CFOs of private equity firms continue to focus on future proofing their businesses, a new EY report finds. One key area of concern is retaining millennial staff – many of whom are quick to move on if conditions are not supportive. To boost retention, CFOs say that they will continue to invest in professional development opportunities, training and transparency in communication.
Private equity (PE) firm CFOs are facing a host of new challenges when it comes to meeting ‘the challenges of tomorrow’, finds a recent EY survey of the industry. The survey, titled ‘Have yesterday’s challenges provided a foundation for tomorrow's success?’ and involved 100+ CFOs from the PE industry, explored the key areas of attention going into the future to make their businesses more competitive includes talent management, improved reporting and leveraging technology.
The respondents were asked to rank recent efforts to make their respective businesses more competitive. The most prominent move has been the hiring of talent, cited by 67% of respondents, followed by improving investor reporting, cited by 62%. In recent years, regulatory pressures have increased across the financial sector – particularly in light of a range of sector scandals – resulting in more regulatory compliance. Retaining talent ranked fourth.
To make the business more competitive in the future, 51% of the CFOs cite retaining talent as a key focus, followed by improving cybersecurity efforts. Automating manual processes comes third, cited by 48% of respondents. Better data management techniques came in fourth.
The research also asked respondents to rank their top operating objectives going into 2017. The results reflect wider efforts to become more competitive, with improving management reporting on top of the list, as cited by 55% of respondents, followed by developing personnel, at 53%. The automation of operations and system investments come in at 45% and 35% respectively. Outsourcing services was cited as important by 27% of respondents.
The training and development of a company workforce remains a key cost, as well as a key element of long-term success. The survey asked respondents to rank the priority of a number of key talent related metrics, in relation to the past two years and the next two years. The results show a considerable increase in focus on increasing staff productivity, up from 67% of respondents for the past two years to 79% for the coming two years. Priorities related to hire quality remain the same at 45%.
CFOs say that they are less likely to focus on further increasing headcount, however, they are likely to improve retention levels, up from 17% stating is as a priority over the past two years to 33% that see it as a priority in the coming two years. The number of respondents citing a move to decrease headcount is up slightly, from 10% to 12%.
One area of increased challenge for CFOs is engaging the instreaming millennial generation of employees. Recent studies highlight that this group is considerably more mobile, as well as more value driven and less profit focused. 70% of respondents, as such, expect the average millennial to stay around 2-5 years, although 22% say that they expect them to stay less than two years.
In a bid to retain millennials – many of whom place personal development and career progression highly – CFOs say that they will focus on professional growth opportunities, increasing technical skill development, and providing transparent communications.
Scott Zimmerman, EY Americas Private Equity Assurance Leader, remarks, “Private equity firms’ CFOs realize they have to build teams, retain talent and capitalize on rapidly developing technology to be competitive in the foreseeable future. People will always be most important, but today, it is also about optimizing operations through understanding the true impact of their digital agenda.”