By Dan Grosh – Managing Partner, San Francisco –
Within the private equity and venture capital community, the value of having an internal talent function to support a portfolio of companies has far more upside than downside. On its face, it clearly eliminates the need for each Partner to manage the human capital process. Having a point person driving the human capital efforts within the firm not only gives a portfolio a leg up but also allows the firm to focus on strategy and investment opportunities.
Having been asked many times about the need for a head of talent within private equity and venture firms, it’s clear to me that the position holds its own ground for the following reasons:
◾Builds an ongoing bench of high quality executives
By including a talent function within an investment firm, it is possible to stay up to par on top talent in the industry. Creating a constant flow of discussions with top tier executives can save time and increase agility for portfolio companies in targeting the best level of talent.
◾Creates a robust tracking mechanism in one central repository
Having a dedicated human capital expert on hand can result in building a powerful database with not only class “A” talent but also a mapping of external vendors, consultants, and service providers. The human capital partner is responsible for managing and keeping this updated at all times.
◾Becomes a value-add for a portfolio company
The head of talent for an investment firm can serve as an interim staffing manager / head of talent when needed. This function can help assess organizational needs, provide coaching and insight, and contribute market data / perspectives regarding the talent landscape. The head of talent can also assist in sourcing high quality deals. While building a bench, the human capital executive is very close to strong entrepreneurs building a business. S/he can provide assistance on due diligence / back channel referencing on teams in which the firm is potentially interested in investing in their business and on candidates potentially joining the business.
◾Keeps a keen eye on the best external vendors
When the need for a search firm arises, the talent executive can easily assess the best external vendors, their recent work history, and the ability to execute quickly.
◾Provides thought leadership for the firm
Having a head of talent can not only keep the firm in alignment with hiring trends, but it also provides a thought leadership perspective that can attract new deals and keep the company top of mind.
As a human capital expert, I find there is nothing more important than making sure the right team is in place to execute on the vision. As a comparable example, why are sports franchises consistently great or awful? Usually, it boils down to simple logic – terrific or poor leadership / ownership and perfect execution / lack of execution. Not having the Joe Montana-like human capital “quarterback” to manage and drive the offense seems counterintuitive to me.
So with all these “pros” in having an internal talent executive, where does that leave external recruiters?
The simple answer is that we are irreplaceable. There is no way one single point of contact can manage more than a few searches at a time while managing all of the additional responsibilities attached. Even in a firm like Andreessen Horowitz (where they have a unique model with several talent partners) has more than their share of searches that each talent partner manages that no single point of contact could handle. In many cases, the human capital partner typically does not get involved in the day to day recruiting on every search and has firms like us drive the searches because of their significant and additional responsibility above.
In addition, it can be critically important for a company to separate itself from the sourcing process due to potential non-solicitation issues and have the external search partner serve as the bridge to ensure the best executive candidate targets are being sourced. Finally, a competent search partner will bring their expertise, exclusive attention, knowledge and value-added perspective that is critically important to every successful search project and outcome. Most times, an external perspective is absolutely critical like having Bain or McKinsey involved in corporate strategy & advancement. There are countless examples of the critical value of outside consulting firms in multiple industries. As much as we hear about external executive search firms waning, the evidence from a variety of publications show the exact opposite. The good ones are here to stay, are growing and are more impactful than ever.