By: Colin Allodi, SVP, Institutional Sales
General Partners (GP) in the private markets space are getting it from all sides these days – inflation driving up operating costs, higher interest rates, and, to top it off, a talent shortage that makes it hard to attract and keep people to meet growth aspirations. How are COOs at private market firms dealing with these pressures?
I took part in a panel discussion at the 2022 Private Markets Operational Leaders US Summit, along with speakers from the GP side, to tackle this question. While the conversation was wide ranging, a few consistent themes emerged.
Invest in strategic partnerships
The panel discussed how extremely important this is. Strategic partnerships often include vendors or service providers whose capabilities augment yours, but they have a big stake in your success, and you want to see them succeed as well. It’s important to periodically evaluate these relationships with your team and identify those that are truly delivering value to your business. This is not an area where the panel wanted to pinch pennies but rather suggested leaning into those relationships that help control costs and return a profit.
Talent: It’s a seller’s market
On the talent front, it’s no secret that it’s been a job seeker’s market for the past couple of years, especially with fewer young people choosing finance as their career path. However, we’re starting to see a little bit of leveling off now, with job cuts in the tech sector. But the dynamic has definitely changed. Employees expect more from their employers – not just more money, but more flexibility and recognition that they have lives outside of work and that their well-being matters. And as an employer, you still have a high bar for talent. So, you have to be more competitive, first to get people into those open positions, and then to be sure your incentives are consistently aligned as their careers evolve. The longer someone stays with you, the more valuable that person becomes to your firm.
There is no single “right” way to attract talent or shape your culture that makes people want to stay. Firms have to figure those things out for themselves. What is consistent, though, is that people want to know the work they’re doing is contributing to the success of the firm, and that in turn will enable them to grow and improve. We see technology playing a critical role, especially with younger people, in alleviating some of the mundane tasks that tend to fall on more junior staff. It’s important to equip people with modern tools that help them be more effective, which makes them feel better about how they’re spending their time.
Align on outsourcing success criteria
A third topic our panel tackled is technology outsourcing – clearly a continuing trend. Again, outsourcing is less about saving money than adding value. In the context of the talent shortage, it’s also about leveraging outside expertise that you may not have internally and being able to scale or de-scale quickly as business needs change. Before engaging, you have to look at why you’re outsourcing, the potential time savings and efficiencies, and whether the whole new vendor relationship makes sense for the business. Does it make sense to build something in-house, or is it a better use of dollars and time to leverage a solution someone else has already invested in? And you have to be crystal clear with the provider about your expectations and make sure you are both on the same page about what success looks like.
We are passionate about regularly participating in industry events like this panel to share our insights and best practices and to learn and connect with firms to help them leverage technology to work more efficiently and effectively. The realization is that cost and staffing pressures are significant challenges in today’s environment. Reducing the amount of “non-core and non-value-adding” tasks is one way to improve employee morale and retention. I invite you to check out our independent research on the productivity of BD and IR professionals in alternative investments to see how to operate more efficiently and free up time to focus on bringing in new business and building strong relationships in these challenging times.