Are Talent Executives Ready to Lead in Private Equity?
Charlotte, NC – November 19, 2019 – Summit Leadership Partners, a leadership and organization development consulting firm advising boards, investors, CEOs and senior leaders on delivering peak organization performance and value creation, today revealed the results of a study examining the current state of the Human Capital (or Talent) Executive position at private equity (PE) firms and requirements for success. The team interviewed Talent Executives at nearly a dozen PE firms ranging from small, mid-market growth funds to large global buy-out funds.
A fairly new position in PE firms, the Talent Executive is tasked with helping PE investment teams identify and build capabilities within portfolio management teams and organizations, with the ultimate goal of ensuring that the internal talent will drive value creation. This important position has risen in popularity as PE firms increase their involvement in the day-to-day operations and performance of their portfolio companies, engaging more intimately with management teams in an effort to more speedily generate greater returns.
“Based on our client base and conversations within the industry, we estimate that 80-percent of PE firms with assets under management exceeding $5 billion have a Talent Executive in place in charge of the talent and organization performance in their portfolio companies,” said Dan Hawkins, President and Founder of Summit.
Summit interviewed numerous Talent Executives to glean insights as to the nature of the job, their ability to positively impact value creation and how individuals in these positions can achieve success in this nascent role. The findings from the study include the following key takeaways:
- Executives in these roles, most of whom come from human resources, executive search and talent management backgrounds, must quickly embrace a broader level of thinking around the business, understand investment strategy and let go of some of the tactical, process-oriented and functional tasks of the past.
- Earning credibility and respect from investment teams and portfolio company CEOs is a soaring requirement. Talent Executives should set out to immediately demonstrate value and produce a positive result early, notching even a small win where possible.
- Those who are the first Talent Executive at their PE firm must learn to educate their investment partners so they can understand and embrace new approaches to assessing and addressing talent gaps in their portfolio companies. There is often resistance to change and, therefore, great resilience is required.
- As the role remains loosely defined from one PE firm to the next, the onus is on the Talent Executive to define the role for themselves. It is incumbent upon them to identify, on their own, the strategies and activities that will resonate, deliver results and demonstrate value, with an understanding that how value is created varies greatly from one PE firm to another.
- Building trust and credibility with portfolio CEOs and management teams is just as important as with investment teams. Successful Talent Executives ensure that portfolio management teams see them as value-added problem solvers and trusted advisers, as opposed to a threat. If the portfolio CEO sees value in Talent Executive, so will the investment team.
- Most newly hired PE talent heads grow their role and influence through three phases: From Practitioner to Broker to Advisor.
“With the increased hands-on involvement PE firms now have with their portfolio companies, there is an emerging appreciation for the impact that leadership and talent have on the ability of portfolio companies to create value and deliver on the investment thesis,” Hawkins continued. “The Talent Executive is challenged with earning respect and credibility. When that is achieved, the individual in this role can have a dramatic and significant impact on portfolio company performance and value creation.”
A detailed account of Summit’s interviews with PE Talent Executives can be found here, as published in Middle Market Growth Magazine.
About Summit Leadership Partners
Summit Leadership Partners advises boards, investors, CEOs and senior leaders on strategically scaling business through talent and organization assessment, coaching, executive team performance, leadership development and organization effectiveness. The exceptional consulting team has held top leadership roles in successful companies across the globe. Summit is located in Austin, Charlotte, Dallas, Denver, Nashville, New York and San Francisco. Visit Summit online at http://www.summitleadership.com, and follow the company on LinkedIn and Twitter.