Middle Market Talent Gap Impacts Private Equity
New research from the National Center for the Middle Market on the talent gap within the middle market paints a gloomy picture for growth. The research indicates that for a variety of reasons, middle market firms (defined as those firms with annual revenue between $10 million and $1 billion) are challenged to attract and retain the talent they need to fuel growth. This talent gap impacts private equity (PE) more than any other group looking to make investments in acquiring and growing firms in their portfolio.
The first thing you have to realize is that if middle market firms have a talent and skills gap with respect to sales, technical, and functional roles, these firms for damn sure have a leadership skills gap in their management ranks that is also fueling an inability to retain talent. The old perspective that people leave organizations because of there manager is absolutely true. While the research study didn’t focus on the leadership skill gap aspect, it does exist and is the primary risk to growth in middle market companies.
For PE firms this is problematic.Acquiring portfolio companies and bolt-on acquisitions shows growth of course, but that growth could be supercharged by focusing on the leadership gap more broadly and deeper in portfolio companies. The narrow focus on CEO, CFO, and other C-suite roles in PE firms leadership assessment and placement approaches should expand to identify leadership talent from top to bottom and make investments in growing that talent to supercharge growth.
That folks would be an excellent use of investment capital for PE firms.
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Dr. J. Keith Dunbar is founder and chief executive officer of Potentious and recognized expert in M&A leadership