Recruitment has been a hot-button issue for many companies since the economy spluttered back into life after the pandemic. But, for those in the Private Equity space, the challenges of a competitive market for talent are compounded by their need for sustained growth.
Existing skill gaps in industries such as IT, Engineering and Digital are still a big problem for many, and the market remains incredibly competitive for talent as companies across the globe look to grow their teams once again. In fact, surveys show that 30% of UK CIOs and CTOs are looking to add new positions for full-time workers focusing on areas such as IT security, increasing efficiency and cloud computing projects for 2023.
PE-backed companies face challenges to both find and retain critical talent, but most of these can be mitigated by utilising your recruiters more effectively. A strong recruitment function can be more than just transactional – it can be a truly strategic function. Recruiters these days have a wide skill set – they are more than finders and headhunters, they can add value through the whole growth and change process.
So what problems may you face as a private equity-backed company and how might a good internal recruiter help?
Hitting Milestones to secure investment
Securing further investment requires you to hit certain milestones in terms of growth and revenue. You need to have the right people in the right places within your company to make sure you are reaching these. If you are six-nine months out from your first investment but still have vital roles to fill, you are already up against it to ensure your next investment.
Utilising your internal recruitment (or external recruitment partners) in a more strategic way can ensure you keep ahead of the curb. Involve recruiters in discussions as early as possible so they can start planning as early as possible to find that CFO who has experience in high-growth start-ups. Let your recruiters feed information into your growth plans to identify potential areas of risk as early as possible. While it is hard to estimate how much time it takes to hire a C-level employee exactly, typically, hiring a full-time CFO would take around three to four months.
The earlier your recruiters get involved means the longer they can spend nurturing that top talent. Private equity is a very competitive field, hence finding the right candidates ahead of time is a great advantage when building your company. By building a strong relationship between recruitment and the business, this hiring timeframe can drop by 40-60%.
So, while you might not be ready to recruit for two, four or even six months, your recruiters can find those people with the right growth mindset, the technical skills, and those people who can thrive in a high-change environment. This makes the time to hire shorter (from role sign-off) and gives you candidates you can be sure will stick around due to the luxury of a longer qualifying period.
Attrition can have a huge impact
It’s not just vacant positions that can have a detrimental effect on your ability to hit growth targets. Making the wrong hires can severely impact your ability for growth, whether it’s hiring someone who doesn’t have the right mindset for change or someone who just doesn’t hit the mark and leaves quickly.
Attrition is costly at the best of times – an estimated 6-9 months’ salary on average – with new employees usually requiring at least half a year to catch up to speed. But when you might have millions of pounds of investment riding on your new hires driving the business to hit milestones, it’s even more crucial to get it right.
Make sure you utilise your recruiters effectively across the whole process and not just for search and attraction. I can guarantee that most experienced recruiters will have seen most of the common ‘red flags’ that show at the interview stage (and even throughout the offer process). They can help provide a second opinion and flag up any areas that need addressing so you can be more confident that you are hiring the right person.
Rapid turnaround and volume
It’s critical to get the right people in the right places – and those people need that agile mindset where they can react and adapt.
This is challenging enough if you are filling one role – but often, particularly if you are a start-up or your company has been bought out, you will need a whole load of hires at both C-level, department heads, and whole new teams of specialists to hit your growth targets.
For example, digital transformation is often still needed even when investing in a stable company. This requires a whole new skill set to be brought in across the company as digital transformation impacts every area of the business as well as creating new technical teams.
Scaling a business can often involve recruiting on a global basis, and the rise of remote working has made global teams more feasible than ever. But, while clearly having numerous upsides, recruiting internationally comes with its own set of challenges from cultural to regulatory. So, finding an internal recruiter with international experience can greatly relieve future headaches using their experience in both hiring and navigating the unique regulatory landscapes in each country.
At The Small Consultancy, we have successfully recruited teams for scale-ups across the world, including the USA and India.
Increasing Diversity & Inclusion
Private equity is often viewed as one of the least diverse industries. Luckily, the issue is finally being addressed, and companies are visibly making a move towards more diversity and inclusion among their employees. Even if this only means taking small steps in the short term.
There is an undeniable need to increase women in senior positions – Recent surveys show that only 9% of CEOs are women! Furthermore, the male-female ratio among the board members is 91.8% to 8.2%. A Prequin report from March 2022 shows that just one-fifth of all PE fund manager employees are women. Hiring predominantly male employees is just the tip of the iceberg too – when we start looking at other metrics such as hires by ethnicity, the clear need to improve diversity is obvious.
A 2020 Deloitte survey states that in the industry of finances only 20.4% of board members came from minority backgrounds. There are several ways recruiters can help to change these statistics. For example, introducing blind CVs, including diversity-friendly question sets in interviews, and ensuring that the job adverts and interview process are inclusive.
The (not so) secret ingredient to quick and efficient hiring is talent pipelining. The relationship between the company hiring and the recruiter is crucial in this case as well. When the recruiter has a solid idea of what the company might need in the coming months or year, they can be proactive even if there are no positions opened yet.
There are different strategies to keep up a good talent pipeline, but it should be built on both developing the internal talent pool and sourcing an external one – both of these things require close collaboration between the recruiter and hiring manager community to ensure they are talking to the right people to meet their needs over the coming year.
Recruiters are specialists in building and maintaining relationships – a strong recruiter can engage with potential candidates months ahead of time and manage their expectations so when a role does get signed off, they have a ready source of excellent people ready to join.
Talent pipelining makes a measurable difference whether it is nurturing the ‘silver medal’ candidates from previous interviews, identifying internal skills, or lining up new talent for companies with similar needs.
Changing market conditions
Let’s face it – the end of 2022 and the start of 2023 are likely to be turbulent. Market conditions, particularly in the UK, have been changing rapidly from one day to the next, so an agile mindset is needed to adapt quickly to new situations. In this fluctuating market, spotting opportunities and adapting growth plans accordingly will be key to ‘making hay while the sun shines,’ while also maintaining an eye on future robustness.
When the sun is shining your recruiters will be out there front and centre finding the best talent, but in the quieter times, your recruiters can be pipelining that talent for the next 12 months, working on improving agile processes that are flexible enough to scale up and down, looking at things like your employer brand and advertising.
Meeting the challenges head-on
Meeting the unique hiring challenges of a private equity scaleup or start-up can require a shift in mindset in how you view recruitment in the best of times, but over the next year, recruitment will be even more critical to continued growth over the backdrop of difficult economic circumstances.
If you don’t think you have the right internal recruitment support to provide this strategic support, contact The Small Consultancy and find out how we can help.
We have helped private equity scale-ups, carve-outs and start-ups develop robust, agile and scalable in-house recruitment to ensure access to the right talent isn’t holding them back from meeting their growth plans.