A Time for Aggression and a Time for Caution – Differentiated Private Equity Recruitment Strategies

In an interview last February with Hunt Scanlon Media, Eric Frickel, Managing Director at BrainWorks, and leader of the firm’s Private Equity and Portfolio Leadership Practice, said “In over two decades of working both within the industry and in service of its success, I can remember few examples where the value add of differentiated recruiting is so clear. The opportunity to revisit, reanalyze and refine candidate score carding and success characteristics is exhilarating.  Seeing my partners at every level of the industry adjust and return again to fantastic success makes each day more compelling.”

The months since that interview have proven Mr. Frickel’s assessment to be correct with the continued emergence of private equity portfolio operations and transformation groups. In addition, private firms have realized that there needs to be strong focus beyond the C-suite team at the portfolio level. There has been a lack of focus and clear-cut recruiting strategies to drive talent down the stack, a strategy that is paramount in driving transformation with the speed and success it takes now to deliver superior returns in a competitive deal market. “We have been highly active in recruiting strategy consultants, corporate leadership development groups, restructuring/turnaround professionals, and M&A professionals at the portfolio level. We see this trend continuing as firms need a distinctive value creation strategy to win deals, drive top returns and separate themselves from peers,” Mr. Frickel added, “The battle for capital against a backdrop of unprecedented levels of new liquidity, fiscal policy, geopolitical headwinds and global health risks has created a paradox of the need for greater returns on capital in a context where the certainty of those returns is increasingly difficult to predict,”

This new set of circumstances calls for a new kind of leadership in the Private Equity and Portfolio Leadership sector. Where previously PE firms could be divided into the very aggressive and the very cautious, neither of these approaches are likely to succeed in the current climate. Unprecedented levels of new liquidity, geopolitical headwinds, and global health risks have combined to create a paradox of the need for greater returns on capital in a context where the certainty of those returns is increasingly difficult to predict. Both the traditional models are based on models of predictability, with the aggressive assuming that the market would continue to boom, and the cautious being afraid of another balloon bursting.

What is needed now is a new set of skills for success:

• Courageous and intelligent decision-making based on curiosity and learning rather than “I know.”
• Portfolio-level leadership to sustain high returns and shed poor performers – both investments and people.
• Industry expertise as distinct from myths, rumors, and “conventional wisdom.”
• Powerful leadership at the C-Level and a willingness to hire great talent at management levels across all functional areas.

PE firms must have a CEO who recognizes and executes on the importance of building a strong executive team, and especially a strong CFO who is adept in operations and IT and has a strong grasp of the commercial side of the business. Both the CEO and CFO need to have the ability and desire to partner closely with other business leaders so that the firm’s overall strategy and particularly the financial pervade every aspect of the business.

These requirements place a premium on recruiting for and hiring executives and managers who are mentally agile, willing to correct on the fly (“ready, fire, and continuously adjust your aim” rather than “ready, aim, fire” and hope the target doesn’t move), and who are resilient in the face of setbacks and even failures. Finally, and this is a difficult one, successful candidates will have an ability to assess the impact of unprecedented events on a given industry. Covid, for example, drove up hygiene and cleaning-related products – easy to see in retrospect, but few realized the magnitude of the impact.

Now more than ever conventional wisdom does not apply and a willingness to adapt to the post covid hiring era is paramount to remain competitive in the market. Effective hiring will require a recruiting firm that focuses on the recruiting needs of upper and middle management specifically within private equity portfolio companies, as well as partners with private equity firms on investment team recruiting and portfolio operations. Disrupting the way traditional retained search has been conducted, helps leading sponsors outcompete their peers by outmaneuvering them on the hiring front with a focus on speed, quality and results.

ABOUT BRAINWORKS

BrainWorks is a prominent boutique executive search firm offering a 29-year track record of successfully sourcing and placing top talent. By harnessing proven strategies, collaborating with stakeholders, and leveraging a diverse and talented candidate network, BrainWorks helps businesses find, attract, and ultimately hire talented professionals that create differentiated results. To learn more about how Brainworks can help you, contact us.