Private Money in Your Future – Part 3 (Life After Landing)
Private Equity (PE) and Venture Capital (VC) are not immune to macroeconomics. Fundraising has indeed declined in 2022, however, PE & VC are incredibly resilient.
“Higher rates have finally breached the engine room of the PE dealmaking machine—the leveraged buyout,” writes Tim Clarke at PitchBook in their October 22, 2022 newsletter. The source goes on to cite indicators pointing to a decline in leveraged buyout activity before highlighting how the industry is repositioning.
First, “PE is doing more public-to-private deals. Take-privates are on track for a second consecutive year at $100 billion or more in deal value […and] they also allow mega PE funds to deploy their mega amounts of dry powder at beaten-up public prices.”
“Second, PE is finding a new source of funding in private debt funds. Four of the last big take-private deals announced in Q3 used private debt.”
“Lastly, PE firms continue to drive strong top-line growth in portfolio companies. In its Q3 results, EQT estimated that its PE portfolio was still growing revenue at 20% through August. Blackstone indicated 17% revenue growth for its PE companies in Q3.”
“Growth like that goes a long way toward covering higher interest expense.” [See source.]
These strong vital signs of the underlying investments are indeed encouraging. As we have long maintained, from an executive employment point of view, it is the portfolio company level that interests us, in part because of our clients’ positive experience in the sector. So let’s examine a few of our clients who have landed at portfolio or PE-related companies in the past year. Note, these executives generally wish to remain anonymous, and we will therefore respect their wishes.
Let’s begin with a portrait of how one client actually landed.
Our client joined “N-Co.” in August 2022 after a rigorous vetting process that began with gateway interviews, followed on to senior interviews, involved a presentation of a simulated business case to a board of executives, and concluded with an investment thesis presentation outlining how our client would pursue the task at N-Co. if given the opportunity.
N-Co. describes itself as being a group of related family offices that offers an ownership through entrepreneurship program. Apparently our client’s thesis was well received because they hired him as a result. Here’s how he describes his new role: “I launched a fund with N-Co. to invest in and operate a profitable Food & Beverage Manufacturing businesses or Quick Service Restaurant business. We are looking to acquire a majority stake and actively operate the business.”
Our client had experience as an entrepreneur and says he particularly appreciates the support he receives from N-Co.’s service centers on financial management and administration so that he can really concentrate on the “fun” entrepreneurial task of locating suitable acquisition targets. Once he finds one, he will be the new CEO and be fully and operationally involved.
So far the search is going well with thousands of prospects yielding a handful of qualified candidate companies and an on-going vetting process to select the ultimate acquisition.
“I am surprised at how the pandemic has affected some locations and industry segments so severely while leaving others completely untouched or even prospering,” he says, citing businesses that served lunch to office workers in downtown locations as one population particularly hard hit by remote working, while others with a significant takeout or delivery business as either actually benefiting or at least maintaining a neutral performance in the face of Covid-19 effects. It is not his objective to acquire distressed businesses, though, but instead to locate actively growing businesses that need more capital, better scale, or other benefits that he and N-Co. can supply.
Reflecting on the larger picture of PE-related businesses, our client interprets the landscape as being one of opportunity regardless of where we are in the economic cycle, in part because so much money has flowed into PE-related businesses’ coffers, so that fund managers are increasingly looking at smaller businesses to invest in, acquire, or otherwise participate in.
In his experience, fund owners will typically get involved in the hiring of the C-level in their portfolio companies, but leave much of the remaining hiring decisions to the operational management—something our client is looking forward to as soon as he completes his acquisition.
In fact, so far in 2022 Barrett Group clients joined multiple industrial sectors via the Private Equity route in a variety of roles.
Here are a few selected examples:
Healthcare – Operating Partner
Food & Beverage – Chief Information Officer
Biotech – Executive Director
Investment Banking – Lead Operational Risk Officer
Patents – Director of Intellectual Property
Real Estate and Asset Management – Regional Director
Financial Services – Senior Vice President
Real Estate Investment – Managing Director
Financial Services – Fund Advisor
Consulting – Institutional Consulting Analyst
Investment Fund – Lead Portfolio Manager
Our clients are often surprised at the robust activity in what we call the “unpublished market” regardless of the economic cycle. To us this continuous churn is only natural as companies adapt to their competitive environments, change strategies, and adjust internal requirements.
Here is one example that a major executive recruiter describes in summarizing recent talent demand changes at Private Equity companies:
“[…] the traditional ‘slash-and-burn’ CEO is no longer the best fit. Today, we are looking for CEOs with go-to-market, marketing and commercial experience, CEOs who are flexible and creative, future-ready leaders who are agile, and CEOs with a proven track record. We are looking for proven and dynamic profit and loss managers who understand the cost base of a business and who can optimise resources to reflect both diminishing demand and the challenged margin and operating base of these businesses.” [Amanda Worthington, Heidrick & Struggles, See source.]
This is exactly what happens in the executive market when macroeconomic changes roil the business environment: companies need to change direction and they often need new leadership talent with specific experience and/or skill sets. Of course, we see this phenomenon first in the unpublished market (where about 75% of our clients land)—before any of these new requirements have bubbled up to the more visible recruiter and published markets.
PE firms may also be more responsive to macroeconomic changes than many other ownership structures. Here’s how Hugh MacArthur and Brenda Rainey of Bain Capital summarize this subject:
“The good news is that inflation-recession cycles can be relatively short-lived. And the long-term outlook for private equity remains as strong as ever. Limited partners (LPs) have consistently signaled their intent to maintain or increase PE allocations. They remain confident in the fact that PE returns outpace other asset classes. With $3.6 trillion in dry powder generating fees, general partners (GPs) are well positioned to ride out a downturn and prepare for the recovery […]. And that can spell opportunity: Deals done coming out of recessions tend to deliver strong returns, something both GPs and LPs learned in the wake of the global financial crisis.”
“[…] it will be important to help future-proof the business by focusing on key initiatives such as environmental, social, and corporate governance.”
The authors go on to give this advice: “[…] manage proactively to anticipate change and get ahead of it. That will be critical in weathering this period of turbulence and taking full advantage of the recovery to come.” [See source.]
If it sounds as if a certain amount of moral courage may be required to execute a strategy such as Bain suggests, then, please take heart from one of our clients who did exactly that and is proud and pleased to tell his story after landing as Director of External Communications for a PE portfolio company.
Paul Cabellon spent nearly 10 months job-seeking after circumstances forced his employer to shutter operations, but he found himself coming in second place with every job opportunity he pursued.
“I took a deep breath because of the pandemic and started job searching. I was pretty aggressive, but the story of my job hunt is that I always came up in second place,” said Paul.
Paul felt that he was doing all the right things. He sent out dozens of resumes to large companies where he had close contacts. He estimates that 75% of his introductions were networked, and he found it easy to get in the door and line up interviews. But his efforts weren’t yielding job offers.
“I eventually got some feedback from a recruiter that made me realize that I needed help in my job search. He said, ‘Paul, you are clearly the person who would take the company brand and communications to another level, but your approach would probably be too innovative for the average marketing team. Most companies are designing the next fly swatter, and you’re talking about mosquito lasers.’ I felt helpless,” said Paul.
Finally, nine months into his job search, Paul engaged The Barrett Group [TBG].
“I wanted an expert’s perspective on the situation. I knew I was missing something, and I was ready to do the work to figure out my problem,” said Paul.
“I’ve had coaches before, but they’ve always tried to change me to conform to the picture of what employers want. Lisa, however, encouraged me to embrace the distinctions in my career and to feel free, frankly, to show them off.”
“The value of the TBG program outweighed the cost in the first three days! Through Clarity, I recognized that I want a job in which I can have higher altitude conversations about vision, depth, architecting, and ‘What is the 5- and 7-year outlook for this company?’. That goal, alone, eliminated half of the positions that I applied for,” said Paul.
When he next had the opportunity to speak with a recruiter, Paul took a different approach.
“When the recruiter asked me to explain why I’d been unemployed for so long, a streak of boldness came out of me, thanks to TBG. I told her, ‘Everyone is looking for a normal, status quo, person. That’s not me. I’m the one who will take the brand to the next level. If your company launches rockets with your satellites on them and they crash, can your other candidates handle that? If you are looking for a truly innovative communicator, I am the guy you want.’ It’s because of Clarity that I could say that,” said Paul.
When the initial offer came in much lower than Paul had hoped, Jerry [his TBG Career Consultant] helped Paul outline how to negotiate a compensation that better reflected the value that Paul felt he brought to the table. The final offer was more than 30% higher than the original.
“I really wish I had known about The Barrett Group in week 1 of my job search. If I ever transition again, Barrett will be a part of that transition. Period!” [Read More: Paul Cabellon]
When you are ready to make a transition, contact The Barrett Group. “It’s our job to help you find yours!”
INDUSTRY UPDATE: Private Equity & Venture Capital – October 2022
Introduction: Dry Powder and a few Questions about Private Equity and Venture Capital
The last two years have been extremely strong in terms of fundraising for PE and VC firms. One measure had them sitting on as much as $1.4 trillion in fresh capital (dry powder) as of mid-year 2022 (See source.), funds they will need to deploy in the near term, either by take-privates of public companies, or investment into existing, typically private, companies.
Given the economic headwinds in Q4 of 2022, the question is, of course, where is the growth potential and therefore where to invest?
As we have pointed out elsewhere, some companies feel so bullish about the longer term that they see this slowdown as an opportunity to invest and perhaps retool against their future strategy. Sunita Patel of Silicon Valley Bank says, for example, “A downturn can offer opportunities to build an even stronger team, focus on market needs and potentially create whole new categories. The 2007-2009 global downturn produced Airbnb and Uber.” (See source.).
JP Morgan seems to be pursuing this logic by announcing its plans to hire 2,000 software engineers as it executes a strategic pivot toward the digitization of business processes and other strategic initiatives. (See source.)
Other firms will doubtlessly also shift their strategy, rebalancing their investment portfolios away from inflation- or interest-rate-sensitive categories to asset classes likely to appreciate over time, e.g., real estate.
Much of the recent reporting on this sector focuses on a reduction in fundraising and on a decline in valuations. Both of these trends are very important, of course, for the PE/VC funds and their investors, but our focus is on executive opportunities, particularly at the portfolio company level. In this context, there is a tremendous opportunity as we highlight in our recent blog Private Money In Your Future – Who’s Who and What’s What.
Sectors that are likely to benefit from an adverse economic climate include the banking sector, certain real estate segments, environmental services, alternative energy, and electric vehicles and infrastructure to name but a few. In that sense, the changes in the PE/VC companies we will see in this Update are informative as they reflect changes in the underlying strategy and therefore the sectors and portfolio companies these funds are investing in that will ultimately yield executive opportunity.
The data in this Update is naturally historical, so relying on it to make decisions about the future is akin to driving a car while looking in the rearview mirror. We always encourage executives to perform appropriate due diligence during any prospective career change. That is one reason that our clients have access to enormous data resources to make the most accurate decisions possible as they screen markets, select target companies, and then prepare for interviews.
Executive Employment In The Private Equity/Venture Capital Industry
Last year we looked at a smaller set of titles that we have now augmented to reflect the broader PE/VC executive landscape (see Editor’s Note). This expanded set of executives, combined with the strong growth in this sector mean that the entire population has grown by about 3% p.a. to about 313,000 with approximately 16,500 having changed jobs in the last year. Regionally, the EU/UK/Middle East (ME) cohort came in at circa 92,000 industry executives, 4,779 having changed jobs. In the US, the population grew similarly to about 221,000 with some 11,800 changing jobs in the last year.
This total population is largely male, ranging between 77% masculine (US) to 81% (EU/UK/ME) and the average tenure in these positions falls between 3.9 (EU/UK/ME) and 4.9 years (US).
Chart 1 explores the specific industries in which executives who claim affiliation with the PE/VC fieldwork and it is no great surprise that the top five comprise about 77% of the first fifty total. They also have some of the lower to mid-level growth rates (2%-5.1%) in the list while Non-profit Organization Management and Civic and Social Organizations both come in above 10% growth p.a.—and also sport a higher than average female executive share between 28-31%. Separately, LinkedIn lists the following industries as all exhibiting “very high hiring demand”:
Non-profit Organization Management
Hospitality & Healthcare
Health, Wellness & Fitness
Computer & Network Security
Chart 2 begins to explore the companies that employ these executives whereby, the top six in this case cover about 55% of the first fifty.
Of course, some of these leaders are now also leading the way in staff reductions as they shift their portfolios.
For example, Citi has decided to trim its mortgage lending team:
“The bank funded $16 billion in residential mortgages from January to June, a decrease of 5.9% compared to the same period in 2021. Like Citi, other depositary banks are reducing their mortgage staffing levels. Wells Fargo, for example, will lay off 75 employees in its home lending division in Iowa by the end of October, according to Worker Adjustment and Retraining Notification (WARN) notices submitted to the Iowa Workforce Development. The bank eliminated 197 mortgage jobs in Iowa across earlier layoffs. JPMorgan Chase and U.S. Bank have also shed an undisclosed number of jobs in their mortgage divisions.” (See source.)
Painful as these reductions may be for those directly affected, they underline the opportunity inherent in such changes. As a result, Citi hired new talent to execute these changes (Liz Bryant and Darin Lugat, both formerly of Wells Fargo).
Goldman Sachs has also announced adjustments to its staff as the demand for specific segments of its business has changed, for example, IPOs and junk debt issuance. (See source.) For more perspective see The Upside of Downsizing.
On the other hand, Blackstone has ranked number one or two in the capital-raising rankings in the past year and shows accordingly high growth in its executive ranks (+18.3%), although its third quarter 2022 profits were well off, so far it seems to be avoiding staff reductions. (See source.)
Title-wise (Chart 3), the industry is not as top-heavy as some, in this case with far more Vice Presidents and Managing Directors than CEOs — a testament to the relatively concentrated state of the industry at this juncture.
So what does a Vice President versus a Managing Director earn at, for example, BlackRock? One source says the median value is $147,000 for a VP and $250,000 for an MD. (See source.)
Chart 4 explores the specializations cited by LinkedIn member executives indicating their main sphere(s) of activity. Of course, each executive probably does have more than one string to his/her bow, so please bear that in mind when looking at the totals.
Two aspects stand out immediately in this data; the first is that Startups have plunged from number 2 in 2021 to rank 20. Part of this is undoubtedly the enlarging of our executive pool by including more titles this year (see Editors’ Note). However, start-ups also seem to be somewhat out of favor at the moment as being generally too risky. One source cites a 34% drop in Q3 2022 funding for VCs due to this phenomenon (See source). Smart money may instead be chasing established businesses that want to grow and scale.
Nevertheless, there are undoubtedly start-ups to watch in the coming months that capitalize on cost savings, consumer trends, and market opportunities. Here is Forbes’ recent list, for example: Promising start-ups in 2022.
Another key observation based on Chart 4 is the relative transferability of some of these skills versus other industry segments. As we highlighted in our transferability analysis (Read more), generic skills such as Business Development or Sales Management are most universally transferable followed perhaps by Finance, Budgeting, Product Development, and Business Planning. As you will see from Chart 4, some of these are present, but only Finance ranks high in the list. In other words, there is a relatively high level of specialization in this industry vertical.
The industry is notorious for hiring in a very regiment-ed way from primarily three sources: undergrads as analysts, banking analysts from banks, and hiring of industry insiders from other PE firms. (See source.)
Let us examine one example. We mentioned Blackstone’s relatively rapid expansion early in this Update. Where did those associates come from?
Goldman Sachs (+65/-13)
Morgan Stanley (+47/-9)
The list goes on to name Deloitte, J.P. Morgan, and Credit Suisse, but perhaps that suffices to make the point. Note that the moves listed above are not only at the executive level, however, our research can also identify individual job changers in case that knowledge serves our clients’ social capital strategies.
Most of the top 50 locations for PE/VC executives (Chart 5) seem to have grown faster than the industry average. This suggests that some locations must also be shrinking or at least growing much more slowly (Chart 6).
Among the top three locations, Citi, JP Morgan, Goldman Sachs, and Morgan Stanley dominate the employed executives list as the largest employers. As of San Francisco, BlackRock and Charles Schwab join the top ranks. Northern Trust shows up in Chicago, and State Street, Fidelity, and BNY Mellon come in as of Boston. LinkedIn states that the hiring demand is ‘very high’ in these top locations, except for Los Angeles which ranks as ‘moderate’.
Outside the US and the UK, top employers include Credit Agricole, Societe Generale, and Rothschild & Co. in Paris, Citi, Standard Chartered Bank, and Credit Suisse in the UAE, and in Ireland (profiled due to its high growth rate), Citi, State Street, and Citco Group. Naturally many other locations deserve further mention but we have limited space in this Update.
Our clients have access to our complete research capabilities that typically evolve in an initial screening stage, then a deeper dive into a smaller list of targeted companies, followed by in-depth profiling of specific companies and even hiring executives ahead of critical interviews.
In this particular Update “executives” will generally refer to the Vice President, Senior Vice President, Chief Operating Officer, Chief Financial Officer, Managing Director, Chief Executive Officer, Chief Human Resources Officer, Chief Marketing Officer, Chief Information Officer, Managing Partner, General Counsel, Head, and President titles. Unless otherwise noted, the data in this Update will largely come from LinkedIn and represents a snapshot of the market as it was at the time of the research.
Is LinkedIn truly representative? Here’s a little data: LinkedIn has approximately 850 million users (See source). It is by far the largest and most robust business database in the world, now in its 19th year. LinkedIn defines the year-over-year change (YOY Change) as the change in the number of professionals divided by the count as of last year. “Attrition” is defined as the departures in the last 12 months divided by the average headcount over the last year.
Research to the Rescue
Many executives come to us with wide-eyed looks. They mix trepidation with astonishment because they realize they have absolutely no idea how to find a suitable position in today’s market.
Often it has been years, possibly decades, since they looked for a job.
Sometimes they desperately want to change industries, roles, and locations. And, again, have no idea where to start.
Occasionally they are suddenly unemployed and looking for a leg up.
In all of these cases and many more, we calmly start by helping them slow down… to speed up.
“Towards the end, [David, his Clarity Coach] asked me to write about my dream job. I typed out where I wanted to live, what my office was like, and how my family fit into the picture. I’ve been through coaching and personality assessments before, but not like this. David’s insights and the simple tasks he assigned me gave me a clearer vision of myself and my goals. I felt so hopeful!” [Joel Engle, Read more]
Next comes the packaging and personal branding stage. Here, we convert their history and accomplishments into a set of structured arguments. These naturally lead from where they have been professionally, to where they wish to go.
There are innumerable ways to demonstrate the transferability of experience and thereby justify a change of direction mid-career—if you know how.
Fortunately, we do.
Then comes the complex business of winnowing down the market approach to a manageable strategy. Our clients are supported by a team of six professionals. One member of their team is a research specialist. The Barrett Group has one of the most extensive database architectures in the business—one of the reasons Forbes cites us in the top 0.5% of the industry. We cover more than 800 million businesses and executives via this infrastructure. If a client defines their data requests too broadly, they are often shocked at the amount of work they need to personally do in order to contact all of the executives that our research provides.
Dan Resendes, our Chief Consulting Officer Emeritus, narrates one specific example. This is an overview of a research team success story. It resulted in three interviews at the client’s targeted type of organization.
1) The client had originally requested that our research team provide him with the names, email addresses and telephone numbers of hiring executives working at LGBTQ+ organizations across 18 different industries. (This type of research would have taken weeks and is akin to running around the block 15 times to walk in the front door.)
2) Additionally, If we conducted the research using the methodology he requested he would have had to make hundreds of cold calls, to sell his “elevator speech” to total strangers in an attempt to secure an interview.
3) When the research team received his request, they provided him with a) much more precise information b) and a different methodology c) where he could target the exact type of executive he requested d) who would then recruit him, e) without having to use an elevator speech or make a single cold call.
4) The end result was that he followed the research team’s instructions and just by clicking on a few research lists provided and speaking to people already in his social capital he easily secured 3 interviews within 2 weeks at the organizations of his choice.
It does not get any better than that.
B. Randall Willis, a recent client, narrates his Barrett Group [TBG] research experience like this:
…Randall employed a strategy that he had used during a previous career change: Identify marketing companies that were potentially good fits and reach out to them directly. The TBG research team helped by producing a list of 650 agencies for Randall to explore.
“I gave TBG certain criteria, such as agencies only in the Northeast and 200 people or fewer. I researched every company on the list and whittled the number to around 30. Then I reached out to them. [TBG] helped me draft the language. About half responded, and I engaged in conversations with about two or three.”
One company turned out to be an ideal fit – a small, internet marketing firm at which the CEO plans to retire and is seeking a successor. Randall was offered the role of head of client success, with the potential to become a managing director within months and, ultimately, CEO and owner. This opportunity is the sweet spot for Randall between the corporate and entrepreneurial worlds.
“It’s better than I ever could have expected. It’s not too corporate-y. The team has some growing and areas for improvement that I can help with, but I am starting with a good team,” said Randall.
Randall is thrilled with how his career change journey ends. [B. Randall Willis, Read more.]
The executive employment market is daunting, but you don’t have to feel alone. All you need is a little support. The research team at The Barrett Group can come to your rescue! Give us a call.
Private Money In Your Future – Who’s Who and What’s What
Frankly, not everyone can work for the biggest players in the PE/VC industry, nor is that particularly advantageous career-wise, however, let us get our bearings by looking at three different ways of ranking the top companies in this field before we look under the hood: 1) funds raised, 2) assets under management, and 3) executives employed.
Private Equity International publishes a helpful PEI 300 report that ranks companies based on capital raised—beginning at the $1.85 billion mark. The top ten firms raised almost $550 billion in new capital in the latest year. The top two alone managed more than $200 billion. (See table below.)
Alternatively, choosing the assets under management approach, we have a slightly different ranking whose top ten manage some $2.656 trillion in assets. (2021 Data. See source.)
Choosing only executives as we define them (see Editor’s Note) and those who identify themselves as being in the PE/VC industry, we derive the Executive Employment ranking below as of October 2022. These ten firms employ some 68,500 executives in this field, a total that grew by about 5.8% over the last year—excluding employment at portfolio companies.
It is therefore important to bear in mind that raising funds or managing assets does not necessarily correlate with the number of executives employed. Furthermore, much of the executive opportunity in this area is not in the PE companies at all but in their portfolio companies. Let us examine this subject in a little more detail.
To begin, we will choose a representative company from the top of the rankings, for example, Blackstone.
Blackstone highlights currently a number of portfolio companies on their website as follow:
Candle Media (entertainment, Los Angeles) – C/VP level, 3*
Transmission Developers Inc. (renewables & environment, New York) – C/VP level, 3*
This sample serves to illustrate the breadth of the opportunity at the portfolio company level. Blackstone, by the way, says it encompasses more than 200 portfolio companies and half a million employees. To quantify the executive opportunity then in these portfolio companies, let us take the companies highlighted above as a baseline, which, on average, boasted 9 senior executives. Then the at least 200 portfolio companies Blackstone has invested in may employ up to 1,800 executive positions.
To discover whether this is a typical management team average size for a PE portfolio company, let’s look now at the middle of the ranking, for example Altaris Capital Partners (PEI #149) with 14 listed portfolio companies and then the other end of the spectrum (PEI #300), Reverence Capital Partners that listed 13 portfolio companies at the time of this publication.
So, the larger PE firms have hundreds of portfolio companies and the smaller ones perhaps 10 or 15. If we average these to a conservative mid-point, say, 25 portfolio companies multiplied by the average number of executive roles (let us choose 10 as a simple assumption), we arrive at approximately 75,000 executive positions. Keep in mind this covers only the top 300 PE companies who raised at least $1.85 billion in the past year. The total number of executives at PE portfolio companies could well be 3 or 4 times that assumption—a huge population of executives probably with a normal turnover and a faster-than-average growth rate.
As will also be obvious from the examples above, portfolio companies vary not only in size and scale as well as geography, but also in industrial focus. Some PE funds focus in specific industry verticals such as Altaris Capital’s focus on health care and related industries, while others are generalists. Additionally, stage of development is key as VCs tend to focus on start-ups while PEs often focus on existing companies, funding buyouts, for example, or other structural changes.
How are all of the funds invested in PE actually being used, readers might ask perhaps as a prelude to choosing a potential employer at the PE firm or portfolio company level. To begin to answer this question we offer this excellent overview of where the assets under management were invested in 2020. (See graphic “Private market assets under management…”) While a bit cryptic, it does begin to peel back the layers on the geography of these investments and their general objective/focus. (See source.)
It is difficult to generalize about the investment strategies of the industry, because of the very specific objectives individual funds define that presumably drive their choice of portfolio companies. At a higher level, McKinsey highlighted the following general themes influencing PE investments at the end of 2021 (See source):
Infrastructure (“more than roads and bridges”)
Sustainability transition (“transforming unsustainable business models” and “decarbonizing”)
Diversity (some progress at more junior levels but more work required)
Digitization and analytics (“front and back office”)
As far as industries of focus are concerned, as of 2021, the top-ranking industries attracting PE investment included (See source):
Food & Beverage
The same source also highlights some of the major PE firms investing in each of these industries, too.
If this is all beginning to sound complex, frankly, it is. That is one of the reasons executives hire the Barrett Group—to gain access to the six-member team of professionals they can leverage to perform detailed research first at a broad industry level and then at a specific company or individual executive level, particularly to gather background on the hiring manager(s) they will encounter during candidate interview processes. The Barrett Group maintains subscriptions to multiple state-of-the-art databases that encompass literally hundreds of millions of executives.
For example, find out why our client Paul Cabellon who landed in 2022 at a PE-backed start-up firm says “I really wish I had known about The Barrett Group in week one of my job search. If I ever transition again, Barrett will be a part of that transition. Period!” [See source.]
In this particular monograph “executives” will generally refer to the Vice President, Senior Vice President, Chief Operating Officer, Chief Financial Officer, Managing Director, Chief Executive Officer, Chief Human Resources Officer, Chief Marketing Officer, Chief Information Officer, Managing Partner, General Counsel, Head, and President titles. Unless otherwise noted, the data in this Update will largely come from LinkedIn and represents a snapshot of the market as it was at the time of the research.
Is LinkedIn truly representative? Here’s a little data: LinkedIn has approximately 850 million users. (See source.) It is by far the largest and most robust business database in the world, now in its 19th year. LinkedIn defines the year-over-year change (YOY Change) as the change in the number of professionals divided by the count as of last year and “attrition” as the departures in the last 12 months divided by the average headcount over the last year.
Private Money in Your Future
If you do not already work for a company with connections to private equity (PE) or venture capital (VC) firms, you probably will at some point before you retire. We say this because many of today’s most important firms already have PE or VC shareholders. Take the venerable example of Sequoia Capital which invested early in Apple. Today they also list companies such as Uber, Stripe, Zoom, DoorDash, Airbnb, Instagram, WhatsApp, and many, many more as portfolio companies. Beyond this, Forbes offers an intriguing list of well-known companies that are privately owned including Cargill, Koch Industries, Publix Markets, Mars, H.E.B., etc. (See source). So you may well already be working for private money.
But Our Focus Today Is On PE And VC.
So when did the rise of PE and VC companies begin? One source ties this to the development of improved financial transparency and the introduction of limited liability as a legal category in the mid-18th Century—conditions required for equity (as opposed to debt-) financing to really take off. (See source.)
In the US, there are approximately 27 million business enterprises. Between 4,000 and 5,000 of these are publicly traded, so the vast majority of US enterprise is privately owned, and relatively small. (See source) lists approximately 22.5 million enterprises. (See source.) In Europe, publicly listed companies in 2020 totaled about 5,688 (See source.) based on listing at the national level.
Here Again, We See That Public Companies Represent A Very Small Share Of Total Enterprises.
Historically public companies generally dwarfed private companies on the parameter of market capitalization (the value of all publicly traded shares multiplied by the share price). Recently, though VC and PE are showing much faster growth:
About 36,000 companies in the US are VC-backed, versus nearly 16,000 PE buyout- and growth-backed organizations and 4,805 publicly listed companies, PitchBook data shows. Soaring valuations, based on higher growth expectations, also pump up the collective value of VC-backed companies. Unicorns alone are worth a combined $2.3 trillion. (PitchBook, See source.)
One source even suggests that the value of all PE/VC investments is approximately three times the value of public companies. (See source.)
Certainly, PE/VC Fundraising Has Been On A Tear Of Late:
Private equity continued to drive global growth in private markets. Fundraising rebounded across regions, and global totals fell just short of the prepandemic peak established in 2019. [Assets under management] reached an all-time high of $6.3 trillion, driven primarily by asset appreciation within portfolios. With a pooled IRR of 27 percent in 2021, private equity (PE) was once again the highest-performing private markets asset class. (See source.)
This performance was geographically broad as well. According to the same source, the growth of PE assets under management accelerated as follows:
So Where Does All Of This Capital Actually Go?
One way to think about this is to reflect on the underlying strategy of the funds. Broadly speaking these approaches include Buyout, Venture, Growth, and Other (or unspecified). The allocation varies from year to year and during the business cycle, but most recently, the majority of funds flowed into Buyout, followed by Venture, and then Growth. In terms of the number of funds pursuing these various strategic options, within the context of approximately 4,200 funds, VCs outnumber all others by about two to one (circa 70%), while Growth occupies the second position at about 10%, followed by Buyout at 7%. (See source.)
Now It Is Certainly True That PE Fundraising Has Cooled Off In The Second Quarter Of 2022:
The onslaught of adverse economic headlines—inflation, rising interest rates, geopolitical turmoil, etc.—has contributed to the surge in volatility and slowdown in VC deals in 2022. During the first half of the year, global venture deal volume and average deal size (Seed through Series E) declined by ~6% YoY and ~12% YoY, respectively. While volume continued to grow during Q1 (albeit at a considerably slower pace), Q2 marked an inflection point as volume experienced a significant pullback, falling ~17% YoY. (See source.)
However, PE firms of all stripes are sitting on unprecedented cash reserves.
Although deal activity has cooled, VC has continued to attract capital this year despite negative market volatility. Globally, VC firms have raised more than $100 billion through the first half of the year, down ~10% YoY but still elevated compared to pre-pandemic levels (average of ~$75B in the 1H from 2017-2019). The influx of capital and reduced level of deal activity has led to unprecedented amounts of dry powder waiting to be deployed. As of June 2022, VC dry powder globally was more than $500 billion, which is more than double the amount exiting 2019. (See source.)
In Fact, Some In The Industry See This As The Best Time To Invest In Strategic Initiatives.
Sunita Patel of Silicon Valley Bank, for example, had these observations about the current state of play:
“From our vantage point, today’s innovative companies are in a better position to weather a slowdown than in past down cycles. First, the sector today is significantly larger — the digital economy has grown at twice the rate of the overall US economy since 2000 — and technology is embedded in everything we do. Second, record venture capital investment over the last two years has strengthened corporate balance sheets. Even with such investment, private equity and VC firms are sitting on record levels of dry powder ($269 billion through H1 2022) waiting to be deployed, and we fully expect they’ll get back to business again once there is more certainty in the market and valuations stabilize.
Make an offer to someone who previously might have been out of reach. A downturn can offer opportunities to build an even stronger team, focus on market needs and potentially create whole new categories. The 2007-2009 global downturn produced Airbnb and Uber.” (See source.)
And JP Morgan Chase Has Taken It A Step Further By Announcing Its Plans To Hire 2,000 Engineers As It Pursues The Digitization Of Processes And Other Strategic Initiatives.
Their CEO, Lori Beer, had this to say about the recent announcement:
“The move highlights that JPMorgan is “a safe place through the uncertain economic times. … When you are going into a tough economic time and things are very volatile, it does play into our favour.” (See source).
In fact, with so much cash on hand(s), PE companies will be forced to invest if they do not want to lose advantage:
“Private equity firms will continue to remain active as they seek to continue to deploy more than US$1.4[trillion] in dry powder available for new deals. While market volatility, inflationary pressures and rising interest rates are combining to make the investment landscape far more challenging than a year ago, in many instances, PE firms will look to new strategies and investment themes that provide increased resilience against a macro backdrop for which few modern playbooks exist.” (See source.)
From an industrial sector point of view “technology, health care and real estate remain active sectors, collectively accounting for nearly half of PE transactions by value [in the first half of 2022].” (See source.) Additionally, infrastructure, energy, and the environment are all receiving a significant influx of funding as we shared earlier in “New Energy for Your Life, Your Career, and the World.”
In summary, if you have not considered exploring the PE universe in your career plans, we would strongly suggest it.
The Barrett Group is the leading international career management firm, helping executive clients to clarify their career targets and then discover the position of their choice. Only a very small portion of our clients land due directly to our contacts. It is primarily our methodology—honed over the last three decades—that delivers results. Forbes has recognized us as one of the best in the business, our successfully landed clients echo that sentiment, and we are the only such firm to publish weekly results for our clients’ interviews, offers, and landings. Explore our website for more information or to move your career search into higher gear.
INDUSTRY UPDATE: Financial Services – October 2022
Financial Services Market Outlook
As we define it, the Financial Services Market comprises banking, investment advice and management, investment banking, insurance, accounting, and associated financial services. One source says this about the industry’s prospects:
“The global financial services market is expected to grow from $23,319.52 billion in 2021 to $25,839.35 billion in 2022 at a compound annual growth rate (CAGR) of 10.8%. The market is expected to grow to $37,343.95 billion in 2026 at a compound annual growth rate (CAGR) of 9.6%.” [See source]
The same source explains that Western Europe is the largest single market and is followed by North America. This source highlights some of the key trends facing this industry:
Digitization of commercial lending,
Continuing expansion of electronic payments, and
Utilization of big data analytics
Of course, the abrupt changes in interest rates implemented by the US Federal Reserve and other central banks to curb rising inflation will certainly also impact the industry’s outlook:
“Generally, high interest rates are good news for the future of the banking industry and financial services companies as they improve investment yields. In the longer term, digitization and a DIY approach to financial activity will have a transformative impact on businesses in the financial sector. This banking industry trend will improve financial inclusion and the availability of financial products and allow for cost-cutting. On the whole, this is excellent news for the industry, but slow-to-act and high-cost providers will suffer.” [See source]
On the other hand, stock markets have contracted sharply in recent weeks. There have been short-term impacts, particularly on investment advice, investment management, and investment banking. This will likely affect staffing as evidenced by this recent announcement:
It is understandable that when deal-making drops off, a company like Goldman Sachs does not need so many deal-makers or support people. Well-run companies are constantly reviewing their human capital. They evaluate this against the expected demand, shuffling specific specializations as they do to make sure that the demand and capacity remain relatively balanced over time. In fact, even during a restructuring, new positions may be created that require particular skills and experience.
For example, another stalwart in the industry, Ernst & Young, is potentially planning to split to take better advantage of market conditions:
“Ahead of a plan to split its auditing and management-consulting businesses, Ernst & Young revealed that revenues grew by 16.4% in the year to June 30th, the best growth rate in 20 years. Sales from its consulting services grew at a faster pace than those from accounting, although accounting still brought it more money. [E&Y] thinks a break-up will allow the consultancy side to thrive, freeing it from conflict-of-interest rules that stop it working with firms that [E&Y] also audits. Its 13,000 partners will start voting on the spin-off in November.” [The Economist, weekly September 24, 2022]
One of the enduring changes we can expect in the future is more attention to the composition of companies’ boards, especially in Europe.
Here is how one source rates the overall board situation in Europe:
“European financial services firms meet shareholder expectations in traditional areas of boardroom experience, including politics, accountancy, legal and compliance.
But directors with sustainability, FinTech and cybersecurity experience are underrepresented in the boardroom, according to investors.
However, board appointments in sustainability and technology are accelerating, with almost half (45% and 46% respectively) of directors with experience in these areas recruited in the last three years.
And, while gender diversity remains below investor expectations, the data shows more female than male board appointees have been made over the last three years.” [See source]
Outside the boardroom, other pockets of opportunity in this industry revolve around the reimagination of the energy business. This is due to both a new emphasis on environmental sustainability and trailing impacts from Russia’s invasion of Ukraine. These investments will buoy the Middle East as Europe pivots away from Russia. It will stimulate electric vehicle manufacturing and the charging infrastructure, gas terminals, and transportation. It will also create demand for executive talent not only in engineering but in financial service disciplines as well. [Read New Energy for Your Life, Your Career, and the World for more information.]
Another major segment, the insurance sector, has showed incredible agility in managing the recent string of crises. One source forecasts this segment’s immediate future as follows:
“The road ahead is dotted with multiple hurdles—rising inflation, interest rates, and loss costs; the looming threats of recession, climate change, and geopolitical upheaval; and competition from InsurTechs and even noninsurance entities such as e-tailers and manufacturers, to name a few. This is no time for carriers to be satisfied with the adaptations they’ve had to make.”
“Instead, they should be building upon the momentum they’ve achieved to maintain an ongoing culture of innovation while making customer-centricity the focal point of the industry’s standard operating model.” [See source]
The same source goes on to highlight the relative risks and opportunities in multiple subsegments of the insurance market. Illustrating as it does so the overall theme for the financial services industry: expect significant changes and, while staying put becomes ever riskier, keep your eyes open and take educated risks going forward that can potentially pay big dividends.
[See the Editor’s Note for more details and definitions.]
Some 900,000 executives work in the financial industry. It grew by about 1% in the last year and shows a persistently low female executive share of just 25%. Industry players in the EU, UK, and Middle East employ some 256,000 execs. This group expanded by 2% in the past year but is even less gender-balanced at just 18% female. The US cohort comprises some 648,000. Having grown by 1%, it boasts a higher though modest female executive share of 27%. Median tenure runs 3.8 years in the EU, UK and Middle East. The median tenure is 4.7 years in the US.
Not surprisingly, this source identified the most executives in four major sectors (See Chart 1). These sectors include banking, insurance, investment management, and accounting. Collectively these employ approximately 660,000 execs—73% of the total industry’s executive population.
These largest segments are not the fastest growing, though. That accolade goes to VC & PE (+7.3%), Non-profit Organization Management (+6.7%), Biotechnology (+6.2%) and Research (+6.1%). Other sectors have in fact contracted over the last year, including Oil & Energy, Medical Practice, Transportation, and Restaurants.
In keeping with the size of the segments noted above, Chart 2 lists mainly banks as the largest employers of executives. However, there are two notable exceptions: Goldman Sachs and Marsh, a diversified financial services firm and an insurance specialist. Overall, it seems that the fastest growing subsegment in the past year has been consulting specialists. Companies such as EY (+15.8%), KPMG (+14.6%), PwC (+12.2%), but Goldman Sachs (+12%) and Blackstone (+18.2%) also grew strongly.
In keeping with the size of the segments noted above, Chart 2 lists mainly banks as the largest employers of executives, with two notable exceptions: Goldman Sachs and Marsh, a diversified financial services firm and an insurance specialist. Overall, it seems that the fastest growing subsegment in the past year has been consulting specialists such as EY (+15.8%), KPMG (+14.6%), PwC (+12.2%), but Goldman Sachs (+12%) and Blackstone (+18.2%) also grew strongly.
As mentioned in the introduction, Goldman Sachs may be reversing some of that growth later this year.
Bear in mind that this company has about 8,300 vice presidents and almost 190 C-level officers collectively having an average tenure of 7.3 years if LinkedIn’s data is correct, and that this group has actually grown over the past year by a net 115 positions. Most of the talent flow has been an exchange with Morgan Stanley (-26 departures /+28 hires), JP Morgan Chase & Co. (-14/+26), Next Capital (+36), Citi (-10/+17), and Wells Fargo (-12/+11). (Note: Barrett Group clients have access to incredibly detailed data on millions of companies via our research arm.)
Interestingly, Blackstone added a net 1,279 employees (not just execs) and has hired significantly from Goldman Sachs over the past year (-16/+72), Morgan Stanley (-13/+47), PwC (-4/+46), EY (-2/+40) not to mention a long list of additional donor companies. Peak hiring occurred in June 2022 so far.
In relatively unconcentrated industries we often see more CEOs than Vice Presidents because every small company must have a head honcho, however, this industry is obviously much more concentrated based on the title demography (Chart 3) that shows relatively more Vice Presidents. The preponderance of Presidents is an interesting point—quite different from most industries possibly because of the strong banking component. Female executive shares peak in the Chief Operating Officer (32%), Vice President role (36%) and Chief Marketing Officer (40%) and achieve their nadir in the Chief Information Officer and Managing Partner positions (each at 15% female).
As usual, we are interested to know a little more about what these executives actually do.
Chart 4 sheds some light on this point by enumerating the specializations that executives have cited in their LinkedIn profiles. Normally Sales and /or Business Development top these charts but not in this industry. Here the specific skills of Finance, Financial Analysis, Risk Management, Banking, Insurance, and Investments come out on top ahead of more generic skills. If readers are considering transferring into or out of this industry, the relative frequency of the more generic and transferable skills can be seen in this report: Do You Have Tremendous Transferability? A number of the financial service’s most common skills appear to be highly transferable from industry to industry including Finance, Budgeting, Business Planning, Mergers & Acquisitions (M&A), Financial Analysis, and Risk Management.
As far as location is concerned, Chart 5 provides an overview of where the biggest populations of industry executives work.
New York stands head and shoulders above the others in the ranking but also boasts a higher than average +2% growth rate, which nonetheless pales compared to the heady +3% or more visible in the UAE, Frankfurt, Ireland, and Saudi Arabia. Nevertheless, numerous cities in the US and Europe also exceed the industry’s overall growth rate, including London (+2.6%), Paris (2.1+), Columbus/OH (+2.1%), Munich (+2.3%), Raleigh/NC (+2.0%), and Milan (+2.4%).
There is an interesting variation in the executive gender mix based on location that is probably also related to the industry mix there, too, with the high end in Seattle and Portland (30% female), followed by San Francisco, Washington, DC, Charlotte, and Atlanta (29%), Houston and Detroit (28%), and Boston (27%).
LinkedIn also offers an assessment of the relative hiring demand in each location whereby the following markets are all cited as having a “very high” hiring demand: New York, London, Chicago, Boston, San Francisco, Dallas-Fort Worth, Paris, Charlotte, Austin, Nashville, Raleigh-Durham.
In this particular Update “executives” will generally refer to the Vice President, Senior Vice President, Chief Operating Officer, Chief Financial Officer, Managing Director, Chief Executive Officer, Chief Human Resources Officer, Chief Marketing Officer, Chief Information Officer, Managing Partner, General Counsel, Head, and President titles. Unless otherwise noted, the data in this Update will largely come from LinkedIn and represents a snapshot of the market as it was at the time of the research.
Is LinkedIn truly representative? Here’s a little data: LinkedIn has approximately 850 million users (See source). It is by far the largest and most robust business database in the world, now in its 19th year. LinkedIn defines the year-over-year change (YOY Change) as the change in the number of professionals divided by the count as of last year and “attrition” as the departures in the last 12 months divided by the average headcount over the last year.
The Upside of Downsizing
I remember the first time I was fired. Shock. Devastation. Existential dread. I felt I had worked so hard for that company and delivered so much value, to be fired for what proved to be political reasons was so unfair. But it happened anyway. I felt I was a downsizing tragedy.
Well, In Hindsight, After A Period Of Recovery And Healing It Proved To Be A Good Thing Because It Forced Me To Look Around And Discover New Opportunities. It Also Helped Me Begin The Process Of Weaning My Self-Worth Away From My Job, Role, And Income.
Naturally, I feel deeply for people affected by announcements like this one:
At the rational level, it is understandable that when deal-making drops off, a company like Goldman Sachs does not need so many deal-makers or support people.
Bear in mind that this company has about 8,300 vice presidents and almost 190 C-level officers collectively having an average tenure of 7.3 years if LinkedIn’s data is correct, and that this group has actually grown over the past year by a net 115 positions. Most of the talent flow has been an exchange with Morgan Stanley (-26/+28), JP Morgan Chase & Co. (-14/+26), Next Capital (+36), Citi (-10/+17), and Wells Fargo (-12/+11). (Note, our clients have access to incredibly detailed data on millions of companies via our research arm.)
Well-run companies are constantly reviewing their human capital and evaluating this against the expected demand, shuffling specific specializations as they do to make sure that the demand and capacity remain relatively balanced over time. In fact, even during a restructuring, new positions may be created that require particular skills and experience.
Great, You Say, But What About The Poor People Let Go?
Some of them will feel as I did back then. Others will roll up their sleeves and find new opportunities. Still others will discover that they weren’t happy anyway and look for something more meaningful to do with their lives. Humanity, on balance, is incredibly resilient.
For one thing, when demand in one industry is down, there is usually an industry that requires more talent. Take the industries impacted by the recent US inflation Reduction Act or the resurgent interest in alternative energy sources in Europe as a result of curtailed energy supply from Russia. (Read “New Energy for your Life, your Career, and the World” for more information.) Billions of dollars and euros will flow into these related industries, building electric car charging stations, gas storage and transport infrastructure, new chip manufacturing facilities, and many, many other industries.
You Have No Experience In Those Industries, You Say? So What? We Know How To Demonstrate Transferability.
I’m Tired Of Applying To Jobs Online And Being Ignored, You Might Respond.
If you think recruiters and the online job market are your only options, then think again. There is a vast and powerful market available to you that you might completely overlook. Read “Why are You Peering through a Keyhole at the Market for Executives?” for more information. About 75% of our clients land through the unpublished market—opportunities so new that they are not in the public domain. How do you find them? Simple, hire an experienced guide, an expert in helping executives discover their next career step. Hire the Barrett Group.
Remember, Your Career Is An Asset, And Just Staying In Place Or Chugging Along On The Same Career Track Is Not Necessarily The Safest, Most Lucrative, Or Most Fulfilling Use Of That Asset. (Read “Are Your Career Assets Frozen?” For More Information.)
Here’s an example of one client who stepped outside his professional comfort zone:
“It was very difficult,” said Derek. “I redid my resume and prepared a cover letter. I tried LinkedIn, Indeed, and ZipRecruiter. Also I reached out to people I knew in my industry, but they were in a similar situation. The industry was having such a terrible time. There were no contracts being awarded, no new work going on. People in my network were focused on keeping their own jobs and couldn’t help me in my job search.”
After four months of job searching with few results, Derek hired The Barrett Group (TBG).
“What I liked about The Barrett Group is that it focused on a lifestyle change versus a job change,” said Derek. “The Barrett Group program begins with a self-evaluation. You work on yourself first before going out into the job market.”
It was a great change for Derek because the status quo was no longer an option.
“Initially, I thought I would stay in the same industry, but it became quite evident that the industry would not improve for a couple years,” said Derek.
“I really like the Clarity Program and my Clarity coach, Scott Brown. He is very good at what he does,” said Derek. “Scott got me to look internally. He got me to consider the social and financial parts of my life, my goals past and present, and where I see myself in the future. He made me think more than I’ve ever done in other similar courses. To be honest, it’s probably one of the most valuable things I’ve done in a long, long time.” [Derek Maxwell, Read More.]
So the next time you are forced to think about a new career, whether due to internal or external forces, consider that there is a potential upside to downsizing. We provide emotional and intellectual support to our clients during the transition, not to mention a methodology so tried and true over the last three decades that Forbes magazine cited us as one of the best in the business again for the third year. [Read “Executive Proponent with Impact” for more information.]
Find your personal upside. Invest in professional help to capitalize on your most valuable preretirement asset: your career. Give us a call.
The US Bureau of Labor Statistics (BLS) reports that the overall manufacturing output in the US returned in Q2 2022 to the pre-Covid 19 peak of Q4 2018. (See Graphic below and Source).
Buttressing this generally positive result is further evidence that the number of “establishments” (essentially, businesses) also continues to grow as does the number with job gains while the number with job losses continues to shrink. (See Source).
Of course, this picture varies by industry and location. We will address that shortly.
Still, it seems safe to say that for the moment, the US is out of the woods, so to speak.
Europe may yet face a harsher test due to the energy bottlenecks confronting governments, industry, and consumers alike, but as of June, the picture still looked pretty much like a recovery (See Graphic and Source).
However, every crisis carries the seeds of new opportunity, and environment-related businesses—including energy production, storage and transmission—are receiving vast capital in-flows, so we expect this surge of investment will also help Europe cope with the constraints in due course. (Read More.)
More than 1 million executives as we define them (see Editor’s Note) work in the manufacturing sector in our area of geographic focus (the US, EU, UK, and Middle East). This total grew by about 7,000 (+0.7%) and almost 37,000 of them changed jobs over the last year. This sector remains predominantly male (83%), offers a medium tenure of 3.4 years, and is characterized by LinkedIn as having a “High” hiring demand.
Approximately 340,000 of these executives are in the EU, UK, and Middle East, a population that grew by about 1%. Additionally, more than 15,000 changed jobs, bringing the total new career opportunities in this sector in the last year to more than 18,000. In the US, this sector comprises almost 700,000 having grown by about 0.5%, and a further 21,400 changed jobs, meaning there were about 25,000 new executive opportunities in the past year.
Chart 1 describes the industries that employ these executives. Clearly the automotive subsector is by far the largest but is also growing very slowly, as are the other four in the top five by number of executives employed (Consumer Goods, Mechanical/Industrial Engineering, Electrical & Electronic Manufacturing, and Machinery). The leading companies by number of executives in the top five subsectors include Ford Motor Company, Procter & Gamble, Emerson, Schneider Electric, and Stanley Black & Decker, Inc.
On the high-growth end of the spectrum, Biotechnology (+4.6%), Environmental Services (+3.8%), Financial Services (+2.2%), Renewable & Environment (+2.1%), and Food & Beverages (+2%) all stand out as having relatively strong executive hiring trends. In descending order the leading companies in terms of the number of executives in each of these high-growth segments include Novo Nordisk (Denmark), Mann+Hummel (Germany), Truist (North Carolina, US), Vestas (Denmark), Flowers Foods & Subsidiaries (Georgia, US).
More generally, Chart 2 contains the top fifty companies employing manufacturing executives, and clearly these cover a huge swath of industries as evidenced by the top ten:
That Ford Motor Company with only 442 executives ranks so highly in an industry that employs almost 100,000 execs suggests how broadly distributed those executives most be, spread as they are across primary automobile manufacturers and their entire supply chains.
Of course, the growth of the executive ranks corresponds to some extent to the fortunes of the underlying industrial segment, but also to the strategies and performance of the companies themselves. Intel stands out as having hired 27.9% more execs recently as the company attempts to claw back market share from others in their core industry. Most of the car companies are in a hiring mode, too, perhaps as they respond to the pick up in vehicle demand that followed the Covid 19 trough. But the results are quite mixed for the pharmaceutical industry, for example, with Novo Nordisk (+9.2%), Bristol Myers Squibb (+8.6%), and Pfizer (+5.7%) actively hiring while Novartis (-0.6%), Eli Lilly and Company (-1.3%), and Sanofi (-7.7%) doing the opposite.
To peel back a layer or two on the companies who have been most active, let’s look at where Intel is recruiting its new hires, and also losing talent on occasion. Frankly, here are relatively few surprises in this list containing as it does major semiconductor and chip manufacturers as well as software and hardware specialists:
Another net acquirer of executive talent during the period was Ford Motor Company (+15.4%) who hired significantly from these companies:
Tata Consultancy Services
General Motors (+14.7%) hired from a similar list:
Ford Motor Company
FCA Fiat Chrysler Automobiles (London)
ZF Group (Germany)
Magna International (Canada)
Another fast grower, though less well known, is Alvarez & Marsal (Management Consulting, New York, +14.8%) who acquired talent mainly from the following companies:
Chart 3 offers an overview of the major specializations manufacturing executives have cited in their LinkedIn profiles, though it is important to note that most executives will have more than one specialization listed. Not surprising is the high rank of New Business Development and Sales Management, two skills that virtually always rank high in these lists regardless of industry.
While some of these specializations are relatively unique to manufacturing, notably Supply Chain Management or Six Sigma, most seem quite transferable from other industries, a perspective borne out in our review of skills transferability earlier in 2022 (See Source), whereby manufacturing demonstrates the broadest transferability (into or out of the industry) of any of the specializations we studied.
Lastly, Chart 4 outlines the top locations of these executive positions. To find a large pool of manufacturing executives, in the US you need look no farther than the usual suspects, i.e., New York, Los Angeles, Chicago, San Francisco, Boston, Miami-Fort Lauderdale, and Washington DC that collectively boast about 40% of the US-based manufacturing executive population. Typically, size and growth correspond negatively and that is true in this grouping as the largest populations grew more slowly while Houston, Minneapolis, Charlotte, Austin, Salt Lake City, Milwaukee, Pittsburgh, Columbus, Nashville, and Grand Rapids all show better than 1% growth year on year.
In the EU, UK, and Middle East cohort, the UAE, Saudi Arabia, and Munich all show more than 2% annual growth while Paris comes in close at 1.9%.
In this particular Update, “executives” will generally refer to the Vice President, Senior Vice President, Chief Operating Officer, Chief Financial Officer, Managing Director, Chief Executive Officer, Chief Human Resources Officer, Chief Marketing Officer, Chief Information Officer, Managing Partner, General Counsel, Head, and President titles. Unless otherwise noted, the data in this Update will largely come from LinkedIn and represents a snapshot of the market as it was at the time of the research.
Is LinkedIn truly representative? Here’s a little data: LinkedIn has approximately 850 million users. (See Source) It is by far the largest and most robust business database in the world, now in its 19th year. LinkedIn defines the year-over-year change (YOY Change) as the change in the number of professionals divided by the count as of last year and “attrition” as the departures in the last 12 months divided by the average headcount over the last year.
New Energy for Your Life, Your Career, and the World
Have you noticed the volume of news about energy and the climate lately? Clearly, we are at a watershed moment in history.
The constrained gas supply for Europe provides one explanation as is the crescendo of floods, drought, wildfires, and dramatic weather events—mounting evidence that the environment is changing rapidly. Ice is melting on glaciers and both poles and sea levels are rising. Average peak temperatures are predicted to climb significantly. We call this anthropogenic change—effects caused by humans.
Can humanity mitigate the damage we’ve done?
Well, we are trying! Here are just a few of the recent headlines:
However you personally feel about climate change, one undeniable effect is the enormous number of executive roles this wave of investment will deliver.
Even before these headlines, growth in executive positions related to energy and the environment was a robust 3% p.a., generating approximately 2,000 new executive positions or job changes in the last year*. About 850 of these were in the US (+2% YOY) and the balance, 1,150 or so, were in the UK, EU, and Middle East (+4%).
We are not only talking about engineering roles, either. There are educational, communication, marketing, financial, project management, and many other non-technical executive roles now in this sector—clearly slated to boom over the coming years. Within the area of energy and environment-related positions, LinkedIn lists these as the most important subjects:
Environmental Management Systems
Finance (+15%), recruiting (+13%), analytical skills (+8%), and process improvement (+8%) come out on top in terms of the generic skills most in demand within the burgeoning growth of environment-related executive positions.
Geographically, it is rare to see New York in second place, but these cities constitute the top hiring locations for energy and environment-related executives:
Well, this list will change significantly given the investment surge cited above, but even so, looking at the companies with the highest hiring action in the past 12 months shows how widespread the demand is:
Arcadis (Amsterdam, Netherlands)
Department for Environment, Food, Rural Affairs (London, England)
Wood (Aberdeen, Scotland)
ICF (Fairfax, Virginia)
Brown & Caldwell (Walnut Creek, California)
CDM Smith (Boston, Massachusetts)
Is investment in the environment likely to be just a fad, something that will subside quickly and fade? In other words, is transitioning into this industry a good, long-term career strategy?
In our opinion, the scope of the issues at hand far exceeds humanity’s response so far. The Economist (August 30, 2022) reports that the G20 countries’ environmental ministers met at the end of August to review progress toward their emission reduction goals ahead of the November COP27, and have already acknowledged in their last meeting that we collectively are not doing nearly enough to meet the goal of keeping global temperatures well below 2º C above pre-industrial levels.
What more can we do?
Well, frankly, yes. There is more we collectively can do, including geo-engineering. So you can expect these subjects to gain currency in the near future—among many others:
In this particular article, “executives” will generally refer to the Vice President, Senior Vice President, Chief Operating Officer, Chief Financial Officer, Managing Director, Chief Executive Officer, Chief Human Resources Officer, Chief Marketing Officer, Chief Information Officer, Managing Partner, General Counsel, Head, and President titles. Unless otherwise noted, the data in this Chairman’s Blog will largely come from LinkedIn and represents a snapshot of the market as it was at the time of the research. “YOY” refers to growth in the number of executives over the last 12 months.
INDUSTRY UPDATE: The Market for Executives in 2027 – August 2022
The Executive Market In 2027
According to LinkedIn, the executive market today comprises approximately 8.4 million professionals in the US, UK, EU, and Middle East. This market has grown by about 0.9% in the past year. Meanwhile circa 316,000 executives have also changed jobs. In total, there were about 390,000 executive opportunities in the past year available to career changers.
This executive market is approximately 25% female—well behind the general population from a gender point of view—and regionally quite diverse. For example, in the US this segment numbers about 4.8 million. US numbers grew more slowly at 0.7% in the past year. They showed a modest 3.3% rate of job change and was slightly better in terms of gender balance at 27% female. In the EU and UK, the segment includes 3.6 million executives. These European numbers grew by 1%, sported a brisk 4.3% rate of job change, and weighs in at just 22% female. The Middle East, also grew by 1% to 432,000. 5.1% of which changed assignments during the year, and, predictably, demonstrates the lowest share of female executives at just 17%.
Chart 1 explores the industry implications of how the executive market is likely to evolve.
Granted, many macroeconomic and political factors may deflect the current trajectory. If current trends hold true over the next five years, it is likely that this market will swell by almost 400,000 in total. Some 60,000 of those positions will be in the Financial Services industry which in this case excludes banking (+1,500) and insurance (+6,455). Computer software will also grow significantly, adding another circa 29,000 opportunities. Management consulting will also grow (+26,582). On the current trajectory, the restaurant industry, telecommunications, and medical practice will all lose ground while a broad range of industries will add 9,000 or more positions during this time frame.
Some of these faster-growing segments include high female executive shares. These are, for example, non-profit organization management (45% female), hospitals and health care (39%), and professional training and coaching (38%). However, on balance the continued growth of this total industrial portfolio alone is unlikely to significantly change executive gender shares. Changes in the attitudes and practices of industry leaders will more likely impact this balance going forward. [See our special Industry Update on Female Executives for more information.]
What will executives actually do in the future?
Most executives cite specializations as a way of describing their major areas of focus. Chart 2 illustrates how employment is likely to change within each of these specializations, again, if current trends continue.
As usual, generating new business and the related area of sales management come out on top in this overview. These add 38,000 and 34,000 positions respectively. But budgeting and business planning also seem set to grow significantly, adding another 55,000 executive roles between them. Meanwhile entrepreneurship, product development, and operations management also project the addition of 20,000 or more roles each.
Overall, the US executive market population is growing more slowly now so major locations such as Los Angeles, Washington DC, Miami, and Chicago all show increases of 4,000 to 11,000 executives in this time frame. Meanwhile, London (+23,636), Paris (+12,965), and the UAE (+11,311) are all projected to continue to grow at a faster pace.
Now please bear in mind that being employed by a company based in New York does not necessarily mean that you will work in New York. This is especially given the fact that working remotely appears to be here to stay.
How Executives Will Work
Remote Work Is Here To Stay.
As have many other sources, the Economist makes the case that working remotely is here to stay. (See source.)
Here are a few points summarized from their article:
A monthly survey since May 2020 suggests that 20% of full-time hours in the US are now worked remotely. This total is expected to rise to about 28%—up from just 5% before the pandemic.
This is partly because the remote experience has been relatively good both in terms of improved work-life balance and the technological developments allowing smooth communication and integration between remote associates.
The ability to live where you want is also an important factor that seems to be increasingly important in hiring decisions to attract younger employees. This allows employees to live in less expensive areas as well.
Whether remote working leads to higher productivity, in the long run, is still open. Though, certainly, not having to commute is a boon to both quality of life and productivity.
The Gig Economy Will Move Into The Executive Market Suite.
Although over $600 billion in venture capital funds were invested in 2021—ten times the amount a decade ago—the industry has taken a hit in 2022 (See source.). The “war in Ukraine, China’s purging of its tech industry,” and the rise in interest rates have all cramped VC’s style. Nevertheless, The Economist predicts that VC’s role in powering portfolio companies will continue to accelerate.
The Barrett Group reviewed the subject of VC’s portfolio company executive employment recently and reports:
“In the United States, EU, UK, and Middle East, approximately 24,600 executives as we define them are employed in this sector, a cohort that grew by 8% in the past year, and has seen 1,370 job changes in the same period. They are overwhelmingly male (82%) and LinkedIn cites the hiring demand in general as “very high.” ”
“Please remember that this is just the tip of the iceberg. Every one of these firms has a portfolio of companies in which they are invested and every one of those companies employs further executives. For example and chosen purely at random, Battery Ventures, a US-based, mid-level company in terms of the number of executives directly employed, lists 590 companies in which they are invested. If the same relation were to hold true for all VC and PE companies (which we cannot verify), then just the companies we cite later in this update would cover more than 60,000 portfolio companies.” (See source.)
Imagine that each of these estimated 60,000 portfolio companies has 3 to 4 executives. You will quickly see the potential impact this trend has on executive employment. Gigs at VC companies can be highly lucrative. However, they are typically relatively short, averaging 2-4 years depending on the specialization.
Beyond the VC sphere, the gig executive option is becoming increasingly attractive. This is in times of uncertainty as a company may need a growth specialist at one point or an efficiency maven at another. Hiring gig executives allows flexibility. It avoids commitments to large blocks of fixed cost, a practice gaining currency as “fractional leadership.” (See source.)
Adaptive Compensation Will Increase Complexity And Opportunity In The Executive Market
There was a time when compensation was simple. Large companies had a scale such as Hay points that defined the relative value of a role. These would then correlate to a level of base pay. Some variable elements would then be added on top and perhaps a few specific benefits such as vacation and sick days. Well, life in HR has become increasingly complicated as the search for more efficient and effective compensation has progressed.
At a high level, Equity Methods summarizes four key trends in executive compensation (See source.):
Growing adoption of relative performance awards.
Increasing reliance on sector-based comparison groups when issuing relative awards.
A surge in the issuance of executive mega grants.
The onset of ESG metrics in annual and long-term incentive plans.
Intense competition for talent and demographics also play a role. We read every day how millennials and still younger generations may value social or cultural aspects of work more than monetary rewards. Deloitte effectively debunks some of this belief (See source.). They reach the conclusion that what motivates employees to join a company may differ considerably from what encourages retention. In any case, according to Deloitte, dissatisfaction with compensation appears to affect millennials, too. Nevertheless, millennials have undoubtedly forced companies to broaden the portfolio of perks and benefits available.
At a micro-level, this complexity breeds opportunity for executives to influence their compensation packages far more broadly than ever before.
ESG Is Likely To Gain Momentum
A recent Economist article reminds us of the importance of these three letters:
“…environment, social and governance (ESG) investing […] has ballooned in recent years; the titans of investment management claim that more than a third of their assets, or $35 trn in total, are monitored through one ESG lens or another.” [Economist, July 23rd, 2022].
Whether through sincere altruism, a desire to protect future generations, self-interest, or due to the threat of expected government regulation, there seems to be definite momentum behind industry efforts to clean up their acts environmentally.
In our Industry Update on Female Executives, we highlighted the social front. The growing consensus is that diversity is important in its own right and not only because of government regulation.
Many corporations are actively adopting guidelines and practices to promote diversity.
…JPMorgan Chase has eliminated gender-specific language from its bylaws, including replacing “chairman” with “chair” and removing gendered pronouns like “his” and “her.” This announcement is consistent with the bank’s commitment to diversity and inclusion, which includes a $30 billion commitment to advance racial equity and a commitment to expanding a diverse workforce.” (See source.)
Other companies have adopted targets aimed at increasing gender equality in the executive suite. Wells Fargo, for example, has recently stated that “…diversity, equity, and inclusion metrics are integrated into monthly business review meetings.” [See source.]
The impact of ESG is gradual. But it means that executives will require new skills and perspectives to steer through the increasing complexity of cultural measures being created to address these challenges.
Who Will Own The Companies At Which Executives Work?
Private And Public Companies In The US
In the US, there are approximately 27 million business enterprises. Approximately 4,000 of these are publicly traded and another 8,000 are powered by private equity. So the vast majority of US enterprise is privately owned, and relatively small. In fact, small to medium enterprises (SME’s) make up 86.4% of employment at firms with 500 employees or more. You might be surprised at the list of privately held companies compiled by Forbes. These include giants such as Cargill, Koch, Publix, Mars, and HEB as the top five. (See source 1.See source 2).
Private equity is a very active player in this large pool. It is likely to take a larger share of private companies over time. For example, PitchBook has this to say about PE fundraising in 2022:
“Private equity firms are currently in what PitchBook analysts call “perhaps the most crowded fundraising market in history,” according to our latest US PE Breakdown. Firms raised $176 billion across 191 funds in the first six months of 2022, setting a pace that, if sustained, could surpass last year’s total fund value of nearly $340 billion across 577 funds.” (See source.)
According to McKinsey, the number of public companies dropped from about 5,000 to the current number primarily in 2010 and as a result of acquisition essentially in the banking, manufacturing, and technology sectors. Since then, counting IPOs and continuing acquisitions and mergers, the total number of publicly traded companies in the US has remained relatively stable. (See source.) Overall they comprise about one-third of non-farm employment.
Interestingly, the top ten employers of executives by our definition (see Editor’s Note) are all banks or financial services companies including the following:
It seems safe to summarize that, in the US, the balance between publicly traded and privately owned companies will remain relatively stable over the forecast period. However, private companies will increasingly, if very gradually, be acquired by private equity.
Verizon opines that private companies respond more quickly to challenges and opportunities. And also that private companies are more likely to invest in growth than public companies (See source.). So if that is the culture you are seeking, then being a big fish in a small pond may well be for you. If you go the private equity route, it will be more like a gig—a job defined by a project or achieving specific milestones—versus a more traditional, long-term relationship.
On the other hand, larger companies simply have more executive positions to offer. There is considerable churn in their ranks (attrition ranged between 3% and 6% for the top five companies listed above). So the smaller fish in the bigger pond approach has its benefits, too.
Private And Public Companies In Europe
Europe lists approximately 22.5 million enterprises (excluding financial services) and this number also seems to be relatively stable (See source.). Publicly listed companies in 2020 totaled about 5,688 (See source.) based on listing at the national level with the highest number in Spain (2,711) and the overall average equaling 316 per country. Here again, we see that public companies represent a very small share of total enterprises. In Europe, SMEs (in this case up to 249 employees) cover approximately 64.5% of employment. (See source.).
Although the data is a little out of date, the European Savings Institute offers an interesting illustration of how total share ownership has changed in Europe over recent decades. Households have dropped from 38% to about 15% of equity. Government and insurance funds have also shrunk while investment funds and above all foreign capital have blossomed—more than doubling their share of total European equity during the period. (See source.)
Europe is also seeing record deal-making in the private equity space as reported by PitchBook:
“European PE deal value well surpassed 2021’s H1 figure, with an estimated €463.5 billion transacted across 4,053 deals, representing year-over-year increases of 35% and 16%, respectively. Transactions continue to grow in size, particularly at the top of the range, pushing total deal value upward.”
“The business products and services sector received the largest share of European PE capital in the first half of the year, with €124.2 billion invested—its highest ever H1 figure. Companies in the sector are likely [to] maintain or even grow their revenues as the market becomes more distressed, while its consumer counterpart is expected to continue to struggle.”
Because public stock markets are underperforming at the moment there is a tendency toward “take-privates” rather than IPO-style exits, however, this is probably cyclical and not systemic. (See source.)
As in the US, LinkedIn’s overview of the companies employing the largest number of executives as we define them (see Editor’s Note) includes a large number of financial services companies:
Executives in Europe have a clear choice between being smaller fishes in larger pools at the publicly traded companies (see the list of largest employers above) with relatively high attrition rates between (4%-7% for the list above), or joining the large and vibrant ranks of smaller, private companies that drive GDP growth and employment in the region. The latter offer relative stability if not glamour, although, increasing private equity ownership probably means the gig economy will also probably intrude in the executive suite as individuals are hired to execute a specific strategy or achieve a specific set of milestones.
In this particular monograph, “executives” will generally refer to the Vice President, Senior Vice President, Chief Operating Officer, Chief Financial Officer, Managing Director, Chief Executive Officer, Chief Human Resources Officer, Chief Marketing Officer, Chief Information Officer, Managing Partner, General Counsel, Head, and President titles. Unless otherwise noted, the data in this Update will largely come from LinkedIn and represents a snapshot of the market as it was at the time of the research.
Is LinkedIn truly representative? Here’s a little data: LinkedIn has approximately 830 million users. (See source.) It is by far the largest and most robust business database in the world, now in its 19th year. LinkedIn defines the year-over-year change (YOY Change) as the change in the number of professionals divided by the count as of last year. “Attrition” is defined as the departures in the last 12 months divided by the average headcount over the last year.
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