Jun

Middle market, middle management: The secret driver of the business

by Derek Gracey

In a recent article, we discussed the CHRO’s role as a value creation driver for private equity portfolio businesses. With the growing importance that role is taking in private equity portfolio companies comes an increased focus on, and demand for, strong mid-level leaders within the HR function, especially as organizations grow into the upper middle market threshold. 

These leaders, usually director and vice president-level folks, should both complement and supplement the skills of the CHRO, and are an equally critical part of the equation for a successful HR function. With that in mind, there are few things to think about when building that bench strength in the layers below the CHRO.

There’s a strong emphasis on proven ability, not just potential, when hiring for a position reporting to the CHRO. While many companies are comfortable hiring a strong HR leader who has not yet been in the top seat, we see less flexibility here with the director and vice president roles. Many private equity CHROs are looking for “been-there-done-that” leaders to fill these types of positions, for a few reasons.

There tends to be less hierarchy in these companies, which means these mid-level leaders in private equity organizations are operating at an even more senior level than their corporate counterparts, and they’re doing so with even more autonomy. Because these businesses are growing so significantly and so quickly, often going from a couple hundred employees to a couple thousand employees within the span of a few years, the directors and vice presidents are tasked with developing new playbooks and building infrastructure that is entirely new to the organization. At the same time, they need the agility to evolve those processes as the company continues to grow.

We also see an increased focus on strategic skills for leaders at this level in private equity - which is not to say this isn’t important for CHROs in this space, but it’s usually less of a given at the director level. Just as the private equity CHRO must be comfortable rolling up their sleeves to flex down into the nitty gritty work, a director in the same environment must have the ability to stretch up and work at a more strategic level.