We’ve seen an increasing number of skilled HR professionals join private equity businesses. And what a difference they can make.  At PER we first meet them during a recruitment process. And from our perspective, having a well informed, organised coordinator for recruitment is a fantastic benefit.  But for the private equity team itself it can make a huge difference to the success of a recruitment programme. 

The HR professional can sit with the investment team to scope out the requirements, assess current team members for potential internal moves, beauty parade recruiters, ensure value for money in recruitment costs, promote the firm to candidates, participate in and coordinate the assessment process, manage remuneration negotiations and deliver a great induction programme for the successful candidate when they join.

And those are just the benefits in the recruitment process.  We’ve seen talented HR professionals play a major role in many facets of the business such as developing its people, improving the management skills of the senior team, enhancing internal communication, streamlining comp and benefits and driving some major organisational structural changes through.

So when does a private equity firm decide to add an HR professional to its team? Usually when the growth of the business has begun to highlight weaknesses in the organisational structure. Perhaps some key people have departed, succession issues are looming, there are too many people now for the business to be run informally by the founder and  everyone has a different job title and a different pay scale.

The costs of adding this key person are soon outweighed by the benefits if star performers are retained, recruitment costs are managed and the investment team’s time is optimised.

There is now a body of experienced HR professionals who understand private equity and its nuances and know how to make a difference.  And I don’t know of any team with an HR professional on board who would go back to the good old days when they did all that ‘people stuff’ themselves.

So you’ve arranged a one to one with each of your team. Opening and maintaining lines of communication with the team can engage your people while at the same time gaining a new, fresh perspective on the issues you face. You might also find you have people with skills and ambitions that can offer a valuable contribution in other areas of the business.

But how do you start the ball rolling? 

Here are a few key questions designed to elicit the information you need.

Before you start asking the questions, let the person know that this is a no risk conversation and that you have three main aims:

1. to find out a bit more about them and what’s important to them,
2. to get some honest feedback on the firm and
3. to hear their ideas about the future direction of the business.

What first attracted you to the firm?
Their answer will probably fall into two areas: values and environmental factors. It’s important to make sure that the values that attracted the person to the firm when they joined are still perceived to be there. Many things may have changed with current market conditions and businesses constantly need to evolve. Whereas this is healthy and necessary, you need to make sure that you don’t lose sight of the core values that brought people to the company in the first place.

Where has the company lived up to or fallen short of your expectations?
Assessing where the company has met, exceeded or indeed fallen short of an individual’s expectations, can identify what aspects of the business need fine tuning. You’ll also discover more about your people and their goals and aspirations.

What do you think the main hurdles are that the firm must clear?
You probably have a pretty good idea of what the problems are from your perspective, but it can only serve you better to find out what the people on the ground think. Seeking their opinion will also assure them that they are a vital component in the machinery of the company. Further still, ask them how they would go about tackling the issues – you may find you unearth one or two expert problem solvers.

How do you think you can contribute best to the firm going forward?
It’s helpful to understand how each person sees their contribution, strengths and weaknesses. In this way you can best align career expectations with your needs. When team members have a clear understanding of their career path, they acquire a sense of direction and can focus on achieving their goals.

In today’s volatile investment climate many private equity investors find themselves in a position where they can’t fulfil the role for which they were employed, ie investing!

The changing nature of the private equity industry has meant that from top to bottom, investors have seen their role change. At a time when there are few investments to be made, the focus has shifted to managing portfolios and reporting to LPs.

I’m contacted by experienced investors every day who are looking for ways to be reassured about their future.  A large part of my time at the moment includes being a rational sounding board for the thoughts that they cannot express in the office.  If only private equity team leaders were pro-active in communicating with their team – even if the communication is that nothing is certain – then I’m sure the benefits would be felt throughout the business.  But the norm in many funds seems to be, say nothing.

The most common question people are asking me right now is: Am I in the right place?  More often than not, they are, but what makes them ask the question is anxiety and lack of communication about the future strategy for the business.  Imagine you are an investment executive. Not so long ago you would be busy researching markets, negotiating with managers and bankers and laying the groundwork for a string of potential investments. But now the opportunities have dried up and you find yourself fire fighting in the portfolio and talking to LPs to assure them of the worth of the firm’s portfolio. Naturally you begin to wonder where your job and your financial future, is going.

From my perspective, what private equity partners should be doing is making the team feel they are part of the future of the business. And one of the easiest ways of achieving this is by effective communication.

Change has always presented the greatest opportunity for private equity; the success of the buyout industry itself is founded on the need for owners of companies to find new business partners, and retiring MDs to pass the company on to the next generation of managers.

And it’s for this reason that I know that private equity will embrace the wind of change that blows in today’s market and come out on top.

Sure, roles within all businesses – not just private equity firms – are changing, but why not let your team know how you envisage the future and what their role will be going forward? And if you don’t know then involve them in creating the master plan for survival and revival.

I know it sounds corny and you’re all highly professional, super human investors, but it’s easy to forget that what your team wants is to feel needed, loved and involved. So by clearly communicating your thoughts about the future direction of the firm and the role you anticipate for them, you’ll help alleviate the uncertainty in their minds and have a more productive workforce.  Surely it’s better to be open with the team rather than risk losing them by saying nothing at all? 

As you may have noticed, times have changed.  Today’s private equity market has evolved into a very different creature from what it was last year. But has your team evolved in the same way?

You might be one of those managers who is looking at your team, thinking you don’t have the right people, and as such is ready to introduce new people at the expense of others.  But these measures may not be the right way forward.

In all likelihood you have the right people for the job right there in front of you.  It’s just that some roles need to be changed.  In the words of Eric Morecambe, you’re playing all the right notes but not necessarily in the right order. 

Now’s the time to take stock of what you have in house, to identify the talent you have available and to match it with the competencies you need to succeed.  You’re probably already focusing more on portfolio management, investor relations or business development and you may need to shuffle your pack a little.  Assessment and redeployment is a useful exercise and will leave your business better equipped to tackle today’s tough market.

Many firms use techniques such as psychometric profiling, which is a useful tool in identifying people’s behavioural strengths and weaknesses.  But it’s no substitute for speaking to your people and finding out what makes them tick.

Dialogue is an essential part of the audit process.  I recommend taking each person out to lunch!  In a more informal environment you can ask them about their hopes and ambitions, their concerns and motivations, as well as find out where they think their strengths lie.  You might be surprised at what you learn, and you might learn you already have the right people in the team.

Now’s a great time to roll the dice.  A shake-up of the talent you have can invigorate the team and help people develop new skills that will benefit the firm tomorrow.  So don’t be afraid to speak to your people and find out what role they think they can play going forward.  Check your diary and get those lunches booked.