Function: Human Capital
Why Private Equity Invests in People for Growth
Human capital is a driving force for growth in private equity. A recent BluWave-hosted webinar delved into three leading trends in this service area:
- The rise in human capital investments
- The importance of specialized recruiters
- The value of interim executives
Here are some insights into these topics from from Head of Client Coverage Rena Frackt, Account Executive Evan Garoutte and Research and Operations Consultant Taylor Lee.
Human Capital Emphasis
The trend of investing in people for growth continues to gain traction.
READ MORE: Why Hire an Interim CFO
“Human capital activity has been steadily growing and reached an all-time high in Q3 of this year, accounting for 49 percent of all activity coming through the BluWave network,” Garoutte said. “It’s the number one trend in the industry.”
This reflects a 20 percent increase year-over-year, underscoring the importance of investing in talent for organizational growth and value creation.
Using Specialized Recruiters
Engaging specialized recruiters is crucial for efficiently filling both executive and non-executive positions, particularly during growth phases.
“They stay up to date on market trends, salary range and emerging skill sets, which is extremely valuable,” Frackt said. “The knowledge allows them to identify and attract top talent who possess the right qualifications and of course, and most important would be a cultural fit to the organization.”
READ MORE: Why Hire an Interim Chief Executive Officer
Value of Interim Executives
Interim executives, especially in pivotal roles like CFOs, CEOs and CHROs, provide stability and continuity during transition periods, crisis management and special projects.
“PE firms have found value in being able to try before they buy. And we’ve seen interims convert to full-time employees about a third of the time internally,” Lee said. “There’s just value in confirming that this person can positively see our portfolio companies in the right direction as well as confirm that they’re a culture fit.”
READ MORE: Why Hire an Interim CTO
The discussion underscored the critical role of human capital in driving growth, indicating the various strategies that private equity firms and their portfolio companies can employ.
BluWave’s invite-only network of human capital resources works with PE firms daily to fill needs related to human capital, as well as a wide array of other service areas.
Contact our research and operations team for your next project and they’ll provide a short list of exact-fit service providers within 24 hours.
Transformative Leader for Consumer Products Revitalization
Service Area: Human Capital – Executive Recruiting
Client Type: Small-Market PE Fund
Service Provider Type: Interim CEO
Industry: Consumer Products
The Need
Urgent Leadership Transition and Strategic Revitalization
A West Coast company, specializing in the design, manufacture and distribution of proprietary consumer products, found itself at a crossroads. With a diverse product portfolio distributed across multiple countries, the company sought a transformative leadership change to navigate operational and strategic challenges. The immediate requirement was an Interim CEO capable of steering the company through a phase of revitalization and setting the stage for a permanent CEO.
The Challenge
Navigating a Complex Transition with Precision and Care
The company faced a multifaceted challenge: managing a seamless leadership transition while optimizing operational efficiencies and product margins. The need for a leader who could meticulously balance top-line focus with bottom-line pragmatism was evident. The interim CEO would be tasked with orchestrating a turnaround, optimizing expenses and ensuring product margins were robust, setting a trajectory toward achieving a 20 percent EBITDA boost.
How BluWave Helped
Facilitating a Tailored Connection for Success
BluWave leveraged its extensive network to connect the PE fund with a short list of exact-fit interim CEOs. Each one was aligned with the company’s unique needs and industry nuances. The focus was on identifying a leader with a profound understanding of consumer products, operational optimization and strategic revitalization, coupled with a geographical alignment to the company’s headquarters.
The Result
A Strategic Pathway to Revitalization and Growth
Through BluWave’s precise connection, the company was chose a leader that resonated with its transformation objectives. The interim CEO, equipped with the requisite expertise and strategic foresight, was poised to guide the company through a period of transformative change, laying a solid foundation for sustainable growth and operational excellence in the consumer products domain.
Scott Estill of Lancor: Human Capital’s Evolving Role in Private Equity
Scott Estill recently joined the Karma School of Business podcast, sharing his insights into the dynamic world of private equity, with a focus on human capital.
In a captivating discussion with host Sean Mooney, Estill, a seasoned professional with a wealth of experience in executive search and private equity, discussed the transformative trends shaping the landscape of talent acquisition and management.
He emphasized the essence of human relationships, the mutual selection process in recruitment and the necessity of navigating technological changes with agility and adaptability.
Here are some pivotal insights from their conversation.
3 Takeaways from Scott
1. The Importance of Human Capital in Private Equity
Private equity’s approach to human capital has evolved, placing a stronger emphasis on the value of talent and human relationships in driving business success.
READ MORE: Hire an Interim CHRO
Estill articulated this evolution, emphasizing that the real value lies in the talent that propels the business forward.
“What matters more is what’s your right to win. It’s not necessarily about picking the right weighted average cost of capital or whatever it is for the inputs of the model and how much debt to put on a business. It’s the people,” Estill said.
Mooney also highlighted the industry’s shift toward a more human-centric approach.
“This whole idea of this openness to get a candidate to be wanting to be with you and saying, ‘Call anyone you want.’ That’s something that is relatively new in private equity, but incredibly important,” he added.
2. The Shift in Approach: From Assessment to Mutual Selection
The recruitment process in private equity is transforming into a mutual selection process where both parties assess each other.
“You do need to show the human side. That’s sort of why operating partners exist. And we do a ton of operating partner work because you need the EQ-IQ combination,” Estill said. “But I think painting with a wide brush, if PE firms can be more and more human about what it is to work with them and why they value that talent, it makes the talent of course feel good and it differentiates them from the competitors.”
Mooney said private equity has always been, appropriately, private in the way it operates. But that is shifting.
“One of the biggest evolutions that I think private equity is going through right now is the first word in private equity has always been private. It’s all about kind of holding your cards tight and trying to be this kind of vessel and it’ll drive great outcomes,” he said. “Increasingly, there’s things going on like brand formation. … There’s heads of human capital or HR that are not only looking outwardly but inwardly.”
3. Embracing Technological Changes
In an era marked by rapid technological advancements, the ability to adapt and evolve is crucial. Estill underscored the necessity of embracing these changes.
“The only thing that’s consistent is change. So it’s going to happen. And so as much as we think we’re so smart and we’re trying to get ahead of the curve, we’re already dinosaurs,” he said.
Mooney emphasized the transformative potential of technology in reshaping the industry.
“If you lean into it and embrace it, it can be a good thing,” he said. “But it’s scary in the meantime.”
Estill’s insights illuminate the evolving landscape of private equity, underscoring the pivotal role of human capital, the transformative nature of the recruitment process and the imperative of adaptability in the face of technological advancements.
The entire conversation with Mooney offers nuanced perspectives essential for navigating the complexities of private equity in a human-centric manner.
When you’re done listening, head to the main BluWave podcast page for more conversations with business leaders.
Scott Estill, Lancor | Talent Dynamics in Private Equity: How Firms are Refining their Approach
Decoding Q3 Insights: Harnessing People Power and Growth Opportunities in an Improving Market
Diversifying Talent in a Digital-First Consumer Products Startup
Service Area: Human Capital – Specialized Recruiters
Client Type: Lower-Middle Market Firm
Service Provider Type: Non-Executive Recruiting Firm
Industry: Consumer Products
The Need
Diverse Talent for a Dynamic Startup
A consumer products startup, operating as a portfolio company of a lower-middle market PE firm, was on a mission to enhance its team with diverse talents. Roles in digital marketing, design/creative, product development and people/operations were open, requiring a recruiting firm that understood the startup’s digital-first, data-driven and agile nature.
The Challenge
Complex Landscape of Multi-Role Hiring
The company didn’t have a dedicated talent partner, making the hiring process, especially for multiple roles, daunting. The urgency to hire candidates who could seamlessly blend into the startup’s fast-paced environment and contribute to its growth trajectory was paramount. Traditional recruiting firms, primarily aligned with CPG companies, lacked the finesse to meet the unique demands of a rapidly evolving digital landscape.
How BluWave Helped
Connecting with Specialized Recruiting Expertise
BluWave acted swiftly, utilizing its rich network to connect the PE firm with a specialized recruiting firm. This firm was not only adept at navigating the consumer products industry but also came with a robust expertise in fostering talent for digital-forward, high-growth environments. BluWave’s connection ensured that the recruiting firm could offer a tailored, retained search approach, aligning with the portfolio company’s nuanced needs.
The Result
Streamlined Path to Talent Acquisition
Through BluWave’s strategic connection, the portfolio company worked with a recruiting ally that understood its unique challenges and needs. The specialized recruiting firm’s ability to navigate the digital realm, coupled with its flexibility and adaptability, empowered the portfolio company to move forward confidently in its talent acquisition journey, ensuring that each role was filled with candidates who could thrive and drive innovation in a dynamic startup environment.
Manufacturing Momentum: Challenges, Opportunities in the Modern Landscape
Manufacturing businesses are faced with evolving challenges, especially amid an uncertain economy, constantly pressured from different angles by policy decisions and global events. BluWave sees this every day in the projects it supports for hundreds of private equity firms and thousands of businesses.
Whether in human capital, operations, growth strategy or technology, today’s business leaders have their hands full.
In a recent webinar, Co-Head of Research and Operations Keenan Kolinsky discussed with Product Manager Ryan Perkins the challenges and opportunities in this industry.
The Rising Importance of Human Capital in Manufacturing
The manufacturing sector was once driven primarily by machinery and raw materials. But now it’s recognizing the importance of its most valuable asset: people.
In fact, 74 percent of manufacturers say that “attracting and retaining a quality workforce” is a top challenge, according to the National Association of Manufacturers (NAoM).
Interim executives have emerged as a pivotal solution in this landscape. These temporary business leaders bridge critical leadership gaps, ensuring that companies don’t lose momentum during transitions.
“Interim executives can help businesses keep their foot on the value creation pedal,” Kolinsky says.
Their role is especially crucial in a volatile economic environment where leadership vacancies can’t be left open for extended periods.
But it’s not just about filling gaps. The recruitment process itself is undergoing a transformation. The emphasis is shifting from generalist recruitment approaches to specialized, industry-specific strategies. Manufacturers are realizing that to drive growth and innovation, they need the right people in the right roles, making executive searches a top priority, too.
Operational Excellence: The Backbone of Manufacturing Success
Turning toward a more traditional problem, nearly half of manufacturers identified supply chain issues as a top challenge, per the NAoM. Even with the peak of the COVID pandemic disruption behind us, this issue persists.
“With manufacturers…experiencing a variety of economic and even geopolitical pressures, manufacturing operations and supply chains simply have to be tighter than ever to achieve desired margins and outcomes,” Kolinsky said.
In response, many manufacturers are turning to expert third-party resources to optimize their supply chains. From right-sizing inventory to reducing lead times and optimizing supplier networks, the focus is on efficiency, cost savings and performance.
Beyond the supply chain, there’s a broader push toward operational excellence. Lean Six Sigma principles, rooted in the Toyota production system, are being adopted to streamline processes, identify bottlenecks and drive efficiency. The goal? Faster, more efficient production with greater precision.
Strategizing for Growth in a Competitive Landscape
A weaker domestic economy can poses unique challenges. During those times, growth strategy becomes the north star guiding manufacturers. But how do they chart a course for growth amid such turbulence? The answer is data-driven strategies.
“Markets shift often and they shift quickly,” said Kolinsky, who emphasized the importance of real-time insights. “Base your strategy or plan for growth on current market data and dynamics.”
READ MORE: Analytics, Data & AI Resources
By leveraging data analytics and visualization tools, manufacturers can gain actionable insights, track KPIs and make informed business decisions.
With the advent of more accessible artificial intelligence tools, many businesses in the manufacturing industry and beyond have been focusing on essential pre-cursor activities focused on data hygiene. These will lay the groundwork for a more seamless integration once they’re ready to use AI to accelerate growth.
Embracing Technology: The Future of Manufacturing
The digital revolution is reshaping the manufacturing landscape.
According to Alithya, 43 percent of manufacturers came into 2023 planning to increase their year-over-year spending on technology. it’s clear that the industry is gearing up for a tech-driven future.
“The manufacturing industry is really digitizing rapidly and in more ways than one,” Kolinsky said.
From IT strategy to system selection and implementation, manufacturers are recognizing the need to align their technology tools with broader business objectives.
But it’s not just about adopting the latest tech solutions. Effective change management is crucial. As manufacturers transition to modern systems, they must ensure that their teams are well-equipped and trained to leverage these tools to their fullest potential.
BluWave is here to help you connect with best-in-class, niche-specific manufacturing resources to help with human capital, operational excellence, growth strategies, technology and more.
Contact our research and operations team to scope your need and get quickly connected with the service provider you need in less than one business day.
Culture-Oriented VP of Human Resources for Financial Services Portco
Industry: Professional Services
Service Area: Human Capital – VP of HR
Client Type: Small-Market PE Fund
Service Provider Type: HR Executive Search Firm
The Need
Strategic HR Leader for Rapid Growth
A leading financial services company was on the lookout for a VP of HR. With a strong presence across dozens of locations, the company had been experiencing rapid growth, boasting a revenue in the tens of millions of dollars. Its unique service offering, assisting financial advisors in setting up qualified retirement plans, had set them apart in the industry. As the company expanded, however, leadership realized they needed for a strategic HR leader. This new role was envisioned to not only manage the day-to-day HR operations but also to be a culture carrier and strategic partner in the company’s growth journey.
The Challenge
Local Candidate who Understands Industry Intricacies
The search for the right VP of HR was not just about filling a role; it was about hiring someone who could seamlessly integrate into the company’s culture and ethos. The ideal candidate would have experience in the financial services sector, with a deep understanding of its intricacies. A locally based candidate would be a bonus.
The company also emphasized the importance of industry experience, especially in online lead generation and financial services. With such specific criteria, the challenge was to find a candidate who would tick all the boxes.
How BluWave Helped
Knowing Exact-Fit Providers Ahead of Time
BluWave, with its extensive network and deep understanding of the professional services industry, took on the challenge. Recognizing the unique needs of the company, BluWave presented three exact fit HR executive search firms with a track record of placing top-tier HR leaders in the financial services sector. After the initial introductions, the PE firm selected the partner that would be the best fit for its situation and could understand how to align a candidate with the company’s vision and culture.
The Result
HR Executive who Fit Perfectly within Culture
With BluWave’s assistance, the financial services company was able to identify and onboard a VP of HR who not only met its technical and industry-specific requirements but also resonated with its company culture. This strategic addition to its leadership team has positioned the company for continued success and growth, ensuring that its HR strategies are aligned with its business objectives.
Ed Hine, Cold Bore Capital | Breaking the Speed of Sound: Strategic Private Equity Buy and Builds
Interim CFO with Expertise in Commodities, Hedging for Manufacturing PortCo
Industry: Manufacturing
Service Area: Human Capital – Interim Leadership
Client Type: Portfolio Company – Food Ingredients Facility
Service Provider Type: Interim CFO
The Need
Expertise in Financial Management and Hedging
The CFO was leaving a B2B food ingredients portfolio company. The business, with significant operations in commodities and hedging, needed an interim CFO who could navigate the complexities of their financial landscape. This included managing large-scale hedging operations, understanding the impact of hedging on P&L and ensuring covenant calculations were accurate.
The Challenge
Hands-On CFO with Industry Expertise
The company’s operations were intricate, with 85 percent of their capacity for 2023 already booked and hedged. This created a significant exposure on their books, making expertise in commodities and hedging non-negotiable. Additionally, the ideal candidate would be someone who had experience in a private equity environment, understood liquidity and 13-week cash flow, and was more finance-oriented than purely accounting-focused.
How BluWave Helped
Short List of Industry Finance Experts
BluWave leveraged its extensive network to identify a short list of interim CFOs who not only had the required expertise in commodities and hedging but also had a track record in PE environments. The portco and its PE firm selected a candidate with more than three decades of experience, including roles in financial leadership and a deep understanding of the agri-commodity space. Their hands-on approach and willingness to be on-site, even if it meant frequent travel, made them an ideal fit.
The Result
Recipe for Sweet Success
With the interim CFO on board, the company maintained seamless financial operations, ensuring that their hedging strategies were effectively managed and that their financial reporting remained accurate. The temporary executive’s expertise allowed the CEO to focus on other critical aspects of the business, confident that their financial operations were in capable hands.
Chief Medical Officer Search for Healthcare Services Firm
Industry: Healthcare Services
Service Area: Human Capital
Client Type: Private Equity Firm
Service Provider Type: Executive Search Firm
The Need
Chief Medical Officer with Data Expertise
A private equity firm reached out to BluWave in need of a chief medical officer (CMO) for one of its portfolio companies in the healthcare services sector. The ideal candidate would not only possess the typical expertise of a CMO in healthcare practice and management but also have a deep understanding of population health and clinical data analytics.
The Challenge
Niche Expert in a Broad Healthcare Landscape
The portfolio company provided primary care and mental health services to community-based clinics, specifically serving veterans. These clinics were contracted by the VA and were spread out nationally.
The company was in a unique position. Their previous chief medical officer had recently left, and they were looking to fill the position with a candidate possessing a slightly different skill set. The new CMO would be responsible for managing and leading the clinical outcomes and metrics. A key part of their role would be to improve the analysis of clinical data sets and apply population health theory.
How BluWave Helped
Specialized Search for a Unique Requirement
BluWave’s leveraged its extensive network and industry knowledge to immediately identify executive search firms with the niche expertise required for this role. A short list was presented to the PE firm, which quickly chose the best fit. By understanding the client’s unique situation and the intricacies of the healthcare sector, the firm facilitated a tailored search process, ensuring that the client was introduced to the most suitable options.
The Result
Tailored Match for Continued Success
The search was not only efficient but also aligned with the client’s unique needs, ensuring that the portfolio company was well-positioned for future success with the right leadership at the helm. The new CMO stepped in and, according to the PE firm’s associate VP, made an immediate impact.
Great job searching for an industry-specific provider and very responsive. Appreciated the ability to work on a contingency basis and flexibility in scoping given the unique nature of the search.
-Associate Vice President of PE Firm