A leadership role at a private equity (PE) firm is a demanding one. But for a PE firm, the challenge of helping start-up companies raise needed capital is filled with the excitement of working with these fast-moving, growth-oriented businesses. Successful PE firms have a laser focus on raising funds to grow their portfolio companies and recognize that one way to accelerate this growth is to ensure the company has a progressive HR leader.
Salveson Stetson Group has partnered with a number of private equity firms to fill key positions. We increasingly see one critical role that PE firms identify is that of the Chief Human Resources Officer (CHRO). Typically, the role of the CHRO is either a newly created position or is an upgrade from the firm’s existing talent pool.
Here are many of the qualifications and competencies that we find PE firms consistently seek when hiring a CHRO:
Demonstrated track record
As the top HR officer in the company, the CHRO will need to assess, build and enhance the human resource structure to meet the growing needs of the business. Due to the unique demands of PE firms, the best candidates should have prior experience and be comfortable working for an entrepreneurial and fast-growing company. However, it’s often helpful to have worked for larger companies where they learned HR best practices.
Experience leading transformational change
The PE sponsored companies are frequently start-ups that are seeking capital in order to challenge the status quo. The ideal CHRO in these often-uncharted environments, must show that they can lead the successful growth and profitability of these entrepreneurial companies.
Strong talent management experience
PE firms understand the importance of aligning business and talent strategies, because it’s people that pave the way to profitability and growth. It’s the role of the CHRO to develop the organization to design and build their successful team. The CHRO leads the effort to attract, develop, and retain top talent that achieve aggressive business goals.
Creates and enhances employee culture and company brand
It’s no surprise that happy employees are more productive than disgruntled employees. Next to the CEO, the CHRO is the most senior executive charged with establishing, fostering, and in some cases, transforming the firm’s culture, mission, and core values to increase employee engagement and drive performance. The CHRO must recruit and onboard employees who embrace the company’s culture. Equally important is to establish a process to identify employees who are not a good culture fit, and respectfully help them to exit.
Extraordinary ability to build trust across the organization
More progressive PE firms realize the value of hiring and supporting a talented HR leader to serve as a coach, advisor, and valued partner to the CEO. CHROs are also highly engaged with the Portfolio Managers as well as their leadership teams. They must build trust and effective relationships with the senior leadership team and across the organization.
Operate strategically as well as tactically
As a coach and advisor to the CEO, COO, and CFO, the CHRO must possess an understanding of the organization’s business model. Knowing how the money comes, goes, and flows through the business helps build a high-performing team.
Ability to work effectively across geographically dispersed sites
In many cases, the ability to recruit the best talent means reaching beyond your city limits, even around the world. Especially in today’s COVID era when many companies are working from home, the ability of HR leaders to engage and keep their teams motivated remotely is an essential skill.
Ability to juggle multiple priorities and shift gears depending upon the business strategy
By their nature, PE sponsored companies often move fast. They must be nimble to anticipate and react to changes that affect their business. As a result, the CHRO for a PE firm must create an organization that embraces frequent change and is flexible enough to remain productive through it while staying committed to the company’s financial, strategic, and cultural objectives.
Strong communication expertise
As in any business, the CHRO position at a private equity firm requires strong people skills. As a key leadership role, the CHRO must be a strong communicator and reach out to the employee base to ensure they are informed and engaged.
Metrics/analytical focus
As the leader of the HR team, the buck stops at the CHRO. Measuring important human resources data, metrics like headcount, cost to hire, benefits participation, and more, uncover valuable insights that can help the CHRO make better informed business decisions.
Conclusion
These qualifications may resonate with many of you who have held HR leadership roles in PE firms. Each PE firm is unique in the way they support their portfolio companies and most HR leaders are highly engaged with the Portfolio Managers as well as their leadership team in growing the business. They are demanding roles but always filled with the excitement of working in growth-oriented environments. The more progressive PE firms realize the value creation of hiring and supporting a talented HR leader who will serve as a coach and advisor to the CEO. If they are good at it, they will be one of the most valued partners of the CEO and help guide them towards a successful exit.
