Putting people at the heart of value creation

The most effective people leaders don’t treat human capital as a separate agenda; they translate the business plan into the capabilities and structure required to deliver it, and then track progress with the same discipline applied elsewhere in the value creation plan.

Human capital has long been recognised as a critical factor in private equity-backed growth. The real question is how do we make “people” a real part of the Value Creation Plan (VCP), rather than a parallel workstream?

That was the focus of our recent Inflexion People Leaders’ Exchange hosted by Imy Harrison, Assistant Director in Inflexion’s Talent team. “While financial metrics dominate reporting, the biggest value drivers often sit in the organisation itself,” she points out.

Imy shares data to back this up, revealing that portfolio companies that prioritise talent are materially more likely to hit first-year targets, while a significant share of deals that disappoint do so because people issues were not addressed early enough. “Human capital is not a supporting actor; it is often the plot,” she says.

The sentiment is shared by Dan Jackson, who is Mercer’s UK and European Private Equity M&A Leader. Dan works with investors through deal phases and supports PE-backed businesses through their value creation journey — and his core message was that embedding people into the VCP starts by identifying the link between the core investment thesis and the “people topics” that will enable the business to achieve its objectives.

“Start with the business plan, then work towards identifying how people topics can be a driver of the success of this plan” Dan advises. He argued that the most effective approach is to anchor people planning in what the business is trying to achieve beyond HR: revenue growth, margin expansion, growth through acquisition, reducing debt, multiple expansion. Once objectives and timelines are defined, leaders can work backwards to understand how these factors are ultimately driven by people.

Dan structures the thinking around organisational capabilities into a number of buckets about value and culture: organisation design and governance, leadership, talent, total rewards, culture, change management and communications, and HR delivery model. He then advises mapping what needs to happen in year one, years two to three, and out to year five as a plan aligned to the investment thesis.

Turn “organisation design” into actionable insight. Having outlined the business’s intended journey, what does the full team need to look like to deliver effectively? Organisational design needn’t mean a dramatic overhaul; it can evolve in steps along the way.

Dan shared some examples of methods you can use to identify strengths and areas for improvement in your organisational design:

• Salary roll-ups can highlight concentrations of cost and responsibility, raising questions about dependency risk, resilience, and whether certain roles are overloaded or misaligned. 
• A performance-rating “sunburst” can reveal pockets of under- or over-performance, helping teams identify areas that may need additional focus and support.
• Spans of control analysis can act as a sense-check: highly standardised functions may support wider spans, while specialist areas may require tighter management attention.
• Age demographic views can flag future succession risk (for example, clusters approaching retirement) and show where pipelines may need strengthening.

Whilst the best assessment approach will vary by business, Dan says having a structure to monitor and assess the way your workforce is structured can help leaders move faster and avoid finding out too late where businesses are fragile.

Retention and succession should focus on skills, not just individuals. Do companies have retention strategies for critical and high-performing talent, and how far down the organisation should they go?  Dan encourages moving beyond individual-based planning to consider skills and capabilities linked directly to the business plan. “Critical skills should be mapped so you can identify gaps,” he stresses.

He outlined a structured method that begins by categorising capabilities into groups. From there, capabilities can be assessed against operational relevance and business value to help provide a framework to begin to think about which skills and ultimately individuals are most important for retention purposes.

Total rewards are an effective lever for attracting, retaining and engaging talent — particularly when recruiting in new geographies or competing for scarce capabilities.

Dan shared a checklist which stresses the importance of market competitiveness, cost effectiveness, compliance readiness (including the EU Pay Transparency Directive coming into force in 2026-2027), alignment of incentives to value creation, and clarity on equity and benefits structures — especially post-acquisition where integration can unlock both consistency and efficiency.