What qualities do you need to succeed as a CPO in a PE-backed business?

Katrina Stewart, an Executive Search Partner within our Human Resources Practice, offers her valuable insights, along with those of some expert business leaders, into the attributes needed to meet the challenges of a Chief People Officer (CPO)/ Chief Human Resources Officer (CHRO) role in the Private Equity (PE) space.

Many professionals who have not worked in Private Equity aspire to move into in this field because of the perception that PE businesses are much more agile, and that there is a large pot of gold at the end of the rainbow…

In reality, there is a lot to know about how you will need to operate in a PE context. The position of a CHRO or CPO in a PE or PE backed business is both difficult to master, and extremely important to the ongoing success of the business in question. There are many qualities a successful CHRO demonstrates on a daily and ongoing basis – here we have highlighted a few.

1 – You need to be a coach and a mediator

The CEO of a founder-led organisation may feel very protective of the team that has built the business so far. At the same time, a PE firm will want the right people in place to deliver on the growth plan and new product lines. The skill set needed to take the business to where it needs to be in five years’ time may be very different from those currently in place.

A CHRO needs to work tactfully and supportively in between these two forces, and coach the CEO so that they can adapt their mindset to the new era of ownership and accept the need for change.

As James Dickens, CPO of Medivet, says: “As a CPO, you are at times the mediator between the CEO and the Private Equity team. Your job is to get under the skin of what they actually want, what they say they want, and what that means. Your job is to translate it.”

2 – Good communication is essential

When change happens at a business with new PE backing, big decisions need to be made fast – and there is likely to be a lot of concern among the people affected. If a team rapidly expands, the person who was already there may not be leading it, but if it can be explained to them that there is still a career for them in that business, it can make a big difference.

In such circumstances, bringing someone in above them can ultimately help their progression because they can learn and take advantage of future opportunitites. The CPO can play a key role in steadying the ship and ensuring that the members of the team are comfortable with their new landscape.

Claire Head, CPO of Isio, describes the priorities of a new CHRO as: “Ensure that you create a people strategy with key priorities and deliverables to underpin the culture and purpose of the organisation. In turn this will attract, retain and develop your teams to drive business performance and create value for the organisation, your clients and communities.”

3 – Pace is crucial – don’t be a bulldozer

A phrase you often hear in this context is “assess fast, act faster”. Change needs to happen quickly – you do not have months to work out how to create a new business identity. Almost as soon as the PE firm moves in, you need to be working out how to integrate new systems and processes – and how to lock in the right talent and develop it innovatively.

However, that change needs to be implemented in a way that works for the people affected. It is not appropriate to simply bulldoze your way in and make the necessary changes.

You can’t be focused purely on the here and now. You need to bring an understanding of the long-term view of how actions taken immediately will impact the five-year strategic goal that the PE fund has bought into.

4 – Agility, resilience and commitment are key

In these circumstances, a CPO needs to be incredibly flexible. – o be able to switch in an agile manner between operational and strategic commercial imperatives. You also need to be willing to get involved in making the change happen.

As James Dickens puts it: “If you ask the question, ‘Whose job is it?’, look in the mirror.”

A successful portfolio CPO is able to demonstrate a clear value to the company of their actions, while managing the PE fund’s expectations. You are trying to create a business that performs well, and whose amazing results are due to the insightful management of a team who were made to feel valued.

However, part of your focus always has to be the impact on the bottom line. You have to implement innovative ideas around how you attract, retain and promote individuals – typically, with lean amounts of resource and funding.

5 – You need to be data-driven – and culturally aware

The best CPOs recognise how important it is to create the right culture in the new business set-up. It is critical to make sure that everybody comes with you on the five-year journey.

It is also essential to understand the need for data – many founder-led businesses can manage their procedures on Excel, or even on a notepad. If the long-term intention is to sell the company on after five years, you will need to store your data effectively. Any potential buyer will want to analyse your business and will want to see reports and other evidence of company performance in detail. Managing that data will help to show the business in the best possible light. You need processes and procedures that are robust and clearly defined.

6 – Be conscious of ESG and D&I requirements

Historically, when a PE firm looked at a potential acquisition, the focus was almost purely on the financial possibilities. However, many PE funds now believe that, while a target should have excellent financials and a clear next stage growth plan, without diversity on its leadership team it is far less attractive.

Creating an inclusive business to which customers can strongly relate carries immense value to an organisation. Everyone in a business is accountable for a diversity and inclusion strategy, and the CEO needs to be on board with it, but ultimately it is owned by the CPO. PE funds, when it comes to the second round of investment, now want information about D&I strategies, as well as the ESG progress made by a business.

In conclusion, many business leaders say they do not want an ‘HR person’ as their CPO. What they are looking for is a business person who is passionate about people and understands how they drive business performance – and add value to an organisation.

Becoming a successful CPO requires the ability to display and balance a multiplicity of skills. You need to be a mediator, a coach, a great communicator, someone who displays empathy but always has an eye on the bottom line, a commercially aware strategist with the willingness to be hands-on in the creation of dedicated teams.

As Claire Head concludes: “The ability to link people activities to commercial outcomes and wider business purpose is key… the ability to adapt, change and refine policies, approaches and frameworks to suit a more nimble organisation while still narrating the strategic ambition is an important balance.

The route to CPO in a PE backed business

With the growth of private equity, Chief People Officers and aspiring Chief People Officers are always very interested in the most likely route into private equity portfolio positions.

Our recent CPO Pathways report explores the most common routes to becoming a Chief People Officer. Produced in collaboration with leading global data company, BoardEx, we analysed data on over 1000 UK appointments to Chief People Officer between 2019-2021.

In the three years of data we examined, only 13% of CPOs appointed into private equity portfolio posts came directly from roles within a PLC environment, which may well be expected, and mirrors trends across all ownership models. What is perhaps surprising in private equity appointments is that only a third arrive directly from other PE environments; certainly, anecdotal feedback suggests private equity firms prefer to hire candidates with prior private equity experience, but our data suggests it is not a critical factor.

If you would like to speak more about HR in Private Equity, please get in touch with Kat Stewart here:

Katrina Stewart

Partner
Executive Search
Human Resources


Katrina has an impressive track record in delivering high-end HR leadership and board-level roles in PE and VC backed organisations, FSTE 100, 250 and 350 and AIM listed firms. Katrina has loyal clients particularly within financial and professional services and technology. She thoroughly enjoys finding the best possible talent for some of the most highly rated organisations globally.