Private Equity Value Creation: Spotlight on Talent
Introduction
In a world of macroeconomic uncertainty, talent continues to be a crucial driver of value creation. Effective talent can make or break an investment; ultimately, the people hired into a company drive strategy and execution. Attracting the best fit leaders, retaining employees, and optimizing HR processes and culture are just a few of the key talent challenges facing companies today.
Our Value Accelerator (“VA”) talent advisors engage with companies from the outset of an investment to its exit, working closely with company leaders throughout the investment lifecycle. This work can ultimately position a company for sale as buyers require assurance that a stable, credible team is in place to underpin a successful, sustainable business. While we aim to engage skilled advisors who are experienced in their respective domains, the true differentiation stems from how they engage with our portfolio companies in the talent space.
Attracting The Right Talent
There are several current trends in the talent acquisition arena. For one, it's a seller’s market for talent and will remain so for the highest quality candidates. Leaders must sell the company's long-term vision, financial viability and the role to generate favorable hiring outcomes. Second, technology is changing the face of recruiting, making candidates more accessible and speeding up hiring processes. Given this reality, proper assessment protocol looms even larger in ensuring candidates meet the critical requirements for the role and company. Our teams have seen the importance of assessing candidates not only for skills and experience, but equally importantly for fit for the company culture and operating environment. Finally, we see demand for certain candidate profiles on the ascendancy including diverse leaders, interim placements, and the ability to lead distributed and remote teams. Competition for the best talent remains fierce.
VA Advisors begin evaluating talent within our PE portfolio companies in the diligence phase, working alongside the deal team to assess whether a potential target company’s leadership team can deliver the requisite value. As a deal progresses, and in the months after closing, they also help determine how the composition of the management personnel might need to scale and/or adapt.
Our VA talent team partners with companies to help source, assess, place, and scale talent. Advisors frequently leverage their deep networks of industry leading search professionals, industry partners, and Goldman Sachs resources and initiatives to reach the highest-quality candidates in executive search processes.
Case Study
An example of a constructive assessment and placement outcome comes from one of our European portfolio companies – a large global assurance provider. Our VA talent advisors have been collaborating with the deal team and management team since diligence began. Working in close partnership with the company’s HR leader, we completed several projects in talent acquisition, including:
- A leadership assessment to gain insight on individual leadership styles, strengths, and development areas relative to desired goals and deliverables. We helped the company develop role-specific scorecards, structured deep dive interviews and stakeholder feedback sessions, and provided diagnostic tools to facilitate the assessment.
- We created a scorecard to translate an organization’s overall ability to execute on the value creation plan and address talent needs going forward. This helped us translate our investment thesis into outcomes, accountabilities and milestones. In addition, we conducted stakeholder interviews regarding organizational strengths, opportunities and team dynamics. This project resulted in an assessment of the company’s ability to deliver on the scorecard plus recommendations to close the gaps.
Our work resulted in the placement of several key executives, an impactful organizational restructure, the successful integration of new leaders, and scaled talent abilities.
Culture-Building, Engaging and Retaining Talent
Placing qualified candidates into key roles throughout the organization is only the beginning of the talent journey. Once talent is secured it is critically important to establish and reinforce a company’s employee value proposition to drive retention and engagement. Today’s employees seek a strong culture and purpose in the workplace. Many employees and candidates prioritize working for a company that is unafraid to declare its impact aspirations, and they want to feel that connection to purpose in their own roles as well.
When the reality of workplace culture fails to meet expectations, retaining high performing employees becomes a challenge. Comprehensive, competitive compensation proves a necessary but no longer sufficient factor to motivate many workers. We’ve noted a marked uptick in companies looking to harness multiple levers of engagement - from novel recognition and reward concepts (often tied to corporate values and purpose), to enhanced learning and development schemes to unique inclusion and belonging efforts.
VA advisors collaborate with management teams on a wide variety of HR areas across our portfolio to help drive retention, employee productivity, and culture-building. They leverage the full talent playbook in adapting their role to the needs of the portfolio companies - sometimes jumping in for a quick strategic advising session, sometimes partnering to address a longer-term issue.
Case Study
Advisor efforts at one of our US portfolio companies in the personal health space demonstrate the significant breadth of talent engagement touchpoints and outcomes. VA talent advisors have worked consistently with the company since the outset of the investment four years ago. The overarching goal of our work from a talent perspective has been to strengthen management team performance, especially to help the team scale to meet significant growth expectations and increase the company’s retail DNA. We worked through several projects to help the company achieve this:
- Established a strong, engaged, and constructive Board, through focused search efforts and by leveraging the Goldman network.
- Scaled leadership talent by managing leadership transitions, finding interim talent as needed, and assisting with interviewing and assessment, referencing, and onboarding.
- Partnered with the company on organizational design, team effectiveness, performance management, coaching and development, compensation, and HR topics such as field operations management and front-line labor optimization.
- Conducted feedback and development exercises and actively coached C-Suite members.
We believe the company now has a more seasoned, stable, and cohesive leadership team with significantly more large-scale retail experience. We strived to facilitate a talent and organizational uplift, which we believe has been a driving factor behind the company generating strong results: 30-40% revenue growth, numerous acquisitions, and expansion including 50% growth in office locations. Strong collaboration ensures the management team leverages all elements of their people strategy in motivating and retaining employees and creating an effective culture where leaders flourish and drive impact.
Differentiated Engagement with Portfolio Companies
Our value proposition revolves around the specific ways we team with both company leaders and investment professionals. Our advisors adhere to several core principles when we engage portfolio companies on talent:
Embedded Partnership. Advisors are embedded with our deal teams and begin the talent discussion in the diligence phase, with the purpose of providing them with a thorough understanding of the management team and ability to establish strong relationships up front. Advisors then continue to work with portfolio companies throughout the deal’s lifecycle. Benefits of this embedded engagement model are evidenced by the numerous repeat requests from management and deal teams for support as well as the sheer number of companies that have benefitted from working with our talent team (over 150 companies in 2022).
Value-added, light touch style. Another principle pertains to the value-added, light-touch style of interaction between our advisors and management teams. Advisors must bring seniority, depth of experience, and credibility to determine optimal talent plays with portfolio companies. But what’s sometimes even more important is whether the guidance is truly taken to heart. Our advisors employ a deep yet artful relational approach that encourages leader receptivity. We are pulled into consultations as opposed to maneuvering ourselves onto management teams. We believe this collaborative model also contributes to a sustained high level of demand for advisor services.
Curation and rapid deployment of a vast set of resources. We offer companies immediate access to our deep network and resources, both within Goldman Sachs and across advisor networks. Our experts can quickly call search partners, Board candidates, and third-party agencies, and can bring in many resources to help create a plan in direct response to company needs. In addition, our managed VA HR community allows company leaders to connect with one another, avail themselves of relevant information and resources, and share best practices. This combination of direct expertise coupled with access to a broader, targeted network provides a significant value boost to both investment and management teams.
Conclusion
Talent acquisition and retention is a crucial value driver for our portfolio companies. VA talent advisors work across the entire HR landscape, from talent acquisition and scaling to retention and culture building. We believe our differentiation primarily manifests in the ways we engage on the talent topic, in close collaboration with deal teams. Overall, we seek to raise the bar on talent so that it serves as a true asset for exit scenarios, driving HR outcomes across the entire investment lifecycle to ensure maximum impact.
