Our 2026 Chief People Officer (CPO) Pathways Report suggested an appetite for external, first-time, same-sector CPOs and a high number of appointments into PE-backed businesses.

What do these trends tell us and why are PE-backed businesses such active hirers, despite the private equity boom being long behind us?

Katrina Stewart, Partner in Eton Bridge Partners’ Human Resources Practice, draws on her industry insight and conversations with senior leaders to explain why these trends are part of a bigger picture that has caused PE-backed businesses to fundamentally reassess the CPO role.

Under-pressure PE firms are realising they don’t always have the right people leadership

PE firms have had to adapt to longer holds, increased investor scrutiny and fewer exit opportunities for their portfolio companies. They have found themselves operating in a more volatile and competitive market territory, battling margin pressure, increased customer scrutiny, and rising costs. The growth phase has been supplanted by a focus on operational efficiency and reshaping the workforce. Amid these tougher conditions, the CPO role has been pushed to the forefront as a commercial lever, and PE firms are realising that they don’t always have anyone around the portfolio leadership table with the right people skills for the current environment. Hence the draw of external talent. Interestingly, the CPO Pathways Report also found that many of the PE-backed companies hiring CPOs are software and SaaS businesses – organisations that have traditionally been product-led rather than people-led.

The SaaS market is facing significant challenges right now, in fact, many of these businesses are having to adapt to overcrowding, price pressure, difficulty differentiating and AI disruption. So why are they investing so much in CPOs? The answer lies in their need to change the shape and skillset of the organisation – they are finding that the role of the current HR lead isn’t fit for purpose. Instead, they need a more commercial, sector-focused role and this has caused a spike in hiring activity. Successful SaaS companies have strong retention, AI advantages, clear ROI and continuing the raise the bar with innovation.

SaaS isn’t the only sector to feel the pressure from AI, and many of our clients are looking for experienced CPOs who can bring ideas on how to manage, outsource/offshore, and upskill the workforce so it is fit for the future.

PE-backed businesses need CPOs built for pace, pressure, and performance

In an organisation that has been through a recent boom market, you can end up with a leadership that’s not used to struggling. Bringing people in who have experience of working in a business in distress can help plug that gap. A people leader who hails from a bigger organisation in the same sector that has gone through restructuring and divestments can give you the right toolkit. There needs to be a combination of technical skills across workforce planning, driving efficiencies, cost management, and management restructure, as well as emotional skills such as changing behaviour, coaching and leading people through change. The candidates may also have exposure to a broader range of tech and AI products to draw experience from.

A key takeaway from a dinner hosted by PepTalks, the leading PE-focused membership community, was that the CPO is crucial to maintaining morale and motivation during what can be a drawn-out exit process. Attendees also stressed the importance of the CPO in ensuring the People function is not deprioritised relative to financial performance; “It is even more crucial to link people initiatives directly to revenue, risk and exit success.”

Same sector experience can be preferred for a CPO transitioning into PE

Many of the PE Value creation plans see growth through acquisition rather than organic; buying in 500 new employees is a very different process to recruiting 500 new employees. That overnight scale-up involves fundamentally different skills to a traditional HR recruitment/payroll function. The CPO must understand how to rapidly shape a shared culture, sometimes across geographical borders bringing gravitas, EQ, technical and stakeholder experience. An aspiring PE-backed business CPO without PE experience may lack the volume of acquisitions but could still be an attractive hire for the PE firm as they bringsector experience and an understanding the context and DNA of the employees.

Coming from larger organisations, they may have exposure to more complex acquisitions, geographies, remuneration structures and stakeholder management which they are able to bring to the PE environment.

PE-backed businesses need CPOs who can turn AI into a talent advantage

AI has substantial implications for workforce size, succession, employee morale and corporate responsibility. A Morgan Stanley survey found that AI contributed to 11% of jobs being eliminated over the previous 12 months in the US, UK, Germany, Japan, and Australia, with another 12% not backfilled. In conversations with our network, there is much discussion around what this new world of work is going to look like. People leaders are viewing talent in a different way, bringing AI into the organisation and also into the HR function. In some sectors, for example, legal, many entry-level roles have been replaced by AI, which prompts the question: who are the future leaders if you’re hiring fewer people at the bottom?

The need for an AI-informed capability is another driver of demand for external CPOs in PE-backed businesses. Somebody who has led in a large company where there has been significant AI investment is able to bring innovative HR tools with them into smaller, PE-backed organisations. Balancing where AI replaces, versus augments, roles, the reskilling or redeploying of individuals, and potential carving out of businesses fundamentally changed by AI, are skills that are not always present in leadership teams of PE-backed businesses.

The advent of AI was a hot topic at the PepTalks dinner, where attendees commented that tools such as Claude and Gemini can “help analyse data, generate insights and support storytelling to leadership teams”. Attendees also discussed how HR teams themselves can play a role in developing AI tools and that the automation of administrative tasks allows the HR team to focus on higher-value activities.

What does the future hold for the PE-backed business CPO?

At a time when opportunities in the FTSE100/250 are somewhat stagnant, PE-backed businesses can offer an attractive option for the aspiring CPO and the process of buy-and-build means that opportunities are being created for larger, Group CPO roles. As for whether PE-backed businesses will retain their focus on operational efficiency or at some point see a return to boom conditions, the tea leaves are muddied. There are some positive signs with an uptick in M&A activity and a rebound in PE exits last year, but the war in the Middle East and surging energy prices are obvious wildcards.

The growing demand for CPOs in PE-backed businesses reflects a broader shift in private equity itself. As value creation increasingly depends on transformation, leadership effectiveness, and workforce capability rather than financial engineering alone, investors are placing greater emphasis on people as a source of competitive advantage. The rise of dedicated talent operating partners and “human capital” due diligence across leading PE firms underlines just how strategic the people agenda has become.

Whatever market conditions lie ahead, the CPO role is set to remain pivotal in driving value creation, attracting and retaining talent, and helping organisations navigate the transformational impact of AI on the workforce. We look forward to sharing further insights with you – join the conversation here.