Human Capital Planning is an essential process to ensure a business achieves its full potential and produces an excellent return on investment. By understanding how the baseline investment case impacts upon the demands upon roles and individuals within businesses, Boards can can structure and plan their Human Capital requirements with purpose and anticipation.

Historically Management Due Diligence (MDD) has been the process of benchmarking and analysing, whereas Human Capital Planning incorporates the analysis but focuses on the development of the management team, their capabilities and motivations to achieve the business objectives. A Human Capital Planning process should focus on discovering a team’s strengths, offering insight and guidance, and allowing them foresight to see what changes need to be made to succeed in a Private Equity context.

The Benefits of Human Capital Planning

Investors and management teams are embarking on an exciting phase in the development of their business.

Feedback generated through Human Capital Planning can be of significant value to Management as the business moves forward, helping them identify the collective strengths and development areas of both existing and newly formed teams as they work together with new stakeholders.

Investors are able to establish what Human Capital growth and development needs to occur to support the ongoing success of the management team. A successful Human Capital Planning process should inform investors through to the exit strategy with a clear understanding of the impact of required succession issues as well as a monitored succession plan.

On a personal level, Human Capital Planning allows more defined roles, clearer priorities and increased focus on execution. Often roles are under resourced and stretched too thin, these are the individuals who can benefit the most and become more effective.

Introduce Human Capital Planning Early

Introducing Human Capital Planning early in due diligence and framing the purpose is essential to a smooth and successful process. There can be concerns from management teams around being ‘assessed’, the impact on ability to deliver their day to day, as well as apprehensions regarding their future in the business.

For Investment Directors initiating yet another element to such a delicate process can feel like an obstruction. However, communicating early, as well as focusing on the benefits of HCP can enable smooth transitions as well as acquire the buy in from the management teams. Engaging with your Human Capital Planning provider and facilitating a relationship between them and the management team from the beginning reduces the risk of negative interactions.

Moving Forward

How you introduce Human Capital Planning can depend greatly on each individual situation; the relationship with the management team and the overall investment strategy. Private Equity is often an entirely new experience for management teams, enabling them to move through the process smoothly and facilitating a successful investment is always the end goal.

For further details please contact us.