The Rise of Talent Officers at Private Equity Firms
Most private equity fund managers know the value of having relationships with the right operational talent. In today’s private equity industry, being able to consistently source top-quality management and operational advisors is one of the hallmarks of successfully creating value at the portfolio company level. Historically, managers have had a number of ways in which they achieve this objective. Many managers have “recurring” C-suite relationships that they repeatedly deploy into companies. Beyond institutional relationships, managers have historically relied on search firms and their personal/professional network to source talent at the portfolio-level. These days, private equity managers have begun in-sourcing this critical function – or at least creating a role in senior firm management to perform this critical function.
The role that a talent officer can play at a firm is highly flexible. Some firms create a role similar to the business development role, in which the talent manager is the outward face of the firm, attending conferences and developing relationships with talented industry professionals. These talent officers also interface with search firms and other intermediaries to broaden talent sourcing for the firm.
This, however, is only a small part of what a talent manager can be used for at private equity firms. Beyond simply sourcing talent, many talent officers manage a broader portfolio of responsibilities at the firm. These talent officers also act as management coaches and work directly with newly appointed management to allow them to seamlessly transition into the new role. Talent officers can also play a big role in the initial 100-day roadmap after an acquisition by evaluating current management and making recommendations to the board of directors about potential issues with an individual or team chemistry. Given the deep network of industry experts that a talent officer develops, private equity firms can harness this network to provide their expertise during diligence or in offering a unique value creation angle to win a deal.
So what kind of background would make a good fit for such a role? That depends on what kind of role a firm would like that person to play. For talent officer that is solely focused on building a network of industry talent to deploy into portfolio companies, clearly the person’s rolodex is more important and having prior industry experience is not as much of a requirement. Someone with prior experience at a search firm would be the ideal candidate for this role, as they can bring their network with them. For the more operationally intensive roles, however, managers have found that having a background in industry or at another private equity firm better positions the candidate for success. Such a candidate will bring the gravitas and skills needed to not only build a network of industry talent but also make themselves a resource for advice and training.
Given the intense competition in the private equity industry today, it is no surprise to see private equity firms turn to this innovation in order to give themselves an edge in the market. Institutionalizing this process can pay large dividends to fund managers both from an efficiency and operational perspective but also from a marketing perspective. At a time when proprietary deal sourcing and financial engineering are table stakes, GPs are turning to in-sourcing more operating functions as a key point of differentiation that can be leveraged across their portfolios. We see this taking shape by general operating capabilities coming in house, by firms developing in-sourcing digital marketing expertise and now in talent management. Furthermore, creating a designated role with these responsibilities across the portfolio allows investment professionals to reallocate their time in a way that aligns better with their expertise.
Sixpoint Partners, LLC, is a registered broker/dealer, member FINRA (http://www.finra.org) and SIPC (http://www.sipc.org). Sixpoint Partners Asia Limited is licensed by the Securities and Futures Commission (http://www.sfc.hk).