Operating Professional Emerges as the Fastest-Growing Role in U.S. Private Equity Industry, According to New Report from Heidrick & Struggles
- CFO of portfolio operations and head of talent are among the two fastest-growing specialist roles in private equity
- Private equity firms favor candidates with backgrounds in consulting, operations with P&L experience and previous exposure to private equity
Oct 22, 2019
CHICAGO, Oct. 22, 2019 /PRNewswire/ -- Heidrick & Struggles (NASDAQ: HSII), a premier provider of executive search, leadership assessment and development, organization and team effectiveness, and culture shaping services globally, today announced the results of its 2019 North American Private Equity Operating Professional Compensation Survey. The survey of North American operating professionals provides an in-depth look at major hiring trends and compensation data among operating executives who are tasked with driving value and growth for portfolio companies.
As measured by deal activity in 2018, the U.S. private equity market closed a record 4,828 deals worth a combined $713 billion, according to Pitchbook data. The data also shows there has been a sharp decline in fundraising, signifying that firms are likely more focused on investing the capital raised in previous years. As a result, more private equity firms are now tapping operating professionals to help portfolio companies reach their full operating potential.
"It's an interesting time for private equity and the most competitive and active market we have seen in the past two decades. As operational issues and value creation become increasingly complex, general partners are hiring operating executives at a record rate to create value and differentiate themselves in the marketplace," said Jonathan Goldstein, Regional Managing Partner of Heidrick & Struggles' Private Equity Practice in the Americas. "The operating executives who can bring the specific skills and expertise required to meet these challenges in the market will continue to be in demand, and their compensation will reflect it."
According to Heidrick & Struggles' 2019 North American Private Equity Operating Professional Compensation Survey, U.S. private equity firms are becoming more sophisticated and are generating record demand for operating specialists with the skills and experience to actively manage their portfolio companies.
Private equity firms are now hiring generalists, industry specialists and functional specialists to build out their operating professional teams:
- Two of the fastest-growing specialist roles are the CFO of portfolio operations and head of talent, given the expanding range of required skills and need to attract and retain talent.
- More than half of operating executive candidates have general functional expertise (59%), followed by functional expertise in finance (11%).
- Additionally, candidates most often have a generalist industry focus (37%) or focus on the technology/software (19%) and industrial sectors (15%).
Firms also favor operating professionals with certain kinds of experience, from mid-level to the most senior ranks:
- Successful candidates typically have backgrounds in consulting, operational experience (including P&L responsibility) and exposure to private equity, either at a portfolio company or as a former operating partner.
- Nearly one-third (31%) of respondents previously held the title of CEO, followed by management consultant (19%) and operating executive (18%).
- In 2018, 87% of operating partner hires had no prior connection to the investment firms they joined.
Operating professionals received strong base salaries and bonuses in 2018:
- Nearly half (46%) of operating professionals reported that their base salaries went up in 2018, roughly the same percentage as in 2017.
- Thirty-two percent of respondents who received base salary increases saw an increase of more than $50,000 in 2018.
- Similarly, for bonuses, nearly half (48%) of respondents reported higher bonuses in 2018, slightly more than in 2017.
- Forty-seven percent of respondents who reported bonus increases saw an increase of $50,000 or more in 2018.
"Private equity firms are now focused on building out their operating professional groups across all levels, which is something we have never seen before. Most firms prefer a combination of operational and P&L experience, ideally at a PE-backed company, along with previous consulting experience," said Goldstein. "Sometimes we are helping firms find a generalist, but many times the successful candidate will have functional or industry expertise."
Heidrick & Struggles' 2019 North American Private Equity Operating Professional Compensation Survey asked 217 respondents to provide compensation data from 2016, 2017 and 2018. All data is self-reported by private equity operating professionals and has been aggregated to evaluate trends in compensation packages, including base salary, bonus and carried interest plans.
About Heidrick & Struggles
Heidrick & Struggles (Nasdaq: HSII) serves the senior-level talent and leadership needs of the world's top organizations as a trusted advisor across executive search, leadership assessment and development, organization and team effectiveness, and culture shaping services. Heidrick & Struggles pioneered the profession of executive search more than 60 years ago. Today, the firm provides integrated leadership solutions to help our clients change the world, one leadership team at a time.® www.heidrick.com
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