Integrating talent

Asked how he integrates new dealmakers into the firm, one GP said it was similar to the way a trade apprentice learns from a master craftsman. 

Young hires must be moulded to fit the particular style and philosophy of the firm he or she joins. And each hire enters the field only having what they picked up from two years in consultancy or investment banking followed by a couple of years in business school (known as post-MBA hires). Bringing hires onto their first permanent role in private equity can therefore prove tricky.

Junior hires must be monitored and assessed for when they should accrue greater responsibilities at the firm, sources stress. But the first step in integrating young dealmakers often arrives before they step foot in the door. 

BEFORE THEY ARRIVE

Between the time a young hire accepts a job offer and their actual first day, there is a “make or break” moment in making recruits feel a part of the team, says Pam Harrington, a director at private equity recruitment firm Glocap. What firms do to keep the hire engaged usually involves invites to firm events; be they annual meetings or a holiday party.

And hires that are working on specific industry sectors, or in a satellite office, will usually be invited to spend some time at the firm’s headquarters so they meet the core team and get some face time with the senior partners.   

“Firms are good at doing this because it is something very tangible,” says Harrington. “What they are not so good at is general communication during this period.”

Rarely will firms ask a hire to do much before joining and any learning or reading tends to be focused on the individual’s particular sector or job function. 

But this may not do much in making a hire feel a part of the team or firm at large. Letting them know what’s going on; whether it’s a new fund raise, a deal, or a new hire, it’s always better for them to get that information from the firm and not the news, says Harrington. The firms that do this well will keep their MBAs up to date with emails or other modes of communication. 

Many firms fall short on this point, elaborates Harrington. “I’ve heard from MBAs who say ‘I’m joining a different looking team,’ or ’I didn’t realise four associates were rolling off’ or ‘the new VP they hired is someone I’ve come across before – I wish I had known he was now on the team’.”

This period shouldn’t be overlooked as once the successful candidate accepts there is still considerable time before their actual first day. In the US hiring usually starts in September but the official start is not until late summer so nearly a year passes between the two ‘welcome aboard’ handshakes. 

THE ARRIVAL 

From there the first six months of a new hire’s career should be a time to build trust and learn the work dynamics of the firm. 

As part of the process many GPs offer junior hires a combination of formal training, usually introduction speeches and workshops on former deals that last a couple of days, and informal drinks with senior dealmakers as a way of establishing their presence around the office.  

Once the real work starts many firms will partner a post-MBA hire with an associate-level colleague to get involved in more “grunt” work than they may be used to. The pair often spends time collaborating on portfolio company modeling and due diligence work so the junior hire can be gradually familiar with what it’s like working on a deal team.  

Conversely some firms prefer a ‘trial by fire’ start for their post-MBAs with one GP saying that his former firm, a large buyout house, would put post-MBAs straight onto deal teams.  

“They were immediately involved in a few live situations. They might even get put on a portfolio company straight away,” says the GP. The advantages to this approach seem clear: new hires are immediately exposed to the stresses and rewards of a career in buyouts. And what faster way to learn the skills of the trade than on the job experience?  However it may be risky to place an inexperienced dealmaker on a deal team right out the gate, and so junior hires not far enough along the learning curve may benefit more from the mentor approach outlined above. 

Other firms, such as European buyout house Permira, try and strike a balance between the two approaches. The Permira strategy is to assign the standard due diligence and modeling work to new recruits, but leave open the possibility for greater responsibilities – like engagement with portfolio company management teams – when they feel ready to do so, says Larissa Reyes, Permira’s acting head of HR. 

CAREER PROGRESSION

Getting young hires engaged also means building relationships with the partners that will ultimately develop their careers.“If you keep them too far behind the scenes they feel junior and less engaged with what the firm’s actually doing and feel more like a processor than an investor,” says Harrington.

At Permira each recruit gets a “review partner” who is responsible for the recruits development and exposure to other areas of the firm. The recruits are set very specific individual goals that are worked out with the review partner (generally the hire’s direct supervisor). And despite having formal meetings at six month intervals, they will be speaking on a daily basis and will have a meeting scheduled in every month or so.    

About three to six months past their hire date, a new dealmaker is then brought into Permira’s mentor programme. Unlike their “review partner”, a mentor takes on a much more informal relationship with the hire, an “office buddy” if you will, who can share their experiences at the firm. As such mentors usually come from a different part of the business or perhaps even in a different geography. 

MAKING THE MOST OF MBAS

Like most things, the size and structure of the private equity firm also influences the assimilation strategy. 

Smaller firms tend to have fewer resources to formally train recruits but the upside is they gain greater exposure to the senior partners as there are fewer layers of hierarchy (or bureaucracy) to overcome.

Larger firms tend to be more institutional by nature and so have a more structured policy in signing recruits. But, again, this has downsides such as lack of diversity in their work and face time with the senior team members. 

Although this seems obvious senior team members cannot, and do not, always get to know their junior employees well. “Generally speaking the most senior folks will allow the mid-level people to assess the post-MBA talent and will only begin to spend time with those who they think are true long-term players after a year or so,” says Harrington.

“It’s not that they will have zero interaction [with senior partners at the larger firms] it’s just that the senior folks have so much pulling on their time that they wait to see who the real winners might be and then try and spend time developing those who they see as partners at the firm,” she adds.

The dilemma that afflicts these senior dealmakers is that it is not in their nature to be altruistic with their time. 

“At the end of the day these leaders are not rewarded necessarily for being great managers and great developers of talent. I mean you will never see a successful managing director throttle back on the amount of time he or she is spending on sourcing or executing deals. The managing director won’t trade that off to invest that much more time in structured one-on-ones because that’s not how the compensation scheme is set up,” says Sachi Gahan, managing director and practice head of the venture capital and private equity practice at Glocap.

However one private equity company may have found a novel way of getting around this particular issue. Through tying additional points of carry to the time spent mentoring junior employees, the firm is effectively paying them to develop talent (if the carry is in the black of course).

There clearly is no one size fits all approach to integrating junior dealmakers. But what the best processes have in common is keeping them up to date, even before they arrive, and giving them access to live deal-making decisions at an early stage when they feel prepared to do so.