The people who founded private equity organizations years ago are aging fast and new guard hasn’t taken its position. The firms are required to fill vacancies as soon as possible to fulfill the expected lacuna in the system. The digitalization of businesses and the disruption it causes has accelerated the pace of how we operationalize and optimize.
The established firms in the private equity industry have been around for only a couple of decades. The matter of the fact to ponder is how these firms have still got founders in the reins. They are still running the business. But once the time comes to pass over the baton to the young blood, there is a chance of losing the pedestal.
What can be done to avoid such a scenario?
A Great Compensation: For any company, adequate compensation is indispensable to build an excellent talent reservoir. If there is a huge gap which reflects inequality within groups, then there is equivalently huge possibility of a sense of inequality within various departments. The problem with top private equity firms is the compensation for the founders is twice the amount of the next senior position. Such divisive compensation grades only give way to a high rate of turnover and instability. Also, a greater amount of inequality in companies is directly proportional to the instability of organizations. The partners who are good at business excellence and have an outstanding record in the private equity industry but have low shares are usually unwilling to stay for a long-term period. They tend to leave early which eventually hinders the top private equity firms’ business profits.
- Changed Business Models: One thing to remember before hiring the next generation of leaders in the private equity industry is to appreciate diversity in talent acquisition. Talking of technology, it becomes an imperative. For private equity firms to survive, addressing the need to fulfill the lurking skill-gaps is an essentiality. The same business models have been running around in this industry for the last five decades and it’s high time, it’s changed now. With digitalization of processes and operations, talented individuals who understand how the digital economy works will be an add-on.
- Digital Thinking: It’s not a statement not unknown to many that most of the private equity firms around the world have no position for a Chief Digital Officer (CDO). The responsibilities arising out of the unavailability of this role leads to passing on of it to the IT or the marketing department. But a CDO along with his/her team will evaluate the enormity of potential technologies, how they will break the mold to be in the spotlight, and requirement of greater investments.
What’s required is the transformation of the top private equity firms through effective succession planning which will be the result of retaining culture balance infused with dynamic people. Building a reserve of talented individual will be critical for the firms. What’s required in return is a sense of trust and mutual understanding from the new blood.