Matt Breitfelder is fully aware that human resources isn’t the typical path for a Harvard Business School MBA. But it’s where he wants to be.
The global head of Apollo’s human resources, Breitfelder is about as gung-ho over HR as it’s possible to imagine, displaying a warmly infectious intellectual curiosity on, and excitement for, the subject many outside the sector probably don’t often see often.
“Human beings have a fundamental set of needs that, if you meet them, they’re more likely to climb higher levels of the mountain of success. And if you don’t meet them, you’re just making it that much harder to achieve the highest levels of success,” Breitfelder says.
“On the most fundamental level, leadership is about empathy, and understanding what that particular person needs to unlock their full potential and performance. The more we focus on this in our industry, the more successful we will be.”
The widening field of battle
The phrase “sharp elbows” has, since its founding in 1990, stuck to Apollo Global Management like glue in reporting. The firm bazookaed its way into two of what were infamously, at least then, if not now, the most cut-throat businesses the modern world had to offer: private equity and private credit. Right out of the gate, Apollo gobbled up distressed debt and credit, right as monetary tightening in the US fueled a downward spiral in the value of what were then called “junk bonds.” Apollo made hugely successful plays in a forthcoming high-yield recovery and turned credit positions into controlling equity stakes.
To some, the word “global,” stuck right on the tin, may still be redolent of corporate imperialism.
But Breitfelder seems to naturally see the word in dearer terms. “As you get bigger, you get more global. As you operate in more and more communities around the world, you’ve got to invest the time to understand those communities,” he tells Private Funds CFO during an interview at the firm’s New York headquarters.
“It’s data that tells [partners] what people see as working well with their leadership”
Indeed, in a Harvard Business Review piece entitled ‘Why did we ever go into HR?,’ co-written with human capital expert and business founder Daisy Dowling back in 2008, the two suggest a fundamental characteristic of a successful firm’s HR department is that “it makes big places smaller” – that is to say, more connected in its disparate parts and more personal.
But, in keeping with the intense sense of competition that every large, successful firm must continuously whet, HR is also “smack-dab in the middle of the most compelling competitive battleground in business, where companies deploy and fight over that most valuable of resources – workforce talent.”
Perhaps never before has talent acquisition more widely resembled a battlefield – in private equity and elsewhere – than since 2020 and the onset of the covid pandemic that ushered in what’s now called the Great Resignation. Whether you’re a global giant like Apollo or a mid-sized shop out of West Conshohocken, talent acquisition, management and retention has probably been one of your top priorities in the past three years, at least.
But the focus of this intense war for talent has shifted in some fundamental ways. Firms once hell-bent on poaching the best talent from their peers, top IBs and Ivy League universities now find themselves, whether forced by the market or as a matter of a timely change in social and economic philosophy (or both), pursuing undiscovered, sometimes even unburnished, talent.
Mid-market firms speaking to Private Funds CFO and at affiliate publication Private Equity International’s CFOs Forum events in the past several years have regularly expressed exhaustion at the state of the talent market, and particularly in the finance and accounting field. A surge in awareness of diversity, equity and inclusion issues among managers and their investors has both opened new potential avenues to expand the talent pool, while also presenting new challenges.
Not least of those challenges: convincing a generation of founding partners who came of age with, and who were inspired by, the deal-crazed mindset that fueled the industry’s growth, and who often implement a philosophy of austerity onto their own firm’s resource deployment and staffing strategies, as well as overall firm architecture.
CFOs – all too often the default heads of HR and more at mid-market and smaller firms – report everything from trying to communicate the drag on morale resulting from short staffing to trying to mathematically prove the boost to carry that the simple addition of staff would contribute to.
Decades into what is widely seen as a matured industry, it is only now that deals and investment returns are being seen less as the primary goal and sole driver of a firms’ success, and more the product of smoothly incorporated constituent parts working together across a complete business strategy. That includes not just correctly staffing and resourcing departments outside of the deal team, but diversifying the entire firm, employing differentiated human resources strategies to appeal to the evolving sensibilities of successive generations, and reacting flexibly to the changing working environment.
“Partners may say, ‘I’m too busy with investing to do any of these things,’” Breitfelder says. “But the argument you give them is that you’re just introducing them to tools that are likely to make them and the company more successful. They should try some and if they work for them, keep using them. If they don’t, we’ll try some other ones.”
The first, and perhaps most important, of those tools, according to Breitfelder: data. Iris Bohnet, in her book What Works (a Breitfelder must-read), writes: “‘What does not get measured does not count,’ a saying goes. Even more important, though, is the truism, ‘What does not get measured cannot be fixed.’”
Breitfelder regularly cites books and research in conversation, usually along with an enthusiastic recommendation that you read them (his own review blurb features atop the cover of one of his favorites, The Diversity Bonus, by Scott E Page). Amid conversation about Project Aristotle – Google’s internal attempt to go back to first principles behind the question “what makes an effective team” in order to devise a more scientific method of building them – I mention psychologist Abraham Maslow’s hierarchy of needs. Breitfelder responds by crediting his friend, Seattle Seahawks coach Pete Carroll, with emphasizing the importance of the concept in sports and beyond. There’s an intellectual curiosity he possesses that transforms what many see as a drab industry into a cutting-edge discipline. Every successful business in the financial world – perhaps every successful business, period – relies on a wealth of data. Financiers are naturally hungry for numbers to analyze. Of course, managing mountains of data comes with its own challenges. But say ‘data’ to an investment professional, and you’ll probably have their ears.
Indeed, Bohnet notes that “organizations such as… Goldman Sachs, Google, LinkedIn, Microsoft and Teach for America increasingly run their HR departments like they run their finance or marketing departments, based on evidence.”
That makes data the perfect entry point for a conversation about talent recruitment, performance management, retention; everything from the benefits of diversity to the pitfalls of a particular hiring strategy and beyond.
Breitfelder is a big fan of surveys. Get your leadership to agree to surveys and the rest flows from that, he thinks. Apollo takes annual “employee pulse” surveys to assess staff sentiment, firm culture, whether certain policies and strategies are working or need adjustment, and what additional learning and leadership development opportunities might be offered. Shorter surveys on an add-needed basis are also employed.
One such survey, administered during the covid crisis, resulted in the creation of the Apollo Families Network, one of five of what Apollo calls “Affinity Networks.” AFN has since evolved to meet different needs of parents with children of different age groups. One outcome of the survey was occasional story times for members’ children, hosted by some of the most senior members of the firm on Zoom.
“Having that collegiality to help solve some of those problems with your colleagues who all work in the same culture was transformational to our company,” says Breitfelder.
And all partners at the firm, including CEO Marc Rowan and co-presidents Jim Zelter and Scott Kleinman, are given 360 feedback surveys; surveys, a self-assessment questionnaire with a twist: it is also given to direct reports, peers, managers and external relationships. They’re conducted widely, but many to little effect, according to Zenger Folkman, a leadership development consultancy. That’s because the pool of survey takers is too thin – just peers, say – and the survey target is given a report merely to be read and forgotten.
However, when done right, they can thoroughly alter the mindsets of executive decision-makers. Wema Hoover, a former head of DE&I at Google and Pfizer, says such behavioral assessments are key to breaking the hardened molds that some executive minds, with their years of experience and success, are prone to, and to foster a culture capable of evolution and adaptation. “You want to understand: what is that behavior or leadership style that a leader will default to in time of pressure,” Hoover says. “This is what they have had to do time and time again over the last two and a half years. And quite frankly, we don’t know what’s ahead of us.”
Breitfelder says the partners love the surveys. “It’s data that tells them what people see as working well with their leadership and what they need to focus on to raise their impact as a leader.”
Apollo wouldn’t disclose the nature of its surveys in much detail. But Zenger Folkman advise in a 2020 HBR article that the leader in question be allowed to choose which of their colleagues takes it and that the person clearly communicates to respondents that they want their candid observations. After being presented with the result, the leader should be given context to understand the data, as well as a “customized set of developmental recommendations, mapped to the company’s leadership competencies, to help them create a professional development plan,” the consultancy’s co-founders wrote.
It all comes down, Breitfelder says, to co-creation. “If you want the culture to stay vibrant and stay successful and keep evolving over many years, you’ve got to co-create it with your employees. They are pretty clear about what they see as the drivers of great performance and a great place to work. And it accelerates culture change because we’re building it together with an ongoing feedback loop.”
The data acts as the sort of Rosetta Stone that sits between employees and executives, helping them translate each other’s needs, desires and goals into coherence. “All of this is the same thing. They aren’t separate things,” Breitfelder insists.
The ‘Platinum Rule’
“Culture eats strategy for breakfast,” said the late management consultant and author Peter Drucker, considered one of the architects of the field of modern management.
Some 50 percent of Apollo’s current employee base have joined in the past two years. This is around the same time firm co-founder Josh Harris reportedly set out to transform the company’s public image from that of merciless corporate plunderer (although one has to suspect that Breitfelder, who has been with the firm for four years, had some responsibility for the task and whatever its outcomes), acknowledging that younger professionals want to work for what they see as socially minded businesses.
Percentage of Apollo’s employees that have joined in the past two years
Gen Z-ers appear to want more than a corporate social mission, however. Or at least, they see how they are treated individually in the workplace as an indicator or part of the broader social awareness they demand employers have. Citing Project Aristotle as well as Project Oxygen, Google’s earlier study showing that good management is a fundamental driver of employee performance and retention, Breitfelder essentially says this Gen Z workforce is right to see it that way, and that that philosophy has a strong business case.
“Increasingly our field in HR can measure more and more of these drivers of high-performance,” he says. “And you can actually see clearly how material [emotional intelligence], empathy and relationship-building are to long-term success. These studies just show us that focusing more on management skill, leadership skill, getting culture right, putting more focus on the human touch, the personal touch, is not a trade-off of success, or a nice-to-have, it’s a critical driver of success, especially long-term success and outperformance.”
Hoover says: “Leaders with a high [emotional intelligence] will automatically have in mind an inclusive leadership style. [It acts as their] core compass of leadership,” which is a big part of “presenting a model of what success looks like, one that is inviting to people across different [backgrounds].”
These things are thus worthy of a demand that Apollo make of its employees, Breitfelder thinks. “When it comes to inclusion, we ask people to strive for a higher bar than the Golden Rule. We ask for the Platinum Rule: not just treating someone the way you want to be treated, but treating someone the way they want to be treated.”
And as the business and moral case for increasing diversity among employee bases becomes ever clearer, managers must consider individual positions on a range of topics relevant to diversity, equity and inclusion. A collaborative approach to defining a DE&I strategy becomes necessary.
“Putting more focus on the human touch, the personal touch, is not a trade-off of success”
Breitfelder says employees at Apollo are encouraged to take ownership of whatever DE&I issues they think the firm needs to address. That’s not to say employees are told they are responsible for, say, creating a more LGBTQ plus-friendly environment, but for raising issues that matter to them and becoming part of the leadership on those issues, says Breitfelder.
What doesn’t work?
Apollo’s New York employees can have their coffee and water-cooler talk at its apparently officially named The Contrarian Café. (Though perhaps it may be better called “Nonconformist Café,” given a perceivably widespread distaste among younger people for the word “contrarian,” which to many of that generation evokes an image of primarily older white men making indignant, broad and unnuanced objections to matters many of them hold sacred.) Apollo wants everyone, junior associate to Marc Rowan, challenging their own orthodoxies and biases on everything from company culture to investment theses, Breitfelder says.
Challenging convention is a central aspect of successful talent acquisition and retention in the increasingly heated battle for human capital. The question is often not what is working or will work, but rather what doesn’t.
“Culture eats strategy for breakfast”
Author and management consultant
What doesn’t work is the traditional model of acquiring and retaining talent in private equity. The seemingly shrinking pool of talent from Ivy League schools and the lower ranks of top investment banks simply cannot support the growth of the industry. What’s more, that small pool represents a proportionally even smaller pool of perspectives, backgrounds, life circumstances and world views.
“We all have the same problem when it comes to the talent pool,” Breitfelder says. Broadening it is in part about ensuring that a greater swath of potential talent is even aware of the industry or can be convinced to seriously consider a career in it, despite their possible assumptions about the narrow set of people these opportunities are available to.
As Hoover says: “You can’t be what you don’t see.” To that end, Breitfelder is involved in multiple outside initiatives aiming to provide opportunity to a broader swath of the population and to meet and greet the challenges and opportunities brought on by a rapidly changing world of new work technologies. But among Breitfelder’s biggest achievements on this front is his conception of AltFinance, which he created and launched alongside Ares and Oaktree Capital Management.
AltFinance aims to diversify the talent pool for the alternative investment industry by proactively expanding opportunities in it to college students attending three Historically Black Colleges and Universities. “We want to work collaboratively across the industry to expand a pipeline of talent. We don’t need to require people to work at any one company,” Breitfelder says. “We just want you to join the alternatives industry and to give us a chance to compete to show you that our firm is a great place to build your career.”
“You can’t be what you don’t see”
Ex-DE&I at Google
It has produced exciting results. Graduates with little, perhaps even zero, prior experience of finance or business find their way into the system, and quite often succeed. Breitfelder says that chimes with his observations over his career in finance. “In my work over the last decade-plus in the investment world, I’ve seen over and over again that there’s a bigger talent pool beyond just undergraduate finance majors who can excel in the industry.”
But the talent problem is all the greater for mid-sized and smaller private equity firms, who likely don’t have the scale to build a sizable talent pipeline, and often cannot match the compensation offered by the Apollos of the world. Breitfelder suspects some such firms are slaves of convenience, though perhaps through no fault of their own, given resource challenges. “When asset management firms are smaller, they are not hiring that many people, so they tend to focus on the talent pools that they are the most familiar with.”
But even those who try to reach beyond those pools struggle. It takes immense resource and time to expand and tap into new reserves of talent. Identifying rich veins of it alone seems a daunting task. But Breitfelder recommends taking a step back and simplifying it.
“Someone took a shot on every one of us. Coming from the background that I do, I never expected myself to be working here, in this industry.
“So let’s tap into that and let’s ask ourselves, who can we take a shot on? We’re going to provide opportunity to people across our ecosystem from underrepresented groups that have not had a pathway into the industry. And we’re going to open more doors, we’re going to build roads, we’re going to build pathways, and we’re going to expand opportunities in the workplace, marketplace and in the communities where we work and live.”
It’s an ambitious goal but, somehow, a very grounded one, and true to Breitfelder and Dowling’s proposition some 15 years ago that HR is in large part about making big things smaller. Should it succeed – should institutions once competing viciously for human capital and investment opportunities come together to solve the issue, simply by addressing existing structural weaknesses in the system – namely, the lack of opportunity it provides to a wide swath of America’s potential workforce – the alternatives industry may well continue to thrive, resting on a wealth of diverse talent and new perspectives on the industry’s direction and purpose.
In farming, monoculture has provided a history of substantial profit. But it has also resulted in a lugubrious outlook for the viability of future agricultural production. So, too, with business. Maybe the alternatives industry can live up to another interpretation of its name, and become a force behind the creation of other paths toward a productive future that benefits industry and society at large.
Breitfelder’s top reads
Matt Breitfelder has a long list of studies and books that he thinks are helping to change the way people think about human capital. Here are three of them.
The Diversity Bonus: How great teams pay off in the knowledge economy, Scott Page, Princeton University Press (2017), 328 pages
From the publisher: “What if workforce diversity is more than simply the right thing to do? What if it can also improve the bottom line? It can. The Diversity Bonus shows how and why. Scott Page, a leading thinker, writer and speaker whose ideas and advice are sought after by corporations, nonprofits, universities and governments, makes a clear and compelling practical case for diversity and inclusion. He presents overwhelming evidence that teams that include different kinds of thinkers outperform homogenous groups on complex tasks, producing what he calls ‘diversity bonuses.’ These bonuses include improved problem solving, increased innovation, and more accurate predictions – all of which lead to better results. Drawing on research in economics, psychology, computer science, and many other fields, The Diversity Bonus, also tells the stories of businesses and organizations that have tapped the power of diversity to solve complex problems. The result changes the way we think about diversity at work – and far beyond.”
What Works: Gender equality by design, Iris Bohnet, The Belknap Press of Harvard University Press (2016), 400 pages
From the publisher: “Most organizations recognize that gender equality is both a moral and a business imperative. But unconscious bias holds us back, and de-biasing people’s minds has proven to be difficult and expensive. In this essential book, Iris Bohnet combines insights from economics and psychology to improve decision-making and offers simple, concrete steps that have already benefited businesses, governments and the lives of millions.”
Originals: How non-conformists move the world, Adam Grant, Viking (2016), 336 pages
From the publisher: “Adam Grant, one of his generation’s most compelling and provocative thought leaders, again addresses the challenge of improving the world around us, but now from the perspective of becoming a trailblazer: choosing to go against the grain, battle conformity and buck outdated traditions. How can we stand up for new ideas, policies and practices without risking our reputations, relationships, and careers?
“Using surprising studies and stories spanning the worlds of business, politics, sports and entertainment, Grant debunks the common belief that successful non-conformists are born leaders who boldly embrace risk. Originals explains how anyone can spot opportunities for change, recognize an idea, overcome anxiety and ambivalence, and make suggestions without being silenced.”