain future.”
Opportunities and Challenges in Private Equity Recruiting
Private equity firms are saying that talent is the most important factor in driving growth. While financial engineering, inorganic growth, and market expansion remain important tools in the private equity toolbox, talent continues to emerge as key to growing companies and achieving the investment thesis, according to a report from Bespoke Partners. Yet unlike strategic assets, intellectual property, or other resources that fuel growth, talent can be notoriously difficult to optimize. In fact, the biggest challenge for the PE sector is getting talent right, according to Nat Schiffer, managing partner at The Christopher Group. “PE firms often compete with other financial services firms, technology companies, start-ups, and other industries for the limited pool of qualified talent with the necessary skill-sets and experience for the PE industry,” he said. “The intense competition for top talent can make it challenging to attract and retain qualified candidates who may have multiple options.”
Focus Search Partners notes noted that executives with experience in AI, machine learning, and digital transformation are in high demand right now. Private equity firms are looking for leaders who can leverage these technologies—with guardrails—to improve operations and fuel growth. As companies continue to prioritize digital transformation, leaders who understand how to navigate these changes and understand the value these tools can bring to a company are bringing important insights for growth.
Promoting Ethical Leadership and Corporate Responsibility
Ethical leadership is becoming more important than ever. Private equity firms are under increased pressure from clients, investors, and the public to do the right thing. Harvard Business Reviewed explained that many firms are incorporating Environmental, Social, and Governance (ESG) factors into their investment strategies and taking a hard look at adding sustainability and social responsibility to their business model. “Leaders who focus on ethics and sustainability not only build trust but also protect their firm’s reputation, Focus Search Partners said. “For example, private equity firms are increasingly investing in companies with strong ESG practices, such as eco-friendly initiatives and social responsibility programs, to create long-term value and promote positive social outcomes. For private equity firms, acting responsibly isn’t just a nice idea—it’s a key advantage that sets them apart from their competitors.”
Related: A Look at Key Trends in Executive Recruiting for Private Equity-Backed Companies
Expanding Opportunities for Cross-Industry Talent Acquisition
CEO Weekly said that private equity firms increasingly want leaders with experience across different industries, especially as local talent pools shrink for specific industry requirements. “And a broader search for talent yields more than a higher number of candidates,” the Focus Search Partners report said. “These leaders bring fresh ideas and strategies that help deal with uncertainty. They can apply best practices from one sector to another, boosting efficiency and flexibility with innovative solutions that previously may not have been considered.”
Building Stability and Planning for the Future
With fewer executives moving between companies due to slower hiring and longer investment periods, private equity is shifting to retaining top talent rather than replacing it, the Focus Search Partners report explained. “Investing in employee engagement, leadership development, and long-term growth opportunities helps build loyalty and reduce turnover. In today’s volatile market, keeping key leaders is essential for staying competitive,” the study said. “Tough exit environments have led to executive level succession planning strategies too. This is the strategic, cost-effective process of identifying key organizational positions and proactively developing current workers to fill these rules through mentorship, training, or sponsorship opportunities. It also creates leadership continuity, as people who understand the company culture and strategic direction can more easily fill the role without any significant gaps.”
Focus Search Partners was acquired by Vaco in 2014 to become the retained executive search division of the global talent solutions firm. With 35-plus team members and 13 partners across nine states, Focus Search Partners specializes in building teams to grow companies, focusing on recruiting board members, executives, and senior-level individuals.
Founded in 2002 by Jerry Bostelman, Jay Hollomon, and Brian Waller, Brentwood, TN-based Vaco provides boutique-level service with global reach in executive search, consulting, permanent placement and strategic staffing. Its areas of expertise include accounting, finance, technology, healthcare IT, operations, administration, and managed services. The firm operates more than 35 offices, with 780-plus employees and 4,300 consultants worldwide.
Related: The Market for Senior Roles Heating Up at Private Equity Firms
Contributed by Scott A. Scanlon, Editor-in-Chief and Dale M. Zupsansky, Executive Editor – Hunt Scanlon Media
