How will inflation affect hiring in 2023? Will job growth in 2023 continue or plummet? And how does the current financial turbulence paired with increased competition in the Private Equity industry affect the job market in 2023? These are the questions we are getting at Lancor about executive placement and hiring in 2023. My responses below:
What can we expect overall in C-Suite & executive hiring in 2023?
Turmoil and Timing; In the Private Equity ecosystem, these two factors do not mix well. The best solution is hiring top decile talent in the C-suite. As we have explored in our podcasts and articles, buying assets cheaply has never been harder. To succeed in this market, the smart money in Private Equity (or the Investment Banking sell side) need differentiated plans to improve assets with a leadership team that has the right experience to execute. Private Equity firms often are graded on the Internal Rate of Return (”IRR”) and this time-based scorecard does not wait for results. In times of turmoil, timing is everything and improvements need to be made at the front end of the lifecycle of ownership. The need to improve both executive and boardroom talent has never been greater, therefore at Lancor we see hiring at the top levels continuing to be strong and consistent in 2023.
Do you see the job growth numbers continuing overall?
Job growth continues to surprise many pundits, and for the most senior positions the cream continues to rise to the top. CFOs remain the most active position in the C-Suite but CTOs (Chief Technology and Chief Transformation Officers) and CIOs (Chief Information Officers) are very active as well. Again, the same themes of upgrading talent to generate the returns outlines in Investment Committee meetings, are allowing the job growth numbers to remain robust.
How does inflation affect hiring this year?
Inflation has already been a wrecking ball for several PE backed assets. If a PE firm relies on financial engineering to drive returns – they will be in trouble. Some PE firms simply react to an Investment Banker’s auction and resort to simply paying the highest price to buy a company. To pay nose bleed prices, they take on large amounts of debt. Pre inflation, this was rather cheap to do. As inflation has crept into our economy, the cost of this same debt has doubled, and the companies have had to take away money from growth engagements to just cover their existing debt.
Do you see pay packages staying steady or increasing for executives?
We have seen an increase in pay packages for PE executives in 2022. The largest increase in these pay packages have been in the equity component of compensation. If an executive has conviction with the investment thesis, then they should be more than willing to place a larger percentage of compensation in equity because the aggregate amount will be much larger. There is no guarantee that the equity will provide this multiplier effect. In fact, we have seen many PE backed assets miss their return goals. Therefore, the loft pay package (backed by an increasing percentage of equity) only pans out if the investment thesis pans out. Therefore, C-Suite executives need to have conviction with the plan before they join a new firm.
Do you see remote work as a trend sticking around? How will it affect the 2023 job market?
It looks like the five day a week commute is dying. It is hard to unscramble the egg of remote work and the better question is how will executives manage their teams effectively when they did not grow up in this reality. How can a team feel empowered without personal connection? How can lessons be passed down in an apprenticeship environment when this close personal and in-person bond does not exist in the traditional way? We have seen various software programs like Teams and Zoom try to replicate this void, and other programs report how employees are spending time during the day. The only constant is change and we see most firms continuing to allow remote work at various levels. For many firms it can be a plus, as it allows them to hire from a wider pool of talent.