Customer Type: PE Firms

The COVID-19 pandemic won’t last forever, and companies need to be thinking about how to best position themselves to not only maintain their operations, but also seize upon opportunities and prepare for an uncertain future. This means they’ll have to be agile, getting the right people with the right skills at the right time.  

Our economy is more dependent on expertise than ever before – a fact that’s even clearer amid this crisis. A 2019 study conducted by the Society for Human Resource Management found that 83 percent of hiring managers “had trouble recruiting suitable candidates,” 75 percent of whom attributed this problem to a skills shortage in the workforce.  

The recovery from COVID-19 is going to require a lot of innovative thinking, which means contributions from a broad range of experts in many different fields. But expertise is scarce – especially for companies with limited resources. Experts are always in high demand, even more so when companies begin rebuilding after a shock like COVID-19. Companies have little margin for error and they’re taking a hard look at their processes and personnel. That’s why we’ll soon see a spike in the need for on-demand expertise across a wide range of disciplines. 

Here are a few strategies for finding experts and making the most of their skills. 

Know what you’re looking for.
First, your business needs to take the time to thoughtfully define what it needs. For each role, systematically build scorecards outlining what expertise is required for each initiative. This scorecard should measure functional experience, industry experience, budget, values, and the ability to learn and change. For example, if a food manufacturing company is hiring an interim CFO, a candidate with years of manufacturing experience is not enough. The company should look for a candidate who has worked in the food industry, and who has a track record of successfully managing crises and other fluid situations.  

Know where to look.
To find experts like this, you could start by canvassing your personal and professional networks with a specific “ask,” and be specific about your key criteria, timeframe, and budget. These constraints and goals will guide which kind of expert you’re looking for. In some cases, you want someone who can mobilize teams rapidly or manage a fast-moving crisis. In others (some forms of product development, for instance), you want someone who’s more deliberate and meticulous.  

Use intelligent networks.
Intelligent expertise networks are only going to become more important in the coming years as the need for on-demand skills jumps, availability becomes scarce, and margins for error decline. Naturally, a firm like BluWave with deep industry relationships, proprietary datasets, and pre-vetted networks of private equity-grade resources is going to yield faster, more optimal results.  

Explore the alternative workforce.
According to a 2019 report from Deloitte, companies are leveraging alternative workers to address their expertise needs across a wide array of positions. Traditionally, most companies use the alternative workforce for highly specialized technical needs like I.T. However, the employment of alternative workers is rapidly spreading to other areas like sales, marketing, finance, and operations.  

Focus on integrating alternative workers and developing their skills.
Despite the surging demand for alternative workers, only 8 percent of companies report that they have “established processes to manage and develop alternative workforce sources.” The alternative workforce offers access to a growing and sophisticated talent pool, but employers need to develop the resources necessary to successfully draw upon this pool.  

Companies need to think of the on-demand alternative workforce just like they think about their full-time workforce. Define what is necessary to perform well in each role. Recruit candidates who have the specific expertise you require. Hold alternative workers and their managers accountable for results. At the end of the contract, both the employer and the alternative worker should evaluate whether a longer term, full-time relationship would be mutually beneficial.  

The economy is only becoming more interconnected and complex, which makes expertise vital. That’s why companies have to understand what expertise means to them, where it can be found, and how to use their knowledge and talent as effectively as possible.  

A version of this post originally appeared as part of the Forbes Business Council.

When I left my partner position at a PE fund to start BluWave, I sought an operating framework to help us build the company in an agile and customer-centric way. I embraced a model conceived by Air Force Colonel John Boyd called the OODA Loop (Observe, Orient, Decide, Act). This framework has been extremely helpful as we’ve grown to serving more than 350 PE funds in a short period of time. Now more than ever, we have found it to be invaluable as we navigate the uncertain world that has emerged since COVID arrived. Here’s how you can use the OODA loop in your business: 

Observe:
Get actionable data. One relatively inexpensive approach to gathering the right information is the use of a PE-grade voice of the customer firm to actively talk with your customers. As the economy reopens, ask your customers about the progress of their recovery and what products you should lead with. It’s amazing what customers will tell you if you ask. It’s also crucial to clean your data – we’re equipping portcos with interim data-oriented financial planning and analysis teams that can conduct a sprint in order to make data actionable. 

Orient:
Synthesize your observations. Many portcos we support are using PE market due diligence groups to assess competitive landscapes and propose potential courses of action. This is a way to repurpose an existing tool to improve probabilities of success and ROI. We’re also helping a lot of companies rapidly deploy data integration, visualization, and analytical resources to make informed decisions. If you haven’t used these resources yet, now is the time.  

Decide:
This is up to you and your team. The only advice I have here is to get buy-in from your team, as well as your board (for the bigger stuff). This is also a great time to question sacred cows, take a close look at SKUs, make your operations more efficient, etc. Never waste a crisis. 

Act:
It’s time to get going. After collecting hard data, forming conclusions about it, and making decisions with your team, now is the time to make a move. This is where it’s essential to be as adaptable as possible – the road back to Rome is not going to be straight. Be as just–in–time with your resources as possible.  It’s a great time to start using variable resources (aka the “alternative workforce”) to get things done more efficiently and effectively. 

Right after you act, immediately begin the OODA loop again. The most successful companies will be the ones that are agile and diligent during this chaotic and unpredictable time.

Although states and businesses are beginning to reopen amid progress in the fight against COVID-19, the economic fallout has been devastating. Over the past nine weeks, almost 40 million Americans have filed for unemployment while the unemployment rate reached almost 15 percent in April – a number that has steadily increased since then. The private equity industry plays a substantial role in the U.S. Economy.  This raises the question: How is the PE industry equipped to support an economic recovery after such a massive shock?

One way to answer this question is to take a look at how PE-backed companies performed during the global recession in the late 2000s. A 2017 paper published by the National Bureau of Economic Research found that PE-backed companies were more resilient and rebounded more quickly than their non-PE-backed peers during the crisis, which offers hope for our economy today. Here are the top takeaways from that report:

1. During the last Great Recession, private equity backed companies were able to make greater investments supporting their recovery than non-PE-backed companies. Their average quarterly business investment volume was between 5 and 6 percent greater, an effect that’s “not only statistically significant, but also large in economic magnitude.” PE-backed companies maintained this higher level of investment after the crisis.
2. PE-backed companies had access to more debt and equity capital than their non-backed peers, by 4 and 2 percentage points, respectively. Meanwhile, the “cost of debt, measured by interest expense over total debt, was relatively lower for PE-backed companies during the crisis.” The researchers partly attribute these observations to the fact that private equity firms have strong relationships with lending institutions, which gives them more access to credit. PE investment also “did not lead to a low quality or excessively risky projects.”
3. PE-backed companies that were more likely to face financial constraints during the recession (as indicated by factors such as their dependence on outside financing and their “pre-crisis leverage”) were especially likely to benefit from PE investment. Overall, the researchers write, “Private equity firms alleviated financing constraints of portfolio companies during the financial crisis, allowing them to invest more when credit markets were frozen and economic uncertainty high.”
4. PE-backed companies saw “greater growth in their stock of assets in the years after the crisis” and actually increased market share during the recession: “In the crisis period,” the researchers write, “PE-backed companies experienced an 8 percent increase in market share relative to the control group.”
5. PE-backed companies were comparatively seen as more attractive businesses by would be suitors after the recession.  The study found PE-backed companies were 30 percent more likely to be successfully acquired in the post-crisis period. Moreover,

At BluWave, we are already starting to see history repeat itself.  Our clients are moving at a rapid pace in support of the resurgence of their portfolio companies.  We are witnessing each of the elements of the above occurring in real time once again.  Moreover, we are seeing innovative applications of technology and business processes that we’ve never observed before.

While no two recessions are the same, the report suggests that PE-backed companies have several advantages as we navigate another severe economic downturn.  Private equity backed companies will have greater access to capital (at a lower cost) which will allow them to strategically invest more than their non-PE-backed peers and in turn support a faster economic recovery in the United States.