Over the past decade, private equity value creation has evolved significantly.
The industry has moved beyond financial engineering towards operational transformation and strategic growth. In increasingly competitive markets, returns are driven not simply by capital structure, but by execution. This evolution has been driven by challenging market conditions, more competition, and the need to create sustainable value to deliver returns. Today, the model is widely adopted, with more than 60% of firms now running in-house Value Creation teams.
And execution depends on leadership.
Most teams still lean towards a generalist structure, but we are seeing a steady rise in specialist roles. In the lower mid-market, around 20% of Value Creation roles are specialised, increasing to around 40% in large-cap funds. This reflects the growing maturity of the function and the broader range of support portfolio companies now require. While there are emerging patterns in how teams are built, Value Creation is still designed fund-by-fund. The balance between generalists and specialists depends on the investment thesis, portfolio size, sectors, geographies, deal cadence and the maturity of their portfolio companies.
Almost every fund now recognises that value creation relies on people as much as strategy.
Yet there remains considerable variation in how Portfolio Talent and HR roles are structured and defined. Without clarity around remit and expectations, funds risk hiring profiles that are misaligned to their investment strategy - or concentrating too broad a mandate in a single individual.
The cost of getting leadership wrong is significant.
Research from ghSMART suggests that a failed senior hire can cost up to 15 times the individual’s base salary when factoring in hard costs, disruption and lost productivity.
Leadership gaps slow growth.
Board misalignment increases execution risk.
Poor succession planning creates friction at exit.
Designing this capability intentionally is no longer optional. It is a competitive differentiator.
One of the most common areas of confusion across funds is the assumption that Talent and HR Operating Partner roles are interchangeable.
They are not.
While complementary, they address different constraints on value creation.
Focus: Leadership inflow.
Typically responsible for:
The Talent Operating Partner ensures that the right leaders enter the business at the right time.
Focus: Leadership effectiveness and organisational capability.
Typically responsible for:
The HR Operating Partner ensures that leadership teams perform at scale once in place.
Expecting one individual to deliver both disciplines at depth is rarely realistic. Funds that separate these capabilities - or sequence them appropriately - see stronger outcomes.
There is no universal structure.
The right model depends on your investment thesis, deal cadence, portfolio maturity and ownership model.
Funds should ask:
High leadership churn often signals the need for a Talent Operating Partner. Increasing complexity and scaling challenges often signal the need for HR capability. The most effective funds design their model around the constraint that exists today - not the one they anticipate in theory.
Leadership timing directly impacts performance.
Research by Gompers, Kaplan and Mukharlyamov (NBER) found that CEOs hired within the first year of ownership delivered average returns of 3.09x, compared with 2.15x when appointments were made two years later.
The earlier leadership is aligned to the investment thesis, the faster value creation accelerates.
Waiting too long increases execution risk.
Leadership is no longer a peripheral function in private equity.
It is a core lever of value creation.
Funds that define and design their Portfolio Talent and HR capability deliberately - rather than reactively - hire better, reduce mis-hire risk, strengthen succession and drive more sustainable returns.
The question is not whether leadership matters.
It is whether your model is intentionally built to support it.
If you would like to receive a copy of the full report, please contact
Selena Farooqi, Vice President - People & Talent
selena.farooqi@grecoadvisors.com
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