San Diego, CA – July, 2019 – FMG Leading has published its latest whitepaper, “Why PE Firms Need Human Capital Strategies to Accelerate Value Creation.”
In the paper, authors Matt Brubaker, Richard Aldersea, and MaryCay Durrant share their findings from years of advising Private Equity firms. A key finding: when it comes to maximizing human capital, too many PE firms rely almost exclusively on top-grading senior talent with A players and aligning their monetary incentives (a lucrative exit) with that of the general partner. Their belief is that those should be enough to push the strategy forward. Unfortunately, it often does not.
Instead, the authors share their belief that the key leadership team challenge for today’s PE-owned companies is no longer just about hiring new talent at the top and giving them strong financial incentives to execute the growth strategy. While that will always be crucial, amidst today’s demands for more aggressive growth strategies to generate sufficient returns, PE firms need something more. They need to get the leadership of the companies they buy – both new and existing management team – to understand the growth strategy deeply, support it wholeheartedly, work effectively to refine it if necessary, and execute it with passion and excellence.
But creating such a great top team requires not just a growth strategy for the business; it also demands a strategy to align and engage its people. The authors refer to this as a HUMAN CAPITAL STRATEGY. To greatly increase the odds of getting the returns they expect, PE firms must devise human capital strategies at the onset of their acquisitions. From helping create a number of such strategies, they explain how to do so.
The authors also speak with Nick Orum, President of Gryphon Investors, about their approach to human capital strategy and how it accelerates returns across their portfolio of investments.
