At the brink of a new era for education
Private equity firms report persistent workforce challenges across their portfolio companies. At the same time, they are feeling increased pressure from investors and other stakeholders to improve on Diversity, Equity, and Inclusion and make greater progress toward sustainability goals.
Fortunately, PE firms and their portfolio companies have access to an expanding set of innovations arising from the work of nonprofit institutions that can help create more equitable economic opportunities and drive positive social impacts for workers, families, and communities. At the same time, these new strategies can enhance the performance of PE firms’ portfolio companies and increase returns for their investors. To-date, relatively few private equity firms have taken advantage of these new tools but, recognizing the potential benefits, interest and adoption is increasing.
These promising approaches, explored below, are focused on overcoming an array of obstacles that hinder the mutual success of both workers and their employers. Objectives of this work include creating more sustainable work environments; accessing and employing underutilized human capital; developing alternative career entry paths; providing skills-based training; and other career advancement enablers.
Jobs for the Future (“JFF”), is one non-profit organization developing innovative strategies that companies, including those backed by private equity firms, can deploy to expand, strengthen, and support their workforce. Resources such as JFF’s Impact Employer Model provide companies with strategies, including an Impact Employer Talent Framework (see Figure 1), for generating greater opportunity, equity, and advancement for employees while improving business performance. To-date, this model has been leveraged by more than 700 professionals across F1000 employers to address the full spectrum of critical employee centered activities.
JFF relies on collaboration with a wide range of stakeholders to develop, promote, and implement strategies in areas such as apprenticeship-based training and professional certifications. JFF’s partners in this work include, among others, technology companies, community colleges, and regional economic development agencies.
One example of JFF’s approach to supporting continued innovation is the recently announced launch of “JFF Ventures” which will back early-stage companies developing technologies with the potential to improve economic mobility for workers in low-wage jobs. Reflecting JFF’s multi-stakeholder collaborative approach, JFF Ventures will provide strategic support to its portfolio companies through a “Corporate Innovation Council” consisting of leaders from Fortune 1000 companies across multiple sectors.
Another organization advancing innovation in these areas is the Good Jobs Institute (“GJI”) – a 503(c) launched to enable companies to operationalize academic work done by, among others, Zeynep Ton at the MIT Sloan School of Management. Ton’s academic work is focused on identifying and developing solutions to common employee centered frictions that can arise from misalignment of organizational design, operational processes, and firm strategy. These frictions are often felt most acutely by front line workers but also significantly hinder the operational and financial performance of the companies which employ them.
The Good Jobs Institute leverages Ton’s academic work to help companies thrive by implementing a “Good Jobs Strategy” which, GJI describes as creating, “…superior value for employees, customers, and investors by combining investment in employees with operational choices that increase employee productivity, contribution, and motivation.” GJI provides employers practical diagnostic tools, analytic methodologies, and customized workshops enabling firms to successfully implement a “Good Jobs Strategy.”
The Good Jobs Strategy creates superior value for employees, customers, and investors by combining investment in employees with operational choices that increase employee productivity, contribution, and motivation
To-date, the strategies and resources developed by organizations such as JFF and GJI, have been primarily adopted by large corporations such as IBM, Walmart, and JP Morgan. However, interest from small and mid-size businesses is increasing. JFF’s Rusty Greiff explains, “While large employers are becoming more invested and active in this focused work, we are now also seeing more of a nascent innovative approach around equitable career mobility among small- to-midsize businesses.” To support these efforts, JFF, along with SkillUp Coalition, recently introduced a digital toolkit specifically for small and medium-sized businesses. The toolkit allows such companies to explore how common “earn and learn” models — paid internships, Registered Apprenticeships, and on-the-job training — can connect them to a broader, more diverse pool of workers to fill critical skills and labor gaps, while reducing costs to recruit and onboard new workers.
Similarly, Sarah Kalloch, Executive Director of Good Jobs Institute, reports that GJI has primarily supported large employers with hundreds or thousands of front-line workers. However, GJI has also engaged with smaller employers with as few as 100 employees and believes that even very small companies can benefit from the Good Jobs strategy resources made available on-line.
A limited, but growing, universe of private equity firms have been turning their attention to addressing the employee centered challenges and opportunities described above. According to Greiff at JFF, “We are seeing more and more private equity firms, especially impact-driven funds, collaborate with their portfolio companies to …realize career pathways for their employees [and] …diversify their talent and leadership pipelines.” While “impact” focused private equity firms may have been the earliest adopters in employing these workforce innovations, interest is expanding to a wider universe of firms.
One private equity firm seeking to utilize innovative workforce focused strategies is MiddleGround Capital, a Kentucky-based private equity firm investing in lower-middle market manufacturing companies. As an example, Mike Bridge, the firm’s Director of ESG, cites encouraging its portfolio companies to invest in robotic systems that raise worker productivity, reduce injuries, and increase job satisfaction by eliminating the most monotonous (and often lowest value generating) tasks required of manufacturing employees. Such efforts support MiddleGround’s financial goals for its portfolio companies as well as its stated “impact” goal of achieving a minimum $25 hourly labor rate across its portfolio companies by 2025.
More private equity firms are collaborating with portfolio companies to realize career pathways for their employees and diversify their talent and leadership pipelines.
Another firm utilizing innovative workforce strategies in support of their portfolio companies is Mosaic Capital Partners, a North Carolina-based private equity firm with an investment strategy focused on financing the transition of companies to employee ownership. In addition to the economic benefits workers can achieve through employee ownership, Ian Mohler, a Partner at the firm, reports utilizing a “good jobs” scorecard in support of its portfolio companies and their employee-owners.
These and other private equity firms are encouraged by early successes with these practices. However, these firms recognize the greater impact – on both financial returns and employee welfare – that could come through introducing these strategies to their portfolio companies more broadly and systematically. GJI’s Kalloch, agrees, explaining “Once private equity firms understand the Good Jobs Strategy, they are well positioned to apply the strategy across their diverse businesses and our goal is to empower them — through direct engagement and the resources we provide — to do that”.
No posts found.
News & Events
Subscribe to our newsletter.
Subscribe to our newsletter to receive updates about new Magazine content and upcoming webinars, deep dives, and events.
Access all of Impact Entrepreneur.
Become a Premium Member to access the full library of webinars and deep dives, exclusive membership portal, member directory, message board, and curated live chats.