By Che’ Blackmon, DBA Candidate

Founder & CEO, Che’ Blackmon Consulting

🎯 Introduction: The Asset That Never Appears on the Balance Sheet

Private equity has entered a new era. The days of financial engineering as the primary value creation lever are over. Interest rates remain elevated. Multiples are compressed. Holding periods are stretching longer. And the firms that are winning are not the ones with the cleverest capital structures. They are the ones who understand a fundamental truth: the most powerful driver of enterprise value walks through the door every morning and decides whether to give you their best.

Workforce productivity is no longer a soft metric that belongs in an HR presentation buried in the appendix. It is an EBITDA lever. It is a valuation driver. It is the difference between a portfolio company that hits its value creation plan and one that bleeds value through turnover, disengagement, and leadership dysfunction. Research from JRG Partners indicates that strong human capital management can contribute up to 30% of a PE firm’s value creation efforts post acquisition. AlixPartners’ Tenth Annual Private Equity Leadership Survey confirms that senior team alignment and culture are extraordinarily important for value creation, especially as holding periods grow longer and deals become more complex.

Yet most PE operating playbooks still treat people strategy as an afterthought. They bring in operational consultants for supply chain optimization, pricing analytics, and technology modernization. But the workforce? The people who actually execute every initiative in the value creation plan? They get a benefits harmonization checklist and a town hall.

This article is written for PE investors, operating partners, portfolio company CEOs, and fractional CHROs who understand that the next frontier of value creation is not in the spreadsheet. It is in the workforce. It is grounded in my 24+ years of progressive HR leadership across manufacturing, automotive, healthcare, nonprofit, quick service, and professional services industries, and it is powered by the High Value Leadership™ framework, which I developed through real world cultural transformation work and continue to refine through my doctoral research in organizational leadership at National University.

Let’s redefine what “value creation” actually means. 🚀

💰 Section 1: The Business Case — Why People Strategy Is a Value Creation Lever

In private equity, every decision is measured against one question: does this increase enterprise value? People strategy must be held to the same standard. And when it is, the data is unambiguous.

📈 The Numbers That Should Change the Conversation

Consider the following realities shaping the PE landscape in 2025 and 2026:

• Workforce cost is the largest controllable expense in most portfolio companies. In labor intensive industries such as manufacturing, healthcare, and professional services, people costs represent 40% to 70% of total operating expenses. Yet most value creation plans devote less than a page to workforce strategy.
• Employee turnover is a direct hit to EBITDA. The cost of replacing a single employee ranges from 50% to 200% of their annual salary, depending on the role. In a portfolio company with 500 employees and 25% annual turnover, that is a multimillion dollar drag on earnings that rarely shows up in the deal model.
• Engagement drives productivity. Gallup’s research consistently demonstrates that organizations with high employee engagement outperform their peers by 23% in profitability. In a PE context, that engagement delta can be the difference between hitting and missing the value creation plan.
• Leadership quality determines execution speed. PwC’s research on PE portfolio company value creation emphasizes being “decisive and fast with talent changes,” noting that making big talent shifts mid execution of a value creation plan can waste time and slow progress, possibly costing returns.
• The CHRO gap is real. Not all mid market PE backed businesses have a CHRO. Many operate with an HR manager or director who is capable at compliance and administration but has never been asked to build a people strategy that ties directly to EBITDA growth and exit valuation. This is the gap that fractional CHRO partnerships are designed to fill.

In Mastering a High Value Company Culture, I wrote that culture is the lifeblood of any organization. For PE backed companies, I would sharpen that statement: culture is the lifeblood of the investment thesis. When culture erodes, productivity drops, turnover spikes, institutional knowledge evaporates, and the value creation plan becomes a work of fiction.

🛠️ Section 2: The Five Workforce Levers That Drive Enterprise Value

Based on my work across industries and informed by the High Value Leadership™ framework, I have identified five interconnected workforce levers that directly impact enterprise value in PE backed portfolio companies.

⭐ Lever 1: Leadership Alignment and Capability

The single most consequential people decision in any portfolio company is who leads it. AlixPartners’ research confirms that PE firms have increasingly adopted formal leadership assessments during due diligence and onboarding, and the most successful firms have created Human Capital Partner roles to manage leadership issues at the fund level.

There was a manufacturing company backed by a mid market PE firm that struggled for 18 months to execute its operational improvement plan. The problem was not the plan itself. It was that the plant leadership team lacked the emotional intelligence and change management skills to bring the workforce along. When the firm invested in targeted leadership development aligned to the value creation plan, operational metrics improved within two quarters.

High Value Leadership™ Pillar in Action: Purpose Driven Vision. Leaders must connect every employee’s daily work to the investment thesis. When frontline workers understand why operational improvements matter, not just to shareholders but to their own job security, career growth, and professional pride, execution accelerates.

⭐ Lever 2: Workforce Productivity and Optimization

Workforce productivity is not about making people work harder. It is about ensuring the right people are in the right roles, with the right tools, the right training, and the right motivation. It is about span of control optimization, role clarity, skills gap analysis, and performance management systems that actually differentiate high performers from low performers.

There was a healthcare organization in a PE portfolio that discovered through workforce analytics that 30% of its supervisory roles were redundant, not because the people were unnecessary, but because the organizational design had never been rationalized after a series of acquisitions. Restructuring the org design, redeploying talent into patient facing roles, and streamlining management layers improved both quality of care metrics and EBITDA margin.

High Value Leadership™ Pillar in Action: Balanced Responsibility. Optimization without psychological safety creates fear. Fear drives compliance, not performance. Leaders must maintain high standards while ensuring that employees feel safe to innovate, raise concerns, and take ownership.

⭐ Lever 3: Culture as a Competitive Moat

Culture is not a poster on the wall. It is the operating system of the organization. It determines how fast decisions get made, how effectively teams collaborate, how openly problems are surfaced, and how deeply employees commit to the company’s success.

In High Value Leadership: Transforming Organizations Through Purposeful Culture, I explored how high value leadership creates environments where both humans and companies thrive together. For PE backed companies, culture is a competitive moat. A strong culture retains top talent during the turbulence of ownership transitions, accelerates integration after add on acquisitions, and creates the organizational resilience needed to execute ambitious value creation plans under pressure.

FranklinCovey research shows that culture issues lead to a 30% failure rate of M&A transaction financial targets. In a buy and build strategy, where multiple acquisitions must be integrated rapidly, cultural misalignment does not just slow things down. It destroys value.

High Value Leadership™ Pillar in Action: Stewardship of Culture. Leaders must consciously shape and nurture organizational culture. In a PE context, this means treating culture as a board level agenda item, measuring it with the same rigor applied to financial KPIs, and holding leaders accountable for cultural outcomes.

⭐ Lever 4: Retention of Critical Talent

In every portfolio company, there are 15 to 30 individuals whose departure would materially impact the business. These are the employees who hold key client relationships, critical technical knowledge, or institutional memory that cannot be easily replaced. Yet most PE backed companies do not have a formal retention strategy for these individuals until they resign.

McKinsey’s research on talent retention in M&A emphasizes that talent flight can undermine performance, value creation, and both the near and long term success of a deal. Organizations should develop talent retention plans as soon as possible, often before the acquisition is finalized.

There was a professional services firm in a PE portfolio that lost three of its top five revenue producing partners within 12 months of acquisition. The partners cited “cultural misalignment” and “loss of autonomy” as their primary reasons for leaving. The firm’s revenue declined 22% in the following year. The acquisition, on paper, was a success. In practice, it was a value destruction event.

High Value Leadership™ Pillar in Action: Authentic Connection. Retention is not a compensation problem. It is a relationship problem. Leaders who build genuine, trusting relationships with their top performers create the kind of loyalty that survives ownership transitions, organizational restructuring, and market volatility.

⭐ Lever 5: Data Driven People Analytics

You cannot manage what you do not measure. Yet the majority of mid market portfolio companies lack even basic people analytics capabilities. They cannot tell you their voluntary turnover rate by department. They cannot quantify the cost of a bad hire. They cannot predict which teams are at risk of disengagement.

The most forward thinking PE firms are investing in people analytics infrastructure at the portfolio company level. This includes tracking workforce cost as a percentage of revenue, voluntary and involuntary turnover rates disaggregated by demographics and department, time to fill for critical roles, employee engagement scores benchmarked against industry standards, and the correlation between leadership quality metrics and team performance outcomes.

This is an area of particular focus in my doctoral research at National University, where I am exploring how AI enhanced predictive analytics can enable organizations to anticipate culture and workforce challenges three to six months before they manifest in turnover data.

High Value Leadership™ Pillar in Action: Emotional Intelligence. Data without empathy is surveillance. People analytics must be deployed in service of understanding and supporting the workforce, not controlling it. Leaders who combine analytical rigor with emotional intelligence create data informed cultures where employees trust that measurement is a tool for improvement, not punishment.

💜 Section 3: The Talent Your Portfolio Cannot Afford to Overlook

Here is the conversation that most PE operating partners and portfolio company boards are not having: who gets left behind when value creation plans are built exclusively around financial metrics?

The answer, overwhelmingly, is the traditionally overlooked. And most specifically, Black women.

In Rise & Thrive: A Black Woman’s Blueprint for Leadership Excellence, I examined the “double jeopardy” that Black women navigate in corporate spaces, facing bias and barriers related to both race and gender simultaneously. In PE backed portfolio companies, these dynamics are amplified by the pace, pressure, and structural upheaval that characterize the private equity ownership model.

✊🏿 Why This Is a Value Creation Issue, Not Just an Equity Issue

Black women hold just 4% of C suite positions and only 1.4% of executive or senior level positions in Fortune 500 companies. In PE backed mid market companies, the numbers are even more stark. When portfolio companies fail to develop, retain, and advance diverse talent, they are not just creating an equity problem. They are leaving value on the table.

• Innovation deficit. Research consistently demonstrates that diverse leadership teams drive superior innovation outcomes. Portfolio companies with homogeneous leadership are less likely to identify market opportunities, anticipate customer needs, and adapt to competitive shifts.
• Retention risk. When Black women and other underrepresented professionals do not see a path to advancement, they leave. And when they leave PE backed companies, they often take critical client relationships, operational knowledge, and team morale with them.
• Reputation exposure. In an era of heightened stakeholder scrutiny, portfolio companies that cannot demonstrate commitment to inclusive talent practices face increasing pressure from customers, employees, and limited partners.
• The sponsorship vacuum. PE ownership transitions frequently disrupt the informal sponsorship networks that underrepresented professionals depend on for career visibility. When an operating partner restructures the leadership team, the Black woman director who had finally earned a seat at the table may find that her champion is gone and no one in the new structure knows her track record.

🛡️ Practical Actions for PE Investors and Portfolio Leaders

1. Include workforce equity metrics in the value creation plan. Track retention, promotion, and engagement data disaggregated by demographics. Make it a board level reporting item.
2. Mandate leadership development for underrepresented high potential talent. Do not wait for the portfolio company to “find the budget.” Build it into the value creation plan.
3. Conduct equity impact assessments before restructuring. When reducing headcount or reorganizing, analyze who is disproportionately affected. Audit the demographic composition of the roles being eliminated versus the roles being created.
4. Create formal sponsorship structures. Do not leave sponsorship to chance. Pair high potential talent from underrepresented backgrounds with operating partners and senior leaders who have decision making authority.
5. Engage fractional CHRO support with demonstrated expertise in inclusive talent strategy. This is not a checkbox exercise. It requires leaders who understand both the PE value creation model and the lived experience of navigating corporate spaces as a person from an underrepresented background.

🔍 Section 4: When People Strategy Drives (or Destroys) Enterprise Value

❌ When It Goes Wrong: The EBITDA Mirage

There was a PE backed quick service restaurant group that achieved impressive EBITDA growth in its first 18 months through aggressive cost cutting: reducing staffing levels, eliminating training budgets, and compressing management layers. On paper, margins improved dramatically. In reality, customer satisfaction scores plummeted. Employee turnover exceeded 150% annually. Store level managers burned out and resigned. By Year Three, the company’s revenue had declined 12%, and the PE firm was forced to reinvest the savings into rebuilding the workforce it had gutted. The eventual exit multiple reflected the damage.

The lesson? EBITDA built on workforce depletion is a mirage. It looks real from a distance. Up close, it evaporates.

✅ When It Goes Right: The Human Capital Multiplier

There was an automotive supplier in a PE portfolio that took a fundamentally different approach. The operating partner brought in a fractional CHRO during the first 100 days. Together, they conducted a comprehensive leadership assessment, identified three critical talent gaps in the management team, restructured the organization around clear accountability lines, implemented a performance management system tied directly to value creation plan KPIs, and launched a retention program for the company’s 20 most critical employees.

Within two years, voluntary turnover dropped from 28% to 11%. Employee engagement scores increased 19 points. Productivity per labor hour improved 14%. The company exceeded its Year Three EBITDA target by 22% and exited at a valuation that exceeded the original deal thesis by 35%.

The operating partner later described the fractional CHRO engagement as “the highest ROI investment we made in the entire portfolio.”

🔮 Section 5: Current Trends Reshaping PE People Strategy

Several trends are reshaping how forward thinking PE firms approach workforce strategy in 2025 and 2026:

1. The Rise of the Human Capital Partner. Many PE firms have established a senior level leadership role, often called the Chief Talent Officer or Human Capital Partner, that owns talent strategy across the entire portfolio. AlixPartners and Russell Reynolds both document this trend as a defining shift in how PE firms approach operational value creation.
2. Fractional CHRO as a Portfolio Company Standard. Not every mid market portfolio company needs a full time CHRO. But every portfolio company needs CHRO level strategic thinking. Fractional CHRO engagements provide C suite human capital leadership at a fraction of the cost, scaled to the company’s stage and complexity.
3. AI Enhanced Workforce Analytics. PE firms are deploying AI driven tools to predict flight risk, identify skills gaps, and measure the ROI of people investments in near real time. FTI Consulting’s 2025 Private Equity Value Creation Index found that 65% of PE respondents marked AI as a top priority, with workforce applications gaining significant traction.
4. People Due Diligence as Deal Standard. Progressive acquirers are embedding people and culture assessments into pre close due diligence alongside financial and legal analysis. WTW research indicates that two thirds of HR leaders were unprepared for recent M&A activity, underscoring the gap.
5. Operational Value Creation Over Financial Engineering. BDO, Cherry Bekaert, and PwC all confirm that PE firms are moving beyond traditional financial engineering toward real growth and productivity gains within portfolio companies. People strategy is at the center of this shift.
6. Workforce Equity as an LP Expectation. Limited partners are increasingly asking questions about portfolio company workforce practices, including diversity metrics, pay equity, and inclusive leadership development. Firms that cannot answer these questions credibly face mounting pressure.

✅ Section 6: Actionable Takeaways for PE Investors and Portfolio Leaders

1. Treat workforce strategy as a value creation lever, not an HR function. People costs are your largest controllable expense. People productivity is your most powerful growth driver. Manage accordingly.
2. Assess leadership capability during due diligence. Do not wait until Day 100 to discover that the management team cannot execute the value creation plan.
3. Engage fractional CHRO support in the first 100 days. A CHRO level strategist who understands the PE model can accelerate value creation, reduce turnover, and align the workforce to the investment thesis from Day One.
4. Build culture intentionally. Culture is not what you declare. It is what you tolerate, reward, and reinforce every day. Make it a board level priority.
5. Measure people outcomes with the same rigor you apply to financial KPIs. Track turnover cost, engagement scores, leadership quality metrics, and workforce productivity per revenue dollar.
6. Invest in traditionally overlooked talent. The innovation, resilience, and perspective that diverse leaders bring is a competitive advantage. It is also the right thing to do.
7. Apply the High Value Leadership™ framework. Purpose Driven Vision, Stewardship of Culture, Emotional Intelligence, Balanced Responsibility, and Authentic Connection are not abstractions. They are the daily leadership practices that translate into measurable enterprise value.
8. Remember: your best asset is not on the balance sheet. It is in the building, and it decides every day whether to stay.

❓ Section 7: Discussion Questions

Use these questions to facilitate strategic conversations within your PE operating team, portfolio company board, or executive leadership:

1. How does your current value creation plan quantify the impact of people strategy on EBITDA? Where are the gaps?
2. What is the estimated cost of employee turnover in your portfolio companies? How would reducing turnover by 10 percentage points affect your exit multiple?
3. Does your due diligence process include a formal assessment of leadership capability and cultural health? If not, why not?
4. Who are the 20 most critical employees in each of your portfolio companies? Do they have formal retention plans? Do they know they are valued?
5. How do your portfolio companies support, develop, and retain Black women and other traditionally overlooked professionals? What would change if this became a board level conversation?
6. Reflect on the High Value Leadership™ framework. Which of the five pillars is most underdeveloped across your portfolio? What would it take to build it?
7. How could AI enhanced people analytics transform your ability to predict workforce risk and measure people ROI across your portfolio?
8. What would happen if you invested in your workforce with the same discipline, urgency, and strategic rigor that you invest in your capital structure?

🚀 Next Steps: Build Your People Strategy for Enterprise Value

The PE firms that will win in 2026 and beyond are the ones that recognize a simple truth: operational value creation starts with people. Not processes. Not technology. Not pricing models. People.

At Che’ Blackmon Consulting, we partner with PE firms and portfolio companies to build high value people strategies that drive measurable enterprise value. Our fractional CHRO practice is built specifically for the PE model: fast, strategic, commercially grounded, and aligned to the value creation plan.

Our work is powered by the High Value Leadership™ framework, informed by 24+ years of real world HR leadership across manufacturing, automotive, healthcare, nonprofit, quick service, and professional services industries, and sharpened by ongoing doctoral research in organizational leadership and AI enhanced predictive analytics for culture transformation.

We can help you:

• Conduct people and culture due diligence before or during an acquisition
• Design and deploy a workforce strategy tied directly to the value creation plan
• Assess and develop portfolio company leadership teams
• Build retention programs for critical talent
• Implement people analytics systems for portfolio level workforce intelligence
• Develop inclusive talent strategies that unlock overlooked value

Your best investment might not be the next deal. It might be the people already inside the deal you’ve made. 💪

Connect With Che’ Blackmon Consulting

📧  admin@cheblackmon.com

📞  888.369.7243

🌐  cheblackmon.com

📚 Explore More from Che’ Blackmon

Mastering a High Value Company Culture

High Value Leadership: Transforming Organizations Through Purposeful Culture

Rise & Thrive: A Black Woman’s Blueprint for Leadership Excellence

Available at books.by/blackmons-bookshelf

© 2026 Che’ Blackmon Consulting. All rights reserved.

High Value Leadership™ is a trademark of Che’ Blackmon Consulting.

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