Competition for the finest executive talent today, particularly those who thrive in private equity-backed businesses and generate substantial value creation, is at the highest-level Spectrum has experienced since launching our firm over a dozen years ago. The PE firms we support and the CEO’s running their portfolio companies are facing intense pressure to recruit leaders to successfully steer their investments. Relocation has become a major obstacle in the decision-making processes. Candidates have so many more options today and must prioritize which roles to consider, especially those who are currently employed (which constitutes the overwhelming majority of the best candidates). Relocation is the number one reason candidates turn down opportunities or never even consider them.
Resistance to relocating stems from many reasons, both personal and professional, but one thing has become very clear. Covid has changed the way America works – possibly for good, but certainly in the short term. Companies have made major adjustments in allowing remote employees and executives to collaborate in different ways and the universal adoption of technology such as Zoom, or Microsoft Teams, has enabled those changes to work very effectively. Some sectors, such as Business Services, Technology, and Software are more natural fits for this evolution, while Manufacturing and Distribution are still “works in progress” as they require more on-site presence.
Despite these inherent challenges, several PE Clients of ours have adapted to this new reality and understand the only way to win is to be flexible, creative, and – true to their DNA – willing to take risks. We’ve identified five successful strategies to resolve these tough relocation scenarios:
Pay Up. In many cases, money talks. A superior financial package (greater cash and/or equity compensation – along with the right amount of severance to provide some risk mitigation) can knock out rival opportunities. It shows the finalist candidate that their PE sponsor is willing to bet on them and support their willingness to move. Spectrum has seen a 36% increase in signing bonuses offered over the last 6 months and relocation amounts are increasing across the board. Trying to acquire candidates “who will take haircuts in their compensation” AND relocate is becoming increasingly difficult to navigate and often unsuccessful.
Commuting Flexibility. Some businesses require their leadership to be based at corporate headquarters, but others compromise on the relocation requirement. Often, the reasonable solution is to agree on an appropriate amount of time the new executive must be “in-market”. Many candidates have a much higher threshold for increased travel as a substitute for moving their families. The two sides should work out a fair blueprint prior to offer acceptance that allows the executives to drive results without “being there 5 days a week, every week”. We often recommend that part of this compromise includes a greater amount of time in market during the Leader’s first 90-180 days so they can build relationships and master the business dynamics. Often this flexibility trumps the more rigid firms who insist on outright relocation or onerous on-site requirements.
Sell, Sell, Sell. In the current candidate-centric climate, astute clients understand they must sell the attractiveness of their role, the track record and corporate culture of the PE sponsor, and all other relevant reasons to step into a new environment. Several firms mistakenly think that “the fish will just jump in the boat” because of their prior success. The reality is many of their peers are also just as accomplished. The PE firms that excel at painting their vision and connecting with the candidates have a distinct advantage right now and will often win close races. There are only so many “A-Players” with PE experience or who are PE-ready. When you have one in front of you, Sell, Sell, Sell!
Carefully think through “must-have” Hiring Criteria. Private Equity Investors (and their Boards) often have a detailed list of what they want in an ideal candidate. If relocation is a “must-have”, some firms have chosen to prioritize the critical requirements and compromise on others to attract the right candidate. In some cases, that means considering candidates with the potential to do the job as opposed to a “been there done that” profile.
Watch the Family carefully. One would expect all Candidates considering relocation to be forthcoming with their Families about it. From our experience, this is not always the case. Experienced Private Equity firms address the topic very early on and stay on top of it throughout their recruiting process. They do not assume anything. They know the main reason Candidates turn down these types of opportunities is because their Spouse or Partner says no.
Authored by Tom Shahnazarian, Kevin Hahn and Jay Lane, Founders of Spectrum Search Partners, a Denver, CO-based retained executive firm that specializes in private equity. If you wish to reach out to us, please write to: tom@spectrumsearchpartners.com, khahn@spectrumsearchpartners.com, or jay@spectrumsearchpartners.com