The Real Challenge in Private Equity: Finding and Backing Great People
Kensington’s investment philosophy is simple. We invest in companies and back great people, which in turn builds great companies. In Private Equity, a consistent challenge we see businesses facing is finding, attracting and retaining high quality people.
The Importance of the Local Workforce
The strength of the local workforce is very important for us when we consider, for example, building new facilities. Not surprisingly, the best workforce are in the lowest unemployment regions, because everyone who wants to grow their business is looking for high quality talent.
Recently, as you may have heard, General Motors made an announcement about the closure of its Oshawa operations. This announcement has been spurring numerous inquiries about the availability of its factories. Why? Because companies who are looking for plant capacity would likely choose a location like Oshawa for its long history of employing trade and factory workers that are accustom to modern manufacturing practices compared to settling in elsewhere.
Developing a Strong, Local Workforce in Remote Communities
When the talent you look for is plentiful, in a concentrated location, it makes it easier to keep and attract talent. The real challenge is in the development of a quality team in an environment that does not have a history of employing skilled trades workers or manufacturing of any kind.
Kensington works with companies that range from operating in remote communities to heavily populated areas that have immense shortage in a particular set of desired skills. In both circumstances, Kensington first looks at how we might develop the required workforce within the local community. Usually, imported workers sometimes stay, but often, eventually choose to move on. Therefore, we believe that long-term success of an operation relies on the development of a long-term high quality local team. That means, working with local schools to develop the appropriate curriculum, and offering the right training and apprenticeship programs. It also means spending more money on the workforce, than pure plant engineering would prescribe because on-the-job training means duplication of roles in order to properly train inexperienced workers.
When businesses are run with a short-term outlook, it is significantly more difficult to invest in this type of workforce development. Only with a long-term objective of having a sustainable high-quality stable, local workforce can any owner justify the excess shorter-term operating costs to provide the skills training that is required.
Currently, there are several government programs that help offset the cost of having a high-quality, stable, local workforce. Kensington takes full advantage of those where we can, but even with government investment, the business will eventually bear a meaningful cost. Automation, for example can lower the cost of basic tasks, but automated systems require trained technicians to operate and maintain, which cannot eliminate the cost of workforce development.
From our experience, we believe that the long-term support of school-based training programs may be the most effective way to build a workforce with the requisite technical skills. This means, over-communicating with regional trade schools, post-secondary and secondary institutions. Also, it means offering summer work-term and internship employment to people that may seek permanent employment elsewhere when they are ready to enter the workforce.
Our success rate in providing such support to local schools is about 20%, which means that one in five people apply for work after graduation. The others leave the area or find other employment.
Workforce development is one of the most challenging aspects of Private Equity. For us here at Kensington, we see this challenge as more of an opportunity to make a positive impact for the people living in these communities. We do this by influencing key decision makers with the goal to successfully bridge the gap between education and employment.
From our experience, we have realized that when we invest, we are not only investing in the people but in their communities.
Visit us at www.kcpl.ca for more information. Follow us on Twitter @kensingtonfunds.
