Good Jobs | May 14, 2024

The next frontier of private equity value creation: Better jobs for frontline workers

Dennis Price
ImpactAlpha Editor

Dennis Price

Truck drivers. Care givers. Sales teams. Workers on the frontlines of business interactions are key drivers of value and profitability. Improving the quality of their jobs can reduce turnover, boost engagement, and decrease burnout.

By delivering better jobs further down the organizational chart, some private equity firms are unlocking superior returns, says Ellen Frank-Miller of Workforce & Organizational Research Center, or WORC. In Thinking beyond the C-suite pays off,” the center examines the role of human capital management in value creation at private equity firms with more than $5 billion in assets.

Too often firms don’t have the time, money or energy to focus on quality jobs for frontline workers, Frank-Miller says. Instead, they focus on CEO recruitment and perhaps hold leadership accountable for workers’ satisfaction. “There’s so much untapped value being left on the table,” Frank-Miller told ImpactAlpha.

  • Driving value. From employee ownership to quality jobs, human capital management is reshaping private equity. Alongside pay and benefits, practices that drive value include job autonomy, professional growth opportunities, and perceived support from the organization, supervisors and coworkers. Smaller impact managers with an intentional quality jobs focus like HCAP Partners (a WORC client) and FoW Partners (formerly Two Sigma Impact) are poised to capture that value, says Frank-Miller.
  • Finding alpha. Larger fund managers like TPG and BlackRock are upping their game. Follow the money, says Ladell Robbins of BlackRock Impact Opportunities Fund. “In many businesses, that frontline interaction is what drives profitability and drives the success of the investment,” Robbins told WORC. For businesses heavily reliant on frontline workers, he added, “You really want to understand how those individuals are rewarded and compensated.”