Source | LinkedIn : By Dave Ulrich
The Next HR Innovations are Led by Leadership Capital Partners in Private Equity
Written in collaboration with Justin Allen, a Principal with the RBL Group.
We are often asked “What’s next in HR?” Over the years, this has been called HR benchmarking, best practice, state-of-the-art, innovation, transformation, reimagination, future of work, or disruption (the latest buzzword). While the words change, the intent for us is the same: find settings where new HR ideas and practices are being conceived and applied.
In the RBL Institute and through our Strategic HR Academy, we work with 40 to 45 leading companies to explore what’s next in how HR can deliver value to internal stakeholders (employees, line managers, and organization) and external stakeholders (customers, investors, and community) through utilizing talent, leadership, and organization. We have found that most of these leading firms innovate in at least one or two HR practice areas (e.g., analytics, HR digital, HR governance, changing culture, building leadership depth, employee experience). But few innovate in more than those first two areas.
But recently, we have identified a new setting where HR innovation appears to be expanding. In the last 20 years, corporate governance has seen a dramatic shift: the number of publicly traded companies in the U.S. has dropped from about 7,300 to 3,700 (with similar percentage drops in other countries) due in large part to private equity (PE) firms that take companies private and incorporate them into their portfolio.
Today, PE firms have shifted from a “buy and sell” mode to a “buy and transform” approach where they work to improve the operating capabilities of the companies they purchase. This transition means that PE firms’ approaches to talent, leadership, and organization must also change and could be an ideal environment for observing innovation in more than two practice areas of HR.
Increasingly, PE firms are relying on a new job role called leadership capital partner(LCP). We estimate that 20 to 30 percent of all PE firms now have a leadership capital partner (perhaps 50 percent of larger PE firms). Traditionally, individuals in this position might have been search advisors who could source new talent, but today these LCPs are centrally involved in all aspects of private equity and facilitate the changes in talent, leadership, and organization. As we have interviewed over 30 of these individuals, we have not only captured the next phase of private equity success but have envisioned broader implications for the future of HR. One leading LCP said that after 30 years in senior HR roles, he found his work in PE firms the most rewarding of his career because his work had an immediate impact on results, and he described his role as “HR on steroids.”