Key take-aways from this year’s PEI Operating Partner Human Capital Forum

Private Equity International (PEI) held its second annual Operating Partners Human Capital Forum in central Manhattan. The biggest take-away from this event is that it happened at all and was well attended with 50% growth from the inaugural event in 2022.

Private equity has been on a long and steady path over the last 20 years of generating more value from operational improvements rather than financial leverage. The appearance of “Operating Partners” 15 years ago was one indication of this shift. And, over the past 6 years, we have noted a steady increase in the attention paid to people, culture, talent and human capital as a driver of value growth. The 185 talent operating partners in attendance at this year’s PEI Human Capital conference is a strong indication of this trend accelerating.

Some of the other key take-aways from the conference include:

• The need for empathy, listening skills and EQ among portfolio company leaders is an increasingly essential factor of success. In particular, the levers to influence the behaviour of, and activate knowledgeable employees are more subtle and diverse than old-school top-down command-and-control. Attendees noted that especially in the current dynamic market environment, empathy is critical for activating and retaining talented employees that are driving value creation.
• The war for talent is not getting any easier, and requires increased focus on more soft-factor elements to attract and retain top talent. There is a commonly held view that working patterns will never return fully to pre-covid norms, but at the same time it is necessary to build a sense of community. This has placed additional requirements on leaders.
• Organisational analytics are becoming more sophisticated and broader across the portfolios to better understand emerging risks ahead of time and take corrective actions.
• Not only are more funds naming talent operating partners, they are building out their talent teams with different specializations that are more strategic. In addition to talent sourcing, org analytics experts are being added to set-up more structured approaches to understanding leadership and organizational performance on an on-going basis.
• There is a skill shift taking place within talent teams. Whereas many talent operating partners had assessment and/or recruiting backgrounds to date, broader competencies are now being added to address more strategic org design, leadership and transformation demands. This also has significant implications for internal team training and development.
• More structured approaches are being put in place for development and exchange of best-practices between portfolio company HRDs.

Humatica saw the trends noted at the PEI Human Capital conference coming 20 years ago, when the company was founded. Our “3^rd Wave” studies in 2017 and then repeated in 2022 documented these trends and developments. Yet the unique tools, databases and structured services the firm developed are only just now beginning to be more broadly deployed across portfolio companies and funds to improve organizational performance and value growth.