How the Pandemic Transformed HR Function for Private Equity Firms
In 2020, when the Covid-19 virus turned into a pandemic, the business world had to adapt quickly. Companies of all sizes were forced to let their employees work from home as a temporary solution. As the pandemic dragged on, it became clear that remote work was not just a provisional fix but a new way of working.
For private equity firms and their portfolio companies, which had long relied on in-office workforces and face-to-face interactions to conduct due diligence and evaluate company performance, the switch to remote work meant a transformation in how they did HR, according to several private equity HR executives interviewed for this article.
In many ways, the pandemic elevated HR from a back-office function into a strategic role in private equity firms.
“We are thinking about HR or Human Capital in a new way at Southfield” Tim Lewis, Partner at Southfield Capital told me. “10 years ago it was a back office function required for compliance and benefits. Now a thoughtful and engaged HR function is a strategic necessity and the range of activities our HR execs are asked to address has expanded from functioning during a pandemic to addressing new ways to think about the workplace.”
“It’s a whole new game today,” Keith Swenson, longtime HR executive and operating partner at New York-based consulting firm Beckway, told me in a Zoom call.
“For most organizations, they have to press the reset button because the conditions in the market have changed. The expectations of workers have changed. Based upon being remote versus in office, the expectations of new people coming into the organization have changed as a result of that,” he added.
Time for a New HR Playbook?
With the business world moving to a distributed workforce, HR needs new tools and processes. It appears that the old ones just won’t cut it anymore. Swenson, for example, whose company leverages leading B2B commercial products, said HR executives like him had to rethink the way they attract, evaluate, and retain talent.
“Companies are finding themselves having to rethink their whole strategy around people on how they supervise, how they motivate, how they pay,” he said, adding that he has observed some organizations lose key personnel as a result of the pandemic.
Retaining talent has been a significant challenge for companies across industries. According to the U.S. Bureau of Labor Statistics, 4.5 million workers, or 3% of the country’s workforce, quit their jobs in November, intensifying the mass resignations that began in early 2021.
Experts say one of the reasons for the mass exodus is the ability of employees to work remotely. Except for certain jobs that cannot be done from home, such as those in the medical and construction industries, most positions appear to be doable with a computer and internet connection. At least, that is what workers think, and employers have been forced to accept.
“There is a war on talent,” said Lisa Rivoli, the executive vice president of Human Resources for New York-based Milrose Consultants a Southfield Capital portfolio company. “We have to look to retain the talent we have. We are exploring ways of improving our benefit offering and maybe offering a continuous, flexible workweek,” she added.
For HR professionals like Rivoli, the pandemic has meant a shift in the way they do their jobs. No longer can they rely on face-to-face meetings with employees to get a sense of their work performance. They now have to find other ways, such as video conferencing and employee surveys, to gauge how people are performing.
“It’s gotten a lot harder because you can’t just get up and go down the hallway anymore,” she said. “You have to make all these phone calls. And sometimes, you know, people are on the phone, you can’t reach them… I literally have two phones. Two phones are going off. My computers are going off. My house phone might ring. So it’s a lot.”
Attracting New Talent: A Challenge to be Courted
In addition to retaining your best and brightest, attracting talent has also become a challenge for HR professionals. To lure the best talent, Forbes reports, many firms are now offering sign-on bonuses and other perks, such as paid vacation days and tuition reimbursement.
The appeal of remote work is one that PE portfolio companies might have to grapple with for the foreseeable future, including those companies that cannot embrace it because of the nature of their business. American Refrigeration Company (ARC) a Southfield Capital portfolio company based in New England is one such company.
“Finding people during COVID has been the biggest challenge,” said Mary Fairbairn, the company’s Director of Human Resources.
For example, she said as an essential business it remains a struggle to find project managers to oversee product installations for manufacturing plants or ice-skating rinks as those jobs require people to be on site. There is no way an installation can be done remotely – we need people onsite. This problem could become more acute as the pandemic drags on and new Covid-19 variants continue to emerge.
To Fairbairn, remote work has also meant “a mindset shift” for her department as it tries to retain and recruit talent.
“I think it’s shifted our mindset, from something that has to be well defined, to something that’s a little bit ambiguous,” she said, explaining how employees’ personal lives are now a greater factor when it comes to things like scheduling.
“Also, a lot of people have children. We try to be a little bit more flexible when it comes to someone that has child care, or if their child is sick, of course, we’re always very nice about it.”
“A Candidate’s Market”
And nowadays, when people apply for a job, their goal might not be to get hired by the company, but rather to use the offer as a bargaining chip for a better position or more money at their current company, said Rivoli.
“They may want to use your offer to bring it back to their current employer to see if they can gain a better compensation package where they are. So, we’ve had that with people ghost us and then at the ninth hour, tried to negotiate real hard on compensation after they already knew what the compensation package was,” she said.
In light of this reality, Recruitor.com has made six wide-ranging recruiting projections for 2022, including the notion that “remote work is the new normal.”
“It’s a candidate’s market,” said Recruiter.com CEO Evan Sohn. “The talented candidates are in high demand. And if they’re demanding hybrid or remote workforces, the companies have to adjust to those workforces.”
Adam Miller, the founder, and managing partner of Hygge Capital Partners, a human capital solution for the private equity industry and their portfolio companies, says the need for human capital within the PE space has never been greater.
“Now, all firms are rushing to the plate to hire HR professionals to help them,” he said. “They think proactively through each one of these components to make sure that they’re creating a competitive advantage in the market when they’re out telling their story marketing their brand.”
Miller’s views about HR’s function being about “creating value” align with those leading HR scholars such as Dave Ulrich. Often referred to as the “father of modern HR” for his pioneering work on human capital, Ulrich recently said that the time had come to “reinvent” HR.
“HR is not about HR,” he told Geeks, Geezers & Googlization podcast on December 30. “HR is about helping your organization compete and succeed in the marketplace.”
By Lou Sokolovskiy, Founder & CEO at Opus Connect