On PE firms’ minds: keeping young talent

The EY CFO and COO survey panel at PEI's CFOs and COOs Forum on Wednesday reflected an industry focus on retaining talent, especially the millennial generation. 

Human capital issues are high on the priority list for private equity firms, according to the Ernst & Young 2017 Global CFO and COO Survey.
 
The report, presented at Private Equity International's 14th annual CFOs and COOs Forum in New York on Wednesday, included responses from more than 150 private equity fund executives and investors. The survey showed that retaining talent was the most popular strategy for remaining competitive in the future. More than half (51%) of the participants prioritised it over other options, including improving cybersecurity, automating manual processes and data management. 
 
Riverstone Holdings managing director and chief financial officer Thomas Walker echoed that sentiment in the EY panel at the forum. 
 
“If someone has aspirations that we can't accommodate in the future, we bring them up as much as we can,” he said, stressing the importance of providing growth opportunities and keeping employees interested and motivated.
 
The survey showed CFOs are particularly interested in the higher turnover among millennials relative to previous generations. 
 
EY said the term “lifetime employees” is no longer commonly used in the workplace vernacular, with 90 percent of CFOs expecting employees to move onto other organizations within five years. Seven out of 10 survey respondents said they expect millennials to stay at their respective firms for two to five years, while just 8 percent said more than five years. 
 
In an industry that emphasises tenure of founders and aggregate investment team experience, the job-hopping done by junior talent may be a concern for many firms. 
 
But to Thomas Mayrhofer, managing director and chief financial officer of the corporate private equity division at The Carlyle Group, this is not problematic, but rather something that should be embraced. 
 
“The private equity industry is still founder-led and founder-run, with an idea of valuing a long-term employee who knows the carry waterfall for an older fund,” Mayrhofer said at the conference. “But that doesn't happen at big corporations, like General Electric; they wouldn't keep a long-term employee just because they knew about that one sale a long time ago. Turnover could make room for disruption and for innovation.”
 
Still, CFOs are thinking of ways to retain millennials at their firms.
 
According to the EY survey, 99 percent of respondents said they would keep younger professionals by providing them with professional growth opportunities. The participants, who could choose multiple responses, also indicated technical skill development and transparent communication as favored approaches for retaining millennial talent.