Keith Giarman
Managing Partner, Global Private Equity Practice
The Critical Link to Value Creation
In the current and increasingly competitive business climate, with dynamic and shifting markets and associated customer requirements, the CHRO is one of the essential links to the successful growth and profitability of PE-sponsored companies. The top HR officer is at the vortex, with the CEO, in defining and cultivating the culture and driving the talent agenda so critical to meet value creation objectives. HR leadership and associated practices and policies have a direct bearing on the velocity and adaptability of a company’s approach to the market. The CHRO’s role — to develop leaders, attract and grow talent, and create a culture of engaged employees in a dynamic environment – can make or break a company’s ability to meet aggressive performance targets.
Importantly, the required pace of change in a PE-funded company often comes with a leveraged balance sheet and always with a discrete timeline to achieve value creation. This change in ownership requires a sense of urgency, focus, and discipline in all functional areas, including HR. Preferred candidates for this demanding role must be willing to exercise the cultural transformation rapidly with an eye on developing a highly motivated, accountable workforce so high-impact initiatives can yield desired economic improvements. Whereas some may thrive in a faster-paced environment, others may be less effective given the breadth of actions required that affect the entire human resource fabric of the company.
Find Value Accelerators
CHRO Value Accelerator Best Practices
- Strong voice on strategic business issues with a commercial aptitude and proficiency
- Trusted advisor and influencer to executive team and board
- Transformational leadership role model and culture carrier
- Builds executive bench strength and enhances team cohesion
- Drives policies and approaches to engage and grow talent at all levels
- Creates recruiting and branding strategies and tactics to attract top talent at all levels
Required Competencies
In order to successfully fulfill their wide-ranging and increasingly important duties, CHROs must embody many of the same characteristics of all great leaders. While different situations may require different styles to ensure culture fit, we see the following characteristics as common in those who drive the greatest impact.
- Collaborative partner working with CEO and management
- Urgent with results-orientation
- Authentic and self-confident in approach
- High EQ coupled with commercial / business aptitude
- Comfort with ambiguity and shifting priorities
- Executive presence and decorum
- Innovative thinker and willing to disrupt
- Visionary with strategic view of the business
Celebrates & Enhances Culture
Culture drives performance and leadership drives culture. The CHRO is the top “culture carrier” and the most senior executive, other than the CEO, continuously focused on maintaining (and transforming) the firm’s culture in terms of values and behavior. This focus on culture is critical in any company, but it is especially crucial in fast-growing companies that need to recruit and assimilate large numbers of employees to meet customer / market demand and imbue ownership and accountability throughout the organization.
Now more than ever, leadership must foster a culture of inclusion that embraces and rewards the diverse talents of employees. While it is important to celebrate “who you are” as a company and maintain diversity, it is equally important to be disciplined and process-driven regarding employees who are not a good fit and respectfully help them exit the business.
Aligns with Business Economics
Along with culture being critical, the HR leader must also be strategic in thinking about how to support the business in the mission to build world-class teams in each function (and at the management team level). This requires a business-oriented HR executive who knows how to identify the key position holders – high-impact leadership roles that directly affect revenue, profit and productivity.
For example, if the mission of a fast-growth software / SaaS company is dependent on a next-generation platform to annihilate the competition, HR better be focused on building the best engineering team in the world as fast as possible. Likewise, in a multi-site distribution or logistics business, the linkage between talent and profit and cash-flow is quite evident in the field in the ability of regional branch managers to achieve financial objectives. HR needs to know who the high performers are, develop or exit the ones who cannot be developed, and constantly be on the hunt for outside talent that aligns with the organization’s mission.
Instills Change Readiness
During the lifecycle of an investment, PE-sponsored companies almost always enable significant change to increase the velocity of the business and ensure optimum accountability. The pace of change is dictated by the PE sponsor’s investment thesis and corresponding operating plans developed by the management team.
CHROs must build a change-ready organization, with a workforce that is nimble enough to maintain productivity through change and a management team fully committed to financial and strategic objectives. A culture that embraces new ideas and organizational development initiatives is a must. Transparent and direct communication across functions is required. Engagement of employees at all levels should be a constant objective to ensure a culture of ownership and accountability.
Stays Out Front
As the Chief People Officer, it is not enough to be strategic and thoughtful about systems, measurement, and the economics of the business. The CHRO must enjoy being IN the business and make constant and empathetic interaction with all levels of staff – from the board to the management to the factory floor or engineering staff – a priority.
Even with the best systems and processes in place, it is impossible to be credible in the role unless the CHRO practices “servant leadership” and the people in the company see him or her fully engaged in the business and working closely with all functions and employees at all levels. This must be a genuine effort to engage with and get to know the business at all levels. Employees will observe and follow the CHRO who leads by example, just like the CEO and others.
Compensation Architect & Strategist
Few issues are more crucial than the leadership role the CHRO plays in the design of executive compensation plans and programs for the portfolio company that create alignment with value creation objectives. Compensation is a strategic weapon when thoughtfully considered and applied. The manner in which compensation is designed and implemented reflects the culture of the company and is a symbol of the value creation behaviors that are endorsed. Several broad principles apply:
- What is the right mix, balance between cash and equity?
- What other incentives are appropriate beyond monetary ones?
- Who are the key strategic position holders whose success needs to be tied to company performance?
- What behaviors, values, and objectives are paramount?
- How do we instill accountability, transparency, consistency, and ownership?
- Is the plan effective at attracting and retaining key executive talent?
The last point is critical. Key leaders are attracted to a PE-funded company to secure an ownership position and practice their craft as they drive value – to think and act like owners of the business. The CHRO and his or her team need to develop a recruiting machine that “sells” the equity opportunity based on the business plan being applied to achieve investor returns.
Knows HR Technology & Is Data-Driven
In today’s rapidly evolving world of technology, there are incredibly powerful tools available to HR professionals as they seek to better automate internal processes, work with outside service providers, assess potential employees, and more generally automate the “mechanics” of the HR and recruiting process. Specifically, the use of artificial intelligence in hiring, onboarding, learning, and talent management has resulted in increased efficiency, reduced bias in decision-making, and lower operational costs.
The CHRO needs to be a student of these systems working with the head of IT and make sure the company is “state-of-the-art” in its use of technology where the ROI of these systems is warranted. For example, one of the best ways to gauge organizational health is the thoughtful use of targeted survey tools. A CHRO who does not prioritize constant learning to keep pace with the emerging technology landscape will be less effective in the role.
Thoughtful Senior Advisor
While the CHRO must act as a steward to the entire organization, the management teams of PE-funded companies are especially under fire to produce results and meet aggressive performance targets. As a unit, therefore, they must operate like “clockwork” in their execution against the KPIs facing the business.
An accelerated timeline and added pressure dictate trust, transparency, and direct inclusive communication at all times. Every individual on the team overseeing every silo as well as the CEO has a functional “spike” in terms of their interpersonal and professional strengths. The CHRO must engage with the team as a trusted one-on-one and team counselor to break down barriers and ensure optimum performance at a management team level.
CHRO
Perspectives
“There are plenty of HR heads who can deal with the tactical issues related to the workforce, compensation, legal and risk management, and other traditional areas. The ones who drive real impact work closely with the senior team, board, and the field to be sure the organization is focused on scaling and defining culture and understanding the roles that drive real value in the organization. They make sure we are disciplined in recruiting and development to find and cultivate the most valuable and needed talent to execute the thesis.”
– Carrie David, Chief HR Officer, SRS Distribution
“When a PE partner communicates their intent and timeline to sell the company, it creates an imperative for all employees—from the CEO to the frontline—to improve performance. The CEO must share a clear vision, and all decisions should be evaluated relative to the company’s goals, with a willingness to pivot quickly in response to external changes. The CHRO and leadership team must articulate the connection between individual goals and strategic objectives, providing ongoing communication to drive agility and help the entire organization manage change successfully.”
– Peter Capizzi, Chief Human Resources Officer, MSA Security
“As an HR leader within a portfolio company of a PE-backed firm, you’re not just executing tactics—you’re steering talent strategy in lockstep with the business’s evolution. That’s why it’s essential to understand the organization’s short-, medium-, and long-term strategy. Even as priorities shift, a firm grasp of the broader vision empowers you to make bold, calculated human capital decisions. Some of these may be tough in the short term or seem counterintuitive, but when rooted in strategic intent, they become critical inflection points that drive long-term value and competitive advantage through talent.”
– James Briggs, former CHRO for portfolio companies of New Mountain Capital, Madison Dearborn Partners, and Parthenon
“An effective CHRO has the ear of the CEO as well as the Senior Leadership Team (SLT), each trusting that the CHRO has their best interest in mind, which should always align with the best interest of the organization. If there is misalignment, the CHRO will be the first to know, and they must have the courage to drive for alignment or advise the CEO on alternatives if alignment cannot be achieved.
This calls for complete trust between the CHRO and the CEO, which I believe is critical to establish at the very beginning of the relationship. Operating in this manner early on with the CEO and the SLT establishes the CHRO as an honest broker and positions them as a key influencer within their organization.”
– Sylvia Taylor, CHRO, Safe-Guard Products International
Bringing You Value Accelerator CHROs
We’re always connected with the true value creators in the market. Our Private Equity and Human Resources/CHRO consultants deliver impactful executives quickly, allowing you to realize the return on investment you seek from an executive search partner.