Private Equity (PE) firms can take effective measures to de-risk their investments by ensuring their portfolio companies have an effective people strategy. In order to do this, they need to secure a Chief People Officer (CPO) at the right time and with the right skill set to help increase performance and engagement, build a successful culture and contribute to the wider executive team discussions.
The CPO needs to be both a strategic business leader as well as a functional expert. They will need to utilise their relationship management and communication skills to nurture relationships with both the wider workforce and the executive committee to prepare the business for change and manage investor demands. We have found that some PE-backed businesses struggle to identify which stage of the investment cycle is the right time to hire a CPO.
To shed light on this challenge and offer their lived experience of working in a PE-backed business we sat down with Ali Cowen, CPO at AutoRek, Ash Rama, Vice President of People at Hyperexponential, Kate Evans CPO at Xeinadin and Amanda Chillcott, previously CPO at Neptune Energy to hear their thoughts.
With the growth rate of many PE-backed businesses outperforming many publicly owned companies, identifying the right time to hire a CPO for your PE-backed business can be difficult but critical. Ash Rama offered his thoughts by saying “companies need to find the balance between not hiring a CPO too early or too late in the investment cycle. An organisation can sometimes find itself unprepared to support a strategic people leader if they are at a very early stage of formation. If you hire a CPO too late, this could lead to the CPO being forced to unpick various legacy issues.”
Ali Cowen offered a different view by suggesting that “the CPO must be introduced from the very start of the investment cycle to ensure the people agenda links into the overarching strategy, rather than being a bolt-on.” It is important that the people agenda focuses on creating a culture and attracting talent that is equipped to manage a fast-paced, high-pressure environment which can keep up with investor demands. Doing so becomes harder the later a CPO is introduced, as they may be faced with having to shift the overall culture or ways of working to do their job effectively.
Ash Rama proposed taking a strategic approach to introducing a CPO by “assessing the current talent in the business. It could be that early on you hired high-calibre talent that was able to grow with the business and step up when needed. It is however more likely that you hired people at the early stage of investment who complimented the business during that time but are not ready to step into the role of CPO.” Ash explained that “there will come a time when the leadership team find themselves over-stretching their people, culture and talent capabilities. This is when it is critical to add executive level HR expertise to relieve the stretch within the leadership team and make People initiatives a central part of the business strategy.” Amanda Chillcott supported this by suggesting “when juggling various responsibilities becomes too much, or a new way of thinking is required, an official CPO should be brought in to take a more strategic approach.”
Appointing your first CPO is a critical phase of investment and you need to ensure you acquire the best talent to be able to create and integrate your people agenda. When interviewing it’s important to find a CPO that can offer the following:
PE-backed businesses are naturally high-pressure environments with investor demands rapidly changing. Kate Evans highlighted how “it is fundamentally crucial for CPOs in PE-backed businesses to be acutely aware and cognisant of the investor mindset. As the timeline progresses investor priorities shift forcing them to make aggressive decisions which often leaves the C-suite, and wider organisation, under increased pressure.”
Amanda Chillcott supported this by saying “your ability as a CPO in a PE-backed business to link the people agenda back to value creation and delivery is critical. PE-backed organisations require every board member to drive value regardless of your specialism and to do so with the investment cycle timeline in mind.”
When entering a new organisation, it can be easy to want to deliver immediate impact to demonstrate your worth. However, it is essential for your newly appointed CPO to take the time to assess the current state of the business and people function to identify where the real challenges lie. Doing so will allow them to make informed decisions that drive real value against your overall business goals.
Ash supported this by explaining that “my focus in the early days of a new role is to assess what value the leadership team is gaining from the current performance management framework and broader people agenda. This allows me to identify what is effective and what areas need to be adjusted to ensure the people agenda contributes to achieving the overall business goals and investor priorities.”
The CPO’s unique position of being an intrinsic part of the executive team and often having close relationships with the wider workforce puts them in the ideal position to bridge the gap between both parties. Your newly appointed CPO should be able to cultivate meaningful relationships across the business to truly understand the current challenges the workforce is facing and effectively communicate these back to the executive team.
Ali Cowen summarised this by stating “the CPO should be an advisor to the leadership team while also ensuring there is transparent and clear communication to the rest of the business to prevent uncertainty from arising.” This was supported by Kate Evans who commented “it should be a CPO’s priority to ensure there are transparent conversations amongst the board, investors and wider workforce to ensure change fatigue is limited as much as possible without hindering investor goals.”
It is vital that your CPO is comfortable with a certain level of vulnerability to have regular, open conversations across the business. Ash recalled from past experiences that “being part of a leadership team that were vulnerable allowed them to challenge each other on the correct ways of working in a healthy environment.”
With over a third of respondents in our recent Transformational Leadership Report expecting talent shortages to remain a major challenge over the next five years, your CPO must make talent acquisition, development and retention a top priority.
From personal experience, Ash has seen the benefits of introducing formalised interviewing processes early on to attract the best talent possible and commented that “implementing the foundational practises of the hiring process and performance management framework from the very start has been crucial in ensuring we attract and retain high-calibre talent. These processes will also be critical when scaling the business quickly and not having to de-prioritise the quality of talent we want to bring in.”
Ali Cowen equally recognised the importance of this, particularly in the technology industry where often the client will ask for a highly customised service which can lead to a list of requirements that may not be achievable. In this case, she explained how “it is crucial to have high-quality talent in place that can effectively manage the customer and deliver an exceptional service without overpromising or under-delivering.”
Understanding the right time to onboard your first CPO in a PE-backed organisation can be tricky. Ultimately it comes down to identifying the point at which your current executive team doesn’t have the ability to deliver the people agenda, or when the current HR team are not ready to support the business through the next phase of growth.
The CPO you bring in should be equipped to deal with the fast-paced nature that comes with being in a PE environment. They must have the skills needed to nurture meaningful relationships across the business, hold open conversations and create a strategic people agenda that delivers value against the overall business and investor goals.
For support in appointing your first CPO, please reach out to a member of our People & Culture Leadership team.
Amelia is a Director within BIE’s People and Culture Leadership Practice.
She focuses on mid to senior retained assignments and has over 10 years' executive search experience. She has worked for a selection of highly reputable search firms throughout her career in both the UK and Asia. Amelia partners with organisations ranging from start-ups to listed businesses and works across all HR disciplines.
