Every quarter our team analyzes the projects we work on with our 500+ PE firm clients to get a bird’s eye view of the market. We recently compiled our Q1 2023 findings into our BluWave Insights Report. You can request your copy and our client coverage team will be in touch.
Key findings from Q1 ’23 include:
Value creation activity is at an all-time high, matching Q1 2022.
Human capital remains PE’s primary area of focus at 45% of all Q1 activity, also matching an all-time high.
Technology remains a priority at 11% of all Q1 PE activity.
Employee management softwares – or human capital management systems – are a suite of applications that helps businesses automate and streamline their HR processes, from recruitment to payroll.
Streamlined automation. Embrace efficiency with modern employee management software that automates labor-intensive tasks such as payroll processing, benefits administration and performance reviews, saving time and resources while improving accuracy.
Seamless communication. Foster collaboration and engagement with robust communication channels offered by employee management software, including instant messaging, email and video conferencing, enabling smooth communication between employees and managers.
Efficient performance tracking. Stay on top of employee performance with comprehensive tracking features, including goal setting, performance reviews and feedback mechanisms, allowing managers to objectively evaluate performance and provide targeted support.
Effortless time-off management. Simplify time-off management with user-friendly features such as leave requests, approvals and tracking, ensuring employees take the necessary time off while preventing staffing issues.
Streamlined onboarding. Expedite the onboarding process with employee management software that provides tools such as employee profiles, training materials and onboarding checklists, helping new hires quickly adapt to their roles.
Effective benefits administration. Simplify benefits administration with features such as benefit enrollment, eligibility tracking and claims processing, ensuring employees have access to the benefits they need without administrative hassle.
Regulatory compliance made easy. Ensure compliance with labor laws and regulations with employee management software that offers features such as time tracking, payroll processing and leave management, minimizing the risk of fines and penalties.
Data-driven decision making. Empower informed decision making with employee management software that provides reporting, analytics and forecasting tools, enabling data-driven insights for optimizing operations.
Improved employee satisfaction. Boost employee satisfaction and engagement with features such as surveys, feedback and recognition offered by employee management software, resulting in a more motivated and productive workforce.
Enhanced talent management. Attract and retain top talent with user-friendly interfaces, mobile apps and social media integration offered by employee management software, ensuring a skilled and engaged workforce.
Efficient time tracking. Effectively manage employee hours, attendance, and overtime with accurate time tracking features, improving workforce management and payroll accuracy.
Streamlined employee relations. Foster a positive work environment with employee management software that offers features for tracking and managing employee relations, such as conflict resolution, performance improvement plans and employee feedback.
Reduced litigation risk. Mitigate litigation risks with employee management software that ensures compliance with labor laws, manages employee records and documentation and provides a clear audit trail of employee interactions, reducing legal exposure and protecting the business from potential lawsuits.
Features: The first step is to identify the features that are important to your company. Do you need a software that can handle payroll, benefits, recruiting and performance management? Or do you need a more specialized solution?
Scalability: As your company grows, you will need a software that can scale with you. Make sure to choose a program that can accommodate your future needs.
Ease of use: Employee management software can be complex, so it is important to choose a software that is easy to use. Look for one with a user-friendly interface and that is customizable to your company’s needs.
Security: Employee management software can contain sensitive data, so it is important to choose a system that is secure. Make sure to choose a software that has been certified by a reputable security organization.
Cost: Employee management software can be expensive, so it is important have your budget in mind. Make sure to compare prices and features before making a decision.
Situational Capabilities: You may need a software than can cater to your specific situation. For example, perhaps they need experience with unionized businesses. Be up front about that as you send out your RFPs and make your evaluations.
The “best” option is going to depend on your company, industry and exact situation. While we can’t choose one “best” software for you, here are some of the more popular cloud-based HCM systems (in no particular order) and a brief overview of each:
Workday is a human capital management software suite that provides a variety of features for managing employees, including payroll, benefits, recruiting and performance management.
SAP SuccessFactors is another HCM system suite that offers a wide range of features for managing employees, including recruiting, onboarding, performance management and compensation.
Oracle HCM Cloud is a suite that provides a variety of features for managing employees, including payroll, benefits, recruiting and performance management.
PeopleFluent is a software that offers a wide range of features for managing employees, including recruiting, onboarding, performance management and compensation.
Ultimate Software is a cloud-based HCM that provides a variety of features for managing employees, including payroll, benefits, recruiting and performance management.
Monday.com is a little different than the others in that its more commonly used for project management than tracking employee data. (Though you can use it for that, too.) It has a user-friendly interface and can be customized to your company’s needs. It’s also a cost-effective solution for businesses that need a cloud-based HCM system.
Are you ready to upgrade your HCM system, or perhaps implement one for the first time?
Private and public companies as well as private equity firms and their portfolio companies can all reap the benefits of choosing the right employee management softwares.
Fortunately, you’re not in this alone. The Business Builders’ Network is full of experts who have helped companies like yours with industry specific-decisions about their human capital management software.
If you’re ready to take the next step and want an exact-fit third party to accompany you through the process, from start to finish, contact our research and operations team.
We already know the best possible partners for your niche-specific needs, and we’ll connect you in less than 24 hours after our initial scoping call.
Service Provider Type: Business Process Outsourcing – Offshoring
Industry: Human Capital
Need
Business Process Outsourcing – Offshoring
PE firm sought offshore assistance with manual tasks to increase efficiency, lower costs and focus on higher order.
Challenge
Finding an offshore partner to free up resources
The PE firm sought an entity that could get them as close as possible to a turnkey finished product for several daily manual tasks performed by one of their human-capital focused portcos. Many of their work streams were labor-intensive, and the right offshoring partner would help them free up those resources to focus on higher order while lowering costs.
How BluWave Helped
The Business Builders’ Network
After the initial scoping call to understand the PE firm’s specific needs, we reached to a pair of exact-fit resources that we knew would be great matches for this project. The firm evaluated them both and engaged with a BluWave-grade service provider that has completed multiple successful projects for other PE firms.
Result
Lowered operation costs and freed up resources
We connected the private equity firm to a trusted, proven service provider that specializes in offshoring. They tapped into their network in high-growth emerging cities, allowing the firm to lower its operations costs and connect with tenured expertise in a less competitive environment. The manual processes were offshored allowing the PE firm to reinvest the time and money it saved its portco.
How do you identify top C-suite talent? And what’s the best way to improve culture and retention for existing employees?
These were among the most popular topics in the latest BluWave-hosted Human Capital forum March 9.
Megan Ryan Kanefsky of J.F. Lehman & Company, Kristin Brown Patrick of New State Capital Partners and Abby Wilson of Transom Capital Group joined BluWave as panelists for the virtual event.
The panelists discussed the importance of creating scorecard assessments for all executive positions to test technical aptitude.
Incorporating objective criteria, such as personality assessments, can also be helpful. For example, when hiring a CFO, the process might involve screening for cultural fit, sending an assessment that models financial statements with errors and conducting behavioral interviews with key stakeholders.
To ensure success, it’s essential to communicate effectively with candidates and get alignment on what you’re looking for from the onset. Putting in the work upfront can help build a high-performing executive team that drives company growth and success.
Hiring deeper within the organization – beyond the C-suite – also came up. The panelists said that one important aspect of the hiring process is using data to evaluate talent.
Objective criteria like cognitive abilities and behavioral fit for the role can help companies focus on hiring for aptitude and growth potential rather than just credentials. Encouraging a mindset of thinking outside the box can also help identify junior talent with a strong aptitude to learn and grow.
While it may take longer to find smarter and better hires, these candidates are more likely to stay and contribute to the growth and success of the company.
Improving Retention and Culture
Creating a positive and engaging work culture – vital to retaining top talent – was the third and final topic the panelists discussed.
One way to encourage employee buy-in and create a sense of ownership is to offer profit interests to all employees, not just top executives. This can motivate team members as they feel invested in the success of the company. Leadership programs for middle managers and director-level employees can also have a significant impact on retention rates.
Regular standing events create a sense of loyalty to the organization, too. For example, weekly lunches or bi-weekly events can encourage collaboration and give different levels of the organization opportunities to interact. This can foster a sense of community and help create a more positive work environment.
Simple acts of recognition and gratitude can also go a long way toward building a more positive culture, the panelists said.
Service Provider Type: Interim Executive with Manufacturing Expertise
Industry: Manufacturing – Glass
Need
Interim CEO
Struggling to get the right CEO in place for its portco, the PE firm needed a stopgap while it prepared an internal candidate to take over as its long-term chief executive officer.
Challenge
Underperforming Portco
A glass company with a great product line couldn’t keep up with consumer demand. After years of underperformance throughout the holding period, the PE firm was underwater on its investment. Having broken covenants with its bank while battling labor and equipment issues, the team was desperate for a quick turnaround.
They identified a strong internal candidate to take over in the long run, but he needed some guidance to grow into the role. To help him get up to speed, they needed an interim CEO who could serve as a mentor while refining operations at multiple plants across the U.S.
How BluWave Helped
The Business Builders’ Network
The BluWave Vetted™ Business Builders’ Network features a deep bench of hand-selected interim executives, ready to step into a new role on short notice. We immediately contacted the best and brightest leadership talent in the manufacturing industry from within our network and presented a short list of candidates that same week.
The team’s top choice was identified just one day after the initial scoping call, and the interim CEO stepped into the role shortly after. We maintained contact with both the temporary executive as well as the PE firm throughout the entire engagement – and beyond – to ensure the relationship was fruitful.
Result
The veteran executive righted the ship during a six-month stint, buying the PE firm time to name a full-time CEO
The career interim executive hit the ground running and brought stability to the portco. In the meantime, the private equity firm identified and groomed its permanent replacement from within.
The interim executive we provided from our PE-grade network stepped in and mentored the presumptive leader to prepare them to take the reins. At the end of the six-month engagement, the transition was complete and the full-time CEO remains in place to this day as the company continues to grow. Now the PE firm can focus on winding down its holding period and preparing the manufacturing company for sale.
When a company faces a financial crisis, an interim chief financial officer can make all the difference in a successful turnaround.
Whether going through a restructuring, facing bankruptcy or other challenging financial situations, an experienced financial leader is essential.
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Situations for an Interim CFO
A financial crisis can be due to something within a company, external economic forces, or both.
Poorly responding to a distressing financial situation can destroy a business. A capable interim CFO, however, will know how to navigate the following scenarios.
Chapter 11 bankruptcy, though, means a company is still viable but needs help relieving some of its debt.
While an interim CFO would seldom take on a chapter 7 bankruptcy, it’s common for them to step in and help a company try to avoid chapter 11 bankruptcy. If it’s not avoidable, a temporary chief financial officer can also help navigate the situation.
“A very good interim CFO can be a lot of help because they come in and they look at, ‘What are the things between gross profit and net earnings that are negatively impacting the business?’” BluWave controller Justin Scott says.
Cost-saving measures could include lowering headcount, cutting advertising costs or negotiating with creditors, which we’ll discuss more below.
Restructuring
While most restructuring situations are tied to bankruptcies, there are exceptions. Here are some of the more common ones.
Carveouts
An interim CFO who can adeptly perform carve-out tasks is key for organizations looking to sell off part of their company. That can mean getting their hands dirty setting up general ledger architecture or determining which employees to include in the sale.
“Let’s say 25 percent of the existing team is going with the carve-out, then I’ve got to decide ‘What’s the 25%? How are those processes going to work?’” Scott says. “Where you typically see the carve-out CFO come in is because they don’t want all of those activities to take away from the core business that the existing CFO is already managing.”
An acquisition, of course, is the opposite situation. The finance executive must determine how to integrate multiple teams in the same company.
“You likely have multiple sets of books. You have multiple systems. None of them talk to each other,” Scott says. “Essentially, you’re running parallel systems or parallel processes for everything. And then you have to manually consolidate everything and that’s just no fun.”
Ginessa Ross, who is often the first point of contact for interim CFOs BluWave works with, says lots of clients have been emphasizing M&A skills recently.
“All sides of it, whether it be due diligence, post-merger integration or prep for sale – having M&A experience, especially in private equity, is key,” she says.
Cost Savings
A turnaround CFO may be sought when accounts payable get out of control.
If the internal team has become bloated, they’re likely to partner with someone in human resources to reorganize the company more efficiently.
“It’s not typically just finance here. It’s typically that a new technology has been implemented that’s changed the field and headcount needs to be reduced,” Scott says. “How do we eliminate or mitigate the overhead expense of the SG&A of what’s happening today?”
They may also cut marketing costs or improve operations to find savings. This can be done by spending less on advertising, implementing automation tools or canceling automated subscriptions, for example.
Hostile Takeover
Although unusual, there are times when a temporary finance executive is brought in for a hostile takeover.
“It is possible to go to an interim CFO as a stopgap,” Scott says. “But it’s not a likely scenario.”
More often, the company executing the takeover will already have a CFO in place.
What skills does an interim CFO need in a time of crisis? Accounting and finance, of course, are fundamental.
“You have to know the full revenue cycle cradle to grave,” Scott says, adding that strong management is also a key trait.
There are other things, though, that are particularly important for a chief financial officer in financially distressed situations.
Internal Communication
When managing a company’s finance team, the interim CFO must be able to communicate their plan of action. Since they’re typically in the role for around six months, they don’t have as much time to win trust and build unity.
Focusing the early days on getting to know the team helps with buy-in for the duration of the project. One component of this is alleviating fears of the unknown.
“The first day, I think, is talking to as many people as possible in the company, on the finance team, and reassuring them that things are going to get better,” says one long-time interim CFO from our network of experts.
A temporary finance executive must also be able to communicate with his or her peers and superiors. Not only do they sit in the C-suite, but they may be a direct line to a private equity firm that has a lot at stake.
“They have to be able to build credibility going both directions quickly if they’re going to get anything done,” Scott says.
Beyond providing clarity for coworkers, a chief financial officer must also be skilled at working with clients, creditors, vendors and other outside entities.
If a company is in danger of filing for bankruptcy, the interim CFO will likely negotiate with creditors to lower their debts.
They may also ask clients to move up their timeline for accounts receivable so the organization can have more cash sooner.
In either case, being able to work well with others is paramount.
“The situations where financial executives most often fail to reach an agreement are when they don’t have any people skills, or they don’t truly want a result,” Scott says. “You have to be able to bend and give a little bit on some of these things just like in any negotiation.”
Before taking a company’s financial reins in the midst of a crisis, an interim CFO should understand if the firm is planning an exit, and if so, what the strategy is. That allows the company to get the maximum benefit out of its new executive resource.
“Bringing in somebody from the outside allows you to access a broader set of skills and brings a fresh perspective,” BluWave managing director Houston Slatton says.
Here are some differences between prepping to sell the entire company vs. just a few assets.
Sell the Entity
If someone is brought on to prep for the sale of an entire company, their job is to get it in the best shape possible for the buyer.
Not only will this make it a more attractive purchase, but the seller will extract more value, too. This process should be planned for months, if not years in advance, when possible.
The interim chief finance officer brought on in this situation should have experience improving operations, cutting costs, increasing accountability and more. They should also be well-versed in evaluating and working with potential buyers and closing the transaction.
Even when parts of a company are being sold, as opposed to the entire organization, many of the same skills apply.
In this scenario, though, the company remains intact, and employees are not typically part of the package.
The right executive will help an organization receive a large return for those assets, boosting cash flow.
Each interim CFO in the BluWave network has been vetted and reference-checked before we ever put them on our roster.
That way, when companies in financial distress reach out, we can provide two or three exact-fit solutions in less than one business day. Whether your company is in the nation’s capital, Atlanta, our hometown of Music City, or any other major city, we have the resources you need.
This attention to detail and our private-equity speed turnaround give organizations a greater chance of getting back on track financially.
Every quarter we gather human capital professionals from private equity firms to discuss current industry topics and to offer peers the chance to gather, share information, and decompress with one another. In our most recent event, we gathered to discuss top trends in 2022 and top areas of focus for 2023.
These forums are for human capital professionals at private equity firms only and follow Chatham House Rules, so listed below are high-level takeaways only. If you are a human capital professional in private equity and interested in joining fellow human capital professionals at our next PE Human Capital Forum, RSVP here.
Top Trends in 2022
Human capital professionals in PE are playing a wide variety of roles within PE firms and for portfolio companies:
The dynamic economy and labor market resulted in constantly shifting priorities throughout the year which has led to human capital professionals having to lead varying initiatives from retention & recruiting to organizational design.
Recruiting and retention:
Certain sectors are experiencing higher turnover than others and HR leaders have been charged with identifying root causes for turnover and then offering solutions.
PE human capital professionals have been spending time helping portcos clearly portray their brands to help in recruiting efforts.
Leadership and talent upgrading:
In portcos where turnover stabilized, PE human capital leaders have been able to spend more time on leadership and talent assessment.
Proactive PE firms are using market conditions as an opportunity to upgrade talent for the long term, including bringing in wartime generals in place of peacetime ministers. Interim executives and specialized recruiters have been common tools to execute these initiatives.
2023 Top Areas of Focus
Quantifying and communicating human capital initiatives:
Human capital leaders are using data, key performance metrics, and tools like scorecards to illustrate the value they are adding and/or progress being made within the portfolio.
Pay transparency:
Upcoming pay transparency rules are expected to have a meaningful impact on how companies recruit employees across the country. PE human capital professionals are getting up to speed on these new rules and making sure their portfolio companies are ready to comply.
Leadership to navigate tough economic conditions:
PE firm human capital professionals are supporting the evaluation of organizations to make sure they have the right players in the right seats, particularly with senior executives and one level down. They are encouraging portco leaders to be prepared to upgrade talent where needed and/or equip teams with leadership coaching to enhance skills if possible.
We thoroughly enjoyed these thought-provoking conversations that occurred during this recent gathering of PE human capital professionals. If we can be of assistance, please let us know.
Additionally, you may be interested in checking out some of our human capital-specific resources, which can be found here:
Firm had immediate need for interim finance recruiting firm with SaaS experience
A PE partner came to us with a vital need for a recruiting firm to place an interim controller in their software portco. The recent departure of their previous controller and senior accountant left the PE firm in urgent need of an interim controller who could come in, take the reins, and assess the function while the PE firm searched for a fulltime hire. With the task beyond the internal recruiter’s reach, the firm was seeking a recruiting service that could identify interim candidates who had controller experience in other PE-backed portcos, familiarity with the company’s systems, relevant industry experience, the ability to quickly ramp up in the role, and the potential to be a rent to own hire.
BluWave identified top recruiting firms from pre-vetted network
Leveraging our founder’s 20 years in private equity and our experience working on thousands of projects with 500+ PE firms, we have extensive frameworks for assessing PE-grade recruiting needs. BluWave utilizes technology, data, and human ingenuity to pre-map, assess, monitor, and maintain deep pools of recruiters that uniquely meet the private equity standard. We interviewed the PE firm to understand their specific key criteria, and then connected the client with the select pre-vetted recruiters from our invitation-only Intelligent Network that fit their exacting needs.
Client quickly sourced the needed controller thanks to the recruiter BluWave provided
The day after the initial scoping call, the PE firm and portfolio company were introduced to a PE-grade recruiting firm that specialized in finance and accounting with experience recruiting for SaaS businesses. The PE firm engaged the provider and was able to quickly source a controller with relevant experience for the SaaS portco.
