Even the PE world is having trouble finding talent

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The talent challenge. From longer hiring processes to difficulties finding qualified candidates, filling finance roles is getting harder. To better understand these challenges, we created the State of Finance Careers report. In it, we explore the obstacles finance professionals face, the impact of AI, and what’s going on in the job market. Take a look.

Good people are hard to find. These days, it’s getting so tough to source quality employees that it’s become part of the investment outlook in the world of private equity, according to a new study.

BDO’s 2023 Private Capital Survey takes a look at the uncertainty investors are facing, and notes that labor shortages are a significant concern extending from PE firms all the way to their portfolio companies. The survey respondents included 405 US private equity fund managers and operating partners, as well as 200 US Portfolio company CFOs and 50 US board members.

“Almost half (47%) of portfolio company CFOs report that they are understaffed in critical roles, while 43% say they are understaffed across their organization,” BDO found. And companies interacting with those PE firms should know that the feeling is mutual: “Fund managers view staffing levels similarly: nearly half (49%) of fund managers and operating partners describe current staffing levels for critical roles as understaffed and 48% describe staffing levels across the organization as understaffed.”

It’s a problem that happens to focus especially on the financial side: “private equity funds and their portfolio companies are struggling to find the advanced financial and leadership skillsets required to execute their value creation plans.”

This is a theme we’re familiar with from the CPA shortage: With a generational shift in experience and skill sets as boomers retire, companies need to figure out how to maintain strong and fresh talent pipelines that are long and deep enough to keep their operations going.

One differentiator in the BDO data: Smaller is doing better these days. While nearly half of all respondents reported understaffing in critical roles and across their organizations, for companies “owned by funds of more than $15 billion in AUM,” that number creeps up to 60%.

And it appears that some of the latter group need to get ready for tough talk with their investors: While a majority of their CFOs say they’re understaffed, “38% of fund managers and operating partners describe organizational staffing levels as overstaffed” and just “43% say [they’re] understaffed.” BDO attributes this difference in perspective to the possibility that “the largest funds believe their portfolio companies over hired in 2021 and 2022, as many of the largest tech companies did to hoard talent and gain scale, but now need to correct that mistake.”

Just when companies are scrambling to hire, it seems some investors might be telling managers to slow down.