Higher interest rates, continual disruption and innovation as well as a challenging talent landscape has changed the nature of the business. Talent and leadership are increasingly taking centre stage in the value creation process. Yet, many PE firms struggle to attract, retain, and deploy the critical leadership they require. As a Harvard Business Review article highlights, 54% of CEO turnover in PE is often occurring within a year or two of acquisition. These disruptive, unplanned exits highlight the urgent need for a more robust talent strategy in private equity.
Enter the Human Capital OP. This highly specialised role has become a key player in driving value across portfolio companies, blending strategic leadership with deep HR expertise. Their comprehensive understanding encompasses human resources, transformation, M&A, organisational development and effectiveness, talent management, leadership development, and cultural change. The OP uses this combination of skills to empower both the OpCo and fund leaders to accelerate the investment thesis, unlocking growth inhibitors and driving value creation.
How does the Human Capital OP add value?
A Human Capital OP offers a significant advantage in steering companies towards resilience and growth. Key attributes include:
01
Managing organisational health
The Human Capital OP plays a critical role in maintaining organisational health, ensuring cultural cohesion, and enhancing talent capabilities. Their expertise becomes especially crucial during due diligence. During M&A transactions, people-related risks are often underestimated and can significantly disrupt operations and impact the bottom line. The Human Capital OP facilitates smoother transitions and integrations, better. anticipating and accounting for leadership, people, talent and culture costs.
02
Enhancing talent strategy and people development
As identified in the AlixPartners 9th-annual PE leadership survey, a critical gap is the lack of structured frameworks and processes for talent development across portfolios. This often results in high leadership turnover within portcos, ultimately hindering value creation. The Human Capital OP tackles this challenge head-on. They assess and strengthen the talent framework within the portco, identifying key roles essential for sustained value creation and robust succession planning.
They help develop a strong pipeline of executive talent, understanding the key value generators at all levels. Anticipating future skill requirements, they help the development of those critical capabilities to ensure the right talent is in place for long-term success. Additionally, they foster an environment of knowledge sharing and mentorship, promoting continuous learning and leadership development.
03
Recruiting and developing top leadership
With a nuanced understanding of the talent landscape and c-suite demands, the Human Capital OP is proficient in identifying and securing high calibre executives – leaders who possess the necessary vision, skills and experience to executive the investment thesis. The OP also champions comprehensive leadership development programs, offering personalised coaching and mentoring opportunities. This empowers them to realise their full potential and navigate the unique challenges of portfolio companies.
04
CEO and CPO advisory
As a valued advisor, the Human Capital OP collaborates closely with leadership teams across portfolio companies to support strategic transformation plans, enhance leadership skills, manage critical transitions, and refine the overall talent structure to support sustained growth. The OP’s guidance and coaching are especially beneficial to portfolio companies where HR leadership may be non-existent or often less experienced and benefit from mentorship.
Even experienced CPO’s comment that they benefit from the support, collaboration and knowledge sharing.
05
Change management
The Human Capital OP plays a crucial role as a change agent by working alongside leadership teams to implement organisational and cultural transformations. This includes addressing capability gaps and provide expertise on change leadership.
Characteristics of the ideal Human Capital OP
The Human Capital OP is not your ordinary HR professional. This pivotal position is a strategic architect of human capital, blending deep industry knowledge with a holistic approach to talent.
The ideal Human Capital OP possesses a comprehensive blend of HR and organisational development expertise, with a solid track record in talent acquisition, management, and leadership development, along with a strong foundation in organisational effectiveness. Beyond core HR functions, the Human Capital OP thrives in high-growth and change environments. They’re adept at guiding companies through rapid scaling, complex transformations, and critical transitions, ensuring continuity and alignment during these periods.
As a strategic thinker, the OP recognises the value human capital brings to business performance. They operate with an investor mindset, focusing on maximising the return on people investments with diplomatic acumen. They’re proactive and hands-on, driven by a sense of urgency and clear objectives. Their high energy fuels initiatives and propels business goals forward.
Additionally, the Human Capital OP excels at building strong relationships and navigating intricate human dynamics. Their high self-awareness and empathy make them trusted advisors and mentors within an organisation. Adaptable and insightful, they utilise their consulting expertise to deliver customised solutions to unique business challenges.
Key considerations for choosing the right Human Capital OP
Selecting the right Human Capital OP is a strategic decision that demands careful consideration of several crucial factors to ensure alignment with the private equity firm’s needs, their investment strategies and portfolio composition. An exhaustive evaluation of the candidate’s skills, mindset, and cultural alignment is imperative to establish a successful partnership across the portfolio companies.
There are three key classic profiles to consider in an OP with responsibility for People & Culture:
Corporate Chief People Officer (CPO):
Profile: An industry veteran with extensive experience in HR leadership, embodying a thorough comprehension of HR best practices.
Strengths: Brings a proven track record of driving excellence within organisations, leveraging deep insights and best practices in human resources.
Considerations: Ideally suited for firms looking to strengthen their HR functions with tested leadership and operational expertise.
Background in Executive Search:
Profile: Candidates from this background typically have a rich understanding of executive talent acquisition and access to a broad network of leaders.
Strengths: Excels in enhancing advisory capabilities and leadership consultation.
Considerations: While offering deep insights into leadership dynamics and management capabilities, these candidates may lack experience in managing direct organisational change or possess specific M&A-related technical skills. Their strategic value in talent insight and network connections is their main contribution.
Expertise in organisational psychology and talent management:
Profile: These might be executives in leadership or human capital practices within a consultancy, with specialisations in leadership, talent development, or transformation and change management.
Strengths: Combines in-depth HR knowledge with strong capabilities in managing and developing talent, particularly effective in roles requiring significant transformation and change management.
Considerations: This profile is particularly valuable for firms undergoing rapid changes or needing to instil strong cultural transformations.
Partnering for long-term growth
At Redgrave, we specialise in aligning forward-thinking Human Capital leaders with private equity firms focused on transformative growth. Our partnership approach ensures you have access to a highly qualified and adaptable talent pool, poised to elevate your firm and portfolio companies to unprecedented success. We go beyond filling a position; we meticulously define and refine the role to align perfectly with your actual needs, ensuring the capabilities and vision of the leaders we connect you with surpass your expectations.
