Human Capital, Leadership, and Culture in Private Equity
Do these 3 things matter in PE firms?
Human Capital
Leadership
Culture
I wanted to specifically look at these 3 areas and to challenge PE firms that they may be missing a few tricks if they are only looking at:
Exit and liquidity issues or
Valuation gaps or
Fundraising or
LP gaps.
Of course, these are necessary, and indeed strategic, to look for solutions to any of these and other issues. However, here I want to challenge you:
Are you side-stepping critical areas that you actually need to lean into?
Human capital
I have never liked the term human capital. It sounds so transactional and aloof.
In the context of PE firms, it serves a purpose where traditionally everything is deal driven and therefore transactional.
But the people behind the deals are actually human beings and not human doings.
And in my engagements with them they are:
Burnt-out and screaming exhaustion
Diminishing in their confidence (this is especially true of women being penalised for being a woman)
Wanting to express their need for balance in a PE world that thrives on unrealistic pressure points.
In a sentence - Human Capital is highly frustrated and exhausted with the status quo.
Leadership
Leadership has new agenda items to address however do they have the correct strategic acumen and/or tools to address current PE challenges?
Let’s take two examples: AI and Talent development.
AI
A few of my clients have brought in an AI specialist as part of their deal teams - but that is not enough. AI is becoming integral to everything. Processes have to be put in place to ensure that the firm goes through an AI metamorphosis and is embedded in:
Internal operations
Decision-making
Portfolio companies (e.g. supply chain optimisation, dynamic pricing)
AI is here to stay and so what are we as leadership doing to understand it and better leverage off of it in our stables and in our portfolio companies?
2. Talent Development
Talent development is often seen as solely an HR issue.
It is not.
It is also a leadership issue. If the talent pipeline is not being developed in a laser focused way - then it is not developing. And what you shall experience is:
high turnover,
Intelligent staff disengaging,
Territorial team members keeping information to themself to the detriment of deals,
Team members leaving to start their own firm and develop niche funds where they can also develop values that are important to them.
So, what can leadership do?
Define what type of talent you actually want to develop,
Decide how diverse you are willing for that talent pool to be,
Dedicate time and a budget to invest in tools, processes, and people.
Tools, strategy, tracking, and any need for course correction is where ARTELEADERSHIP comes into play.
Culture 101
As leadership can you clearly articulate the culture of your firm?
If not, why not?
If so, are you proud of your firm's current culture?
What traits of your culture would you like to:
Enhance,
Get rid of,
Introduce and develop.
It sounds as if I am going into a culture assessment mode, so short of that let me say: that culture if developed correctly could be your differentiating advantageous factor.
Leadership Identity
My name Chitupa means identity, and so my initial question to any firm is what is your leadership identity?
This is because:
Leadership sets the tone.
Leadership makes the decisions and power moves.
Leadership determines the trajectory of the firm and of its people.
So what is your leadership identity and is that easily identified by:
Behaviours in your firm?
The types of people you attract and retain?
Your portfolio companies?
Your value creation and supply chain?
If you don’t know what your leadership identity is, the firm is creating its own culture that may not be the most advantageous to you.
If you would like ARTELEADERSHIP to create a leadership development programme that truly encapsulates the needs of your people and supports sustainable, high performance:
Stop talking about what you can do.
Start doing it.
