TLDR: Canadian private equity firms are increasingly recognizing human capital as a critical driver of value creation, yet many still lack a focused strategy. Deloitte highlights three key ‘people levers’ to accelerate returns: standardizing leadership assessments, treating culture as a measurable lever, and modeling workforce dynamics beyond just attrition. The article also mentions Deloitte’s proprietary workforce AI tool, Periscope.
Canadian private equity (PE) firms are increasingly acknowledging the pivotal role of human capital in driving value creation, despite a significant gap in strategic implementation. While 80% of PE firms identify talent as a top-three value driver, only 35% currently deploy a focused human capital strategy throughout the deal lifecycle. This insight comes from Deloitte’s analysis, drawing on their report ‘Beyond the term sheet: The human levers that find returns,’ and interviews with Canadian PE firms.
Deloitte has identified three key ‘people levers’ that Canadian deal teams can utilize to accelerate returns:
1. Standardizing Leadership Assessments: Inconsistent leadership remains a primary execution risk in Canadian PE deals. While most firms assess CEO fit pre-close, many still rely on instinct or inconsistent evaluation models, particularly in co-sponsored transactions. Firms that invest early in leadership clarity are better positioned to coach and support new CEOs. One Canadian PE firm, initially using ad-hoc assessments, has since introduced a leadership scorecard to better align CEO potential with their value creation plan, though consistency gaps persist. Empathy is highlighted as a crucial leadership trait that promotes healthier work cultures and improves financial performance.
2. Treating Culture as a Measurable Lever: While leadership sets the tone, culture is the true driver of performance. Many firms, however, treat culture as intangible. A Canadian PE firm noted that culture is often deprioritized despite its visible impact, even when leadership and incentives dominate discussions. Cultural friction can delay the realization of early value creation levers by up to 30%, especially when teams struggle to align with new leadership. Key cultural indicators to assess before investing include clarity, transparency, and speed in decision-making dynamics.
3. Modeling Workforce Dynamics, Not Just Attrition: Talent availability is a growing pressure point for Canadian portfolio companies, yet few firms fully capture its impact. Deloitte’s proprietary workforce AI tool, Periscope, is mentioned as a tool that helps firms assess which roles and tasks are most likely to be disrupted and where investment should be allocated. This suggests a move towards more sophisticated, data-driven approaches to talent management.
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The report emphasizes that by focusing on these human capital strategies, PE firms can enhance their ability to close more deals with confidence and unlock greater value.
