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How to Secure the Best Talent for Your Firm

The M&A world is often characterized as having high employee churn and as a result, very high human resource costs. Improving your HR process is a sure-fire way to gain efficiency, cut costs, and ultimately run a more profitable enterprise.

How have PE Firms and Investment Banks Historically Sourced Talent?

Most PE shops and investment banks have traditionally relied on two main talent acquisition channels for experienced hires:

Channel Pros Cons
Personal networks
  • Reference leads to high degree of comfort
  • No cost
  • Small pool of talent
Recruitment Firms
  • Targeted search
  • Initial vetting handled by recruiter
  • Interview logistics handled by recruiter
  • Small pool of talent
  • Expensive (25-30% of first-year compensation)
  • Inflexible (heavy emphasis on full-time placements)

 

These strategies left many lower middle market firms unable to find top-tier talent because they could not afford expensive placement firm fees and could not match compensation offered by larger firms. To make matters worse, a growing startup scene in the US has created intense competition for talent, with many financial services professionals leaving the industry to work at startups or start their own companies.

However, a new recruitment option that solves some of the challenges associated with existing channels is rapidly gaining traction: web-based hiring platforms.

Technology is Supercharging Recruitment and Remote Work

The proliferation of social networking already has made the professional world more interconnected than ever before. LinkedIn has created the concept of a publicly viewable resume and is now a major force in online recruitment, with 130,000 jobs posted per month (as of 2012). In Q2 2014, LinkedIn generated $360M of revenue from Talent Solutions (recruitment-related activities) – 60% of its revenue for the quarter. More traditional job websites such as Monster.com and TheLadders.com allow you to access large groups of talent in an instant. These technology platforms vastly increase the pool of available candidates vis-a-vis traditional recruitment channels such as personal networks or headhunters.

Remote work has also significantly expanded the pool of available talent. Thanks to ubiquitous high-speed internet, video conferencing (Skype), and robust file sharing mechanisms (DropBox, Google Docs), managing remote workers has never been easier. With people now using technology to work together through virtual offices all over the world, the way we do business has fundamentally changed.

Tech-Enabled Job Marketplaces Lower The Stakes for Hiring Decisions

Thanks to the proliferation of tech-enabled job marketplaces and remote work, access to new talent is at an all-time high. This is especially important for lower middle market firms, which are now able to access a rapidly growing pool of freelance talent.

The combined effect of freelancing and tech-enabled hiring platforms means that you no longer need to commit to a full-time hire upfront. Through services like SpareHire, you can hire employees remotely and on a part-time basis to meet your work demands. Additionally, you can test run a potential employee with a real project, rather than theoretical case studies in an interview. For example, by having the potential employee build a financial model for a live deal, you can examine real work product and gain valuable insight into the employee’s work style and personality before committing to a full-time hiring decision. This is a particularly valuable option if you are a VP-level or senior-level professional at a resource-constrained lower middle market shop, where your time is far better spent on deal sourcing, structuring, financing and other value-add activities.

Since the stakes on both sides are generally lower for projects than full-time hires, freelance projects offer the added bonus of enabling you to tap into higher caliber talent than you otherwise could have. An ex-Goldman banker may be working on a startup of his own and be willing to help with a model or investor presentation, but is unlikely to join a boutique M&A shop on a full-time basis due to the opportunity cost. Freelance projects offer a viable way for you to access this top-tier talent.

So What?

Thanks to the strong network effects of the internet, accessing high-caliber talent on demand has never been easier. Remote work is quickly becoming a major component of our economy. As information flow and liquidity continue to increase, technology should significantly reduce the cost of finding talent. If you run a small M&A shop, make sure you are taking full advantage of the internet to manage your HR efforts.

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