The “New Normal:” Trends Shaping the Executive Talent Model in Private Equity

Regardless of industry or profession, we all experienced some level of challenges in 2020 due to Covid-19. Now, well into year two of the pandemic, a “new normal” has set in, as organizations are focused on proactively preparing for the future. As the CEO of an executive search firm serving private equity and their portfolio companies, I’ve had a unique vantage point over the past 18+ months working side-by-side our PE clients and hearing first-hand how their business strategies are evolving based on experiences and learnings from the global pandemic.

2021 began with a great deal of optimism as vaccine access and distribution began to increase and new Covid-19 cases continued to decrease. For the private equity market – and executive search firms that serve PE firms – it was an explosive year. The uncertainties of 2020 caused many PE firms, and investors in general, to take a conservative approach to investing until markets stabilized. Now, we have seen growth and private equity firms deploying capital at record-setting rates, and the need for key executives to lead these companies continues to be vital.

Like many of our clients, we spent 2021 reflecting on our experiences from 2020 and evolving our business strategies based on learnings from the past 12+ months. I am pleased to share perspective on some of the trends we are seeing in the PE market as we look forward into 2022 and beyond.  

A more hands-on approach 

Many PE firms learned from past crises that during times of turmoil it is critical that they take a more hands-on approach with portfolio companies. This often means looking closer at talent, specifically in leadership roles, and identifying ways to harness higher levels of leadership to increase results and returns. Many firms are now deploying a much wider range of capabilities to drive value, such as building operating partner teams, and adding more specialized functional expertise.

Evolving operating models

Coming out of 2020, many PE firms realized it was time to adjust their operating models to be successful in the “new normal.” Strengthening operational improvement capabilities and leveraging key advisors to implement business models have become top priorities for firms looking to become more agile and resilient to future market volatility. PE firms are continuing to significantly modify their operations to provide safety and protection for their employees, with a focus on limiting business disruption and ensuring agility going forward.

Additionally, PE firms are continually improving upon talent management models, moving beyond traditional views of human resources to something more transformative – with a heavy emphasis on talent management and development, culture, and engagement. Many are looking to experienced recruiting firms to share insights on how other PE clients are successfully evolving the focus and attention placed on talent management and acquisition strategies.

Increased complexities and importance of the CHRO role

As organizations strategically plan for business operations in 2022 and beyond, many are grappling with questions around the future of work, including things like office space, health and safety of employees, remote and hybrid workforces, and maintaining company culture. As some organizations began the process of migrating back to the office this year, there were numerous policy and workplace systems that needed to be addressed to get to this point. Organizations that hadn’t properly invested in human resource leaders prior to the pandemic are now facing difficulties in securing top talent in this area as key HR executives are becoming increasingly important in helping organizations navigate through this period of transition and transformation.

Pent-up demand is impacting talent pools

With many PE firms electing to take a more conservative investment approach during 2020 due to uncertainties, most (if not all) of our PE clients saw 2021 as a recovery year with pent-up demand for both products and services. This year, growth and private equity firms deployed capital at record-setting rates, and the need for key executives to lead those companies was vital. With a drastic increase in market demand, it has been an extremely challenging climate for acquiring top talent. The companies that successfully landed top-tier executives this year were those that moved quickly and decisively, and often exceeded compensation expectations. 

The increased use of technology has also significantly contributed to the expedited pace of search execution. Given the widespread use of video, we are seeing expedited search timeframes as both candidates and organizations are more readily accessible for interviews. I believe this is a trend that will certainly become a part of the “new normal.”

Pent-up demand for great business leaders

One interesting outcome of the current situation is that the pandemic has exposed leaders that looked better than they actually were because of a strong economy. Management at all levels is now being tested on having true leadership skills and strategic capabilities. I believe that sponsors of these businesses have acknowledged the necessity, now more than ever, of having strong C-suite leadership. 2021 provided to be an important year for identifying and securing top business leaders but for reasons mentioned previously, it also provided to be a challenging time to effectively execute on recruiting due to extreme competition for top talent.

Re-thinking requirements when hiring business leaders

Heading into 2022, we anticipate the war for top talent to continue. This will cause more and more organizations to reassess previous requirements for executive roles, particularly as it relates to location. With companies assessing and changing their real estate footprints real-time as remote workforce polices are established, many organizations are grappling with the decision as to whether they are willing to have executive candidates reside outside of their core office location areas. Organizations open to remote leaders may benefit from a wider, and more diverse, talent pool. However, there are also drawbacks to consider – as a lack of key executive presence in office headquarters can have a serious impact on a company culture and employee engagement, two areas that have become increasingly top of mind for organizations during the past 18+ months.   

Technology, flexibility, and agility are the new normal

A tremendous silver lining of the involuntary remote workforce was the expedited nature by which almost all businesses were forced to deploy and adopt technology at a rapid pace. CIOs and technology leaders have been challenged in unimaginable ways since March of 2020, and it’s become increasingly apparent that the most successful tech executives are those that had proactively planned in areas like disaster recovery and security vs. play a more reactive, “keep the lights on” type of role. Going forward, we expect technology, security, and risk management executives to be extremely high in demand across all industries.   With great challenge comes great opportunity, and in 2021 the opportunities were plentiful. At JM Search, we started the year with our best first quarter in our 40-year history and we are looking forward to continuing to partner with our clients to deploy creative and efficient talent solutions to meet their evolving needs in 2022. To a great year ahead and beyond.

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