private equity

Report: Private equity firms can play an important role in the expansion of quality jobs

JFF report makes the case that investment in workers at PE portfolio companies could improve job quality across the county
-

Private equity (PE) firms own U.S. companies that employ about 12 million workers. A new report from Jobs for the Future (JFF) – Private Equity Holds the Key to Creating Quality Jobs for Millionsstates, “Private equity firms could have a significant impact on the push to create quality jobs if they emphasize investing in talent as a core element of their efforts to drive growth in those companies.”

According to the report, “The industry has experienced unprecedented growth, which has intensified competition and caused company valuations to soar. In the United States, the number of private equity funds has more than doubled to more than 19,000 in the past five years.”

The report’s author Megha Bansal Rizoli writes, “We make the business case for why investments in talent at PE portfolio companies could catalyze improvements in job quality throughout the U.S. economy while at the same time delivering strong returns for investors.”

Three levers are identified that PE firms can use to move the companies in their portfolios to create more quality jobs.

  • During the investment life cycle (sourcing, due diligence, ownership, and exit), private equity firms should emphasize the importance of employment policies and practices that improve job quality. This meets workers’ needs, while creating sustainable long-term value for both the companies and the firm.
  • Companies should be encouraged to build inclusive career pathways to ensure that quality jobs are accessible to employees of all backgrounds.
  • Companies should implement employee ownership models that promote long-term value creation and investment in employees.
One Firm’s Initiative

The report shares examples of what some firms are doing, including Blackstone. In 2020, the firm introduced an initiative – Blackstone Career Pathways – “to provide its portfolio companies with tools and resources to broaden their talent networks by improving their ability to recruit, retain, and advance employees who are members of populations that have been underrepresented in quality jobs.”

The inclusion of “individuals without a four-year college degree, young people who are disconnected from work and learning, people of color, people with disabilities, veterans and military spouses, and caregivers” – allows companies to build more” representative workforces and inclusive cultures.”

Win-Win-Win-Win

“Investments in talent will improve job quality, generate strong financial returns, and drive value for workers, portfolio companies, private equity firms, and institutional investors,” says the report. “And that’s a win-win-win-win solution.”

Last year, Jobs for the Future set a North Star goal – in 10 years, 75 million people who face systemic barriers to advancement will work in quality jobs. To that end, the report says, “[PE firms] must move beyond old ways of thinking and adopt new business models and new approaches to managing companies and people.”

The report summarizes the potential widespread impact, “Any effort [PE firms] make to improve pay, benefits, working conditions, and employee agency within their portfolio companies would surely have ripple effects that benefit more workers, more businesses, and more communities across the country.”

See the full report – Private Equity Holds the Key to Creating Quality Jobs for Millionshere.

Get our latest articles, videos, and podcasts
sharing solutions to today's workforce challenges.

Sign Up to Recieve Our Newsletter