Private Equity, an Employer of Millions, Turns Its Attention to Talent

Private Equity, an Employer of Millions, Turns Its Attention to Talent

As investors become more aware of how talent drives value at a company, they are looking for ways to measure that impact and demanding more information about talent issues from the companies in which they invest. But investors won’t always wait for companies to crack the code connecting talent to performance; some are going ahead with this themselves.

Take private equity firms for example.

If asked who the biggest private sector employers are in America today, many would think of companies such as Walmart, Amazon, or General Electric. Not according to Michael Milken, chairman of the Milken Institute. In a speech he delivered recently at the annual conference that bears his name, the Financial Times’ Gillian Tett reported, Milken produced a list of America’s top 10 private sector employers, as calculated by the institute. Walmart indeed tops this list, but the next eight largest employers, according to Milken’s data, are private equity (PE) firms. And while Milken refrained from identifying these entities, it is not hard to guess who they might be, as Tett explains:

Carlyle and KKR, for example, are each estimated to employ about 700,000 people through their portfolio companies, which probably ranks them just below Walmart. Blackstone has “around 600,000” employees, as Steve Schwarzman, its founder, told the Milken event. Apollo, another private equity group, has 300,000 workers in its portfolio companies, while Warburg Pincus, General Atlantic, and TPG are only slightly smaller. Lobbying groups estimate that private equity firms now employ 11 million people throughout the US (the data are not very transparent).

Over the past decade or so, PE firms have become more like conglomerates. In the traditional model, private equity makes money by boosting the value of portfolio companies, then selling them at a much higher price, but according to research by the RBL Group, many PE firms are increasingly pursuing a “buy and transform” model. In this model, RBL’s Dave Ulrich and Justin Allen explain at the Harvard Business Review, PE funds must behave more like employers and pay more attention to talent and leadership. This has led to the emergence of leadership capital partners (LCPs), who are responsible for ensuring that both the firm itself and its myriad of portfolio companies have the right talent, culture, and leadership. According to RBL, over half of PE firms now have an executive with the responsibilities of an LCP:

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Fewer Public Companies, Less Job Security?

Fewer Public Companies, Less Job Security?

At Fortune, Jeremy Quittner discusses a new study from the think tank Third Way showing that in 2015, there were 5,834 fewer companies being publicly traded on the NASDAQ and the New York Stock Exchange than in 2000. The study’s author, University of Michigan researcher and management professor Jerry Davis, describes this decline as a sign of a fundamental shift in the structure and character of corporate America, and not one that’s necessarily friendly to workers.

Quittner thus considers what a dwindling number of public companies might mean for employees. One is that fewer may enjoy the job security and benefits that we’ve come to expect from a traditional corporate job, as business embraces a new employment model based on contractors and gig work:

Notably, the old-guard blue-chip companies aren’t the jobs creators they used to be. General Motors, for example, has 215,000 employees today, about a quarter of its workforce in the 1980s. Similarly, AT&T had just 47,000 employees before its 2005 acquisition by SBC Communications, compared to 822,000 prior to its split in 1982.

However, those companies still provide more jobs than the Valley’s most vaunted tech giants. The combined global workforces of Box, Facebook, Google, LinkedIn, and others are smaller than the publicly traded Blockbuster Video was in 2005, the report claims. In tech especially, “Markets don’t reward firms for growing large in employment,” Davis says.

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