Much has been written about the Great Resignation—the mass exodus of lower- and mid-level employees to more lucrative jobs. This churn is working its way up the corporate ladder. A recent Deloitte survey shows signs of increasing quit rates among executives, with 69% seriously considering leaving their current role for one that supports greater well-being, specifically more work/life balance.
Like all candidates, executives venturing into the job market intentionally or through unprompted recruitment are being enticed by higher salaries, bigger bonuses, and more perks. On top of this, candidates have their pick of employment offers. Vaco found that 22% of recent job seekers received three or more offers and 44% at least one or two in the accounting and finance field.
What does this mean for private equity firms that frequently need fresh C-suite and upper management talent to transform business models, create value, and drive growth at their portfolio companies? They must quickly and decisively identify and win over ideal executive candidates or else risk losing them to more nimble employers.
These best practices can help get your firm’s choice candidates over the finish line.
1. Mine Candidate Objectives
Professor Lynda Gratton of the London Business School believes that these forces behind the “Great Resignation” pre-date the COVID-19 pandemic: longer life expectancies that prize healthier work environments, more two-income families with financial flexibility, and an organizational power shift where employees have a heightened sense of personal agency.
As a result, during the pandemic, she says, employees “unlearned some old ways of working and began to build new habits—like spending more time with their families, serving their communities, and avoiding the daily commute.”
This makes it more important than ever that PE-backed firms hiring for the C-suite and its direct reports talk more openly with candidates about the following to avoid mis-hires:
Candidate goals: What drives them both personally and professionally? Where do they see themselves in 12 months and in five years? Do they want to work for a particular PE firm? How does working in a PE environment fit into their short- and long-term goals?
Positional success: Do the candidate’s skills match what’s needed? Is the candidate a good cultural fit? Do they have reasonable expectations for the role?
Company mission: Can the candidate give meaning to company values? Do they understand what you are trying to achieve financially and otherwise? Do they know how to rally the troops around this opportunity?
2. Introduce Candidates to Key Players
The only way to know if candidates have chemistry with your culture and leadership team is to let them experience both firsthand. Balance your interview process with formal sit-downs and informal discussions over coffee or meals and include PE and company executives and senior leaders. Today’s candidates want to get comfortable with all the key players within the PE firm and the portfolio company before they accept an offer.
Additionally, invite promising candidates to spend time onsite meeting their potential direct reports and cross-functional partners and seeing the atmosphere in person.
For the best results, go the extra mile and arrange for candidates to visit with friends of your PE firm and former executives from its portfolio companies. Even consider inviting a top recruit to the PE annual meeting. All of these efforts help to foster and develop a stronger bond with the candidate you want to become your next CEO, CFO, or other C-suite member.
3. Expedite the Interview Process
While it’s important to move deliberately when hiring C-suite executives or other senior leaders, time is of the essence in today’s candidate-favored job market. Firms that use a strategic hiring process enjoy a distinct advantage in getting top-tier talent across the finish line. Without structure, it’s too easy to add unnecessary steps that weigh lay the process, such as last-minute case studies or additional interviews.
4. Embrace Flexible Work Arrangements
Gratton notes that more companies are experimenting with flexible work arrangements in their efforts to attract and retain talent. The pandemic proved that highly distributed teams can be productive, so firms are continuing to allow fully remote, hybrid, and other arrangements to seal the deal. “The practices they adopt—particularly around flexibility—could well become industry standards,” she says.
PE-backed firms need to recognize this changing dynamic and discuss options with candidates, especially those who would commute. As you get closer to finalizing an offer, formally document the candidate’s commute commitment and your expectations for the first three, six, nine, and 12 months. This will eliminate any unwanted post-hire surprises for either party.
5. Accelerate NDA Process for Serious Recruits
For the most promising candidates, start the non-disclosure agreement (NDA) process earlier than you have in the past. Provide them with the confidential information memorandum (CIM) executive summary and let them digest the information. This keeps things moving forward at optimal speed and lets you hear the candidates’ questions about the CIM and learn their way of thinking.
6. Prepare for Candidate Negotiation
With multiple offers becoming the norm, expect candidates to drive tougher bargains during the negotiation phase. You can put your firm in the best negotiating position by clearly demonstrating the value of the following:
PE firm: Discuss the number of its successful exits, the extent of returns, and experience in the sector at hand.
Management: Highlight other past successes and exits for individual members of the executive leadership team.
Equity: Talk about the capital realistically needed to grow the business, the amount currently dedicated to that goal, and the prospects for additional funding.
Complete alignment: Assure the candidate that the PE-backers and company management agree on the profile needed in their prospective position.
7. Provide C-Suite References
Back up your selling points by referring finalists to C-suite members of the PE firm and its other portfolio companies. Today’s candidates want to speak to these references so they can build stronger relationships with their backers.
8. Set Realistic Recruitment Expectations
The most recent Employment Cost Index shows that wages and salaries for private industry workers increased 8% in the two years ending March 2022, while benefits rose 6.6% for them. Given these rising employment costs, the caliber of candidate you want and what you can afford could be grossly different. To avoid disappointment, set realistic expectations about the level of talent you can attract with the total compensation package you’re financially prepared to offer.
9. Consider the Step-up Route
Another way around compensation limitations is to define development opportunities for step-up candidates—promising professionals ready and willing to take on their first executive role for less money than a seasoned CEO, CFO, or other C-suite members. For this to work, company management and the PE firm must be proactively invested in this candidate’s success as follows:
Clearly defining the step-up leader’s development areas
Surrounding them with a team of mentors who can help them overcome their gaps
Measuring their progress in the new role and providing actionable feedback at routine intervals
New Era in Executive Recruiting
According to McKinsey & Company, the recruiting rules have changed. “Now more than ever, companies must redefine their attraction and retention strategies and build a value proposition that takes employees’ whole lives into account.”
Focus Search Partners sees these same dynamics playing out with executive recruitment. As you work to strengthen your C-suites and upper management ranks with tier one talent, we can help you navigate this evolving era so that your investment goals stay squarely on track.
Time for your next executive hire? Contact Focus Search Partners today.