Private Equity looks to Training as Important Benefit
While cash compensation is certainly front of mind for most individuals working in the private equity and venture capital industry, training can also be an important piece of overall compensation with significant advantages for both individuals and their firms. With advantages to the firm including increased productivity, increasing firm skill and “bench strength,” and higher retention, its easy to see why funds are looking at options for providing increased training opportunities to their teams. And the team members are appreciating the training as well, with indicators of higher job satisfaction and loyalty.
Many private equity and venture capital firms are smaller in size and struggle justifying the sometimes considerable cash cost of training, especially in a market increasingly moving to a lower fee model. However, these are also firms most well positioned to take advantage of training opportunities. In many of these firms, one or two specialists tends to look after certain firm responsibilities, creating issues when these people choose to depart or become overwhelmed. The firm then needs to desperate seek out a replacement or support, which of course is costly and doesn’t always result in a good fit within the team. Providing training to existing team members to ensure bench strength exists and employees are able to cover for each other, at least in the short term, can provide significant value.
While all employees tend to enjoy the opportunity of expanding their knowledge, young employees who are early in their careers, often stand to gain the most from training and also tend to put greater emphasis on this benefit. In fact, attracting young employees out of school or those with only a few years of industry experience may be easier with a strong reputation as a firm who will help employees build their knowledge. Providing training to young employees will also enable them to see a clear path for advancement within the firm, creating loyalty and also potentially lower recruiting costs for higher positions by promoting from within.
Many firms also worry that training their employees will lead them to seek opportunities elsewhere, losing the value of their investment in training costs and time. This is a valid concern and certainly a number of employees will leave after undergoing training. However, even more employees tend to view the investment by the firm in their skills to be an indicator of loyalty, encouraging them to stay on and seeking potential advancement.
Private equity and venture capital firms certainly do stand to benefit greatly by increasing training programs, especially in areas where it can expand the firm’s internal skill set. As a result, expect to see more teams look to training as a key component of their development plans, while more employees will come to demand training as a core component of their overall compensation.