Today, as corporations increasingly realize that investing in their own workforces can boost the bottom line as well as employee advancement, private equity is becoming a surprising, yet welcome new player. In a growing number of cases, private equity firms are even leading the way on best practices to build quality jobs and a thriving workforce.
With 12 million of the country’s workers employed by private equity firms as of 2020—and generating 6.5% of the country’s GDP—private equity firms are poised to have a transformational effect on creating quality jobs for all workers.
My organization has recently partnered with the Families & Workers Fund to mobilize private equity firms and build a data-informed business case for adopting and scaling more inclusive hiring and talent management practices.
Relatedly, this past fall I had the pleasure of attending and presenting at the Blackstone Career Pathways 2024 Summit, a gathering that brought together leaders from the private equity giant alongside foundations, nonprofits, and other corporations focused on providing accessible paths to hiring and promotion that drive better business outcomes.
It didn’t look like the private equity conferences of the last generation—or even the private equity conferences of the last decade. Instead, the summit was all about strategies for building pipelines and retaining talent from populations that have faced systemic barriers to advancement, and success stories from participating companies including Ancestry, Ellucian, and DECA Dental Group.
The summit also highlighted the key role of Blackstone’s social sector partners, such as Per Scholas, Tent Partnership for Refugees, and Grads of Life, who are helping participating businesses think about how to effectively implement the talent strategies that support access and advancement.
The results are worth sharing. Since the Blackstone Career Pathways program launched in 2020, more than 60 of its portfolio companies have welcomed 10,500+ hires from populations facing systemic barriers to advancement, including graduates of minority-serving institutions, people without four-year degrees, veterans, and refugees.
In the weeks since the summit, I’ve continued to feel highly optimistic that private equity is prepared to not only support, but lead, the quality jobs movement. Here’s why:
Private equity has powerful reach
The sheer size of the private equity industry makes it a force to be reckoned with in creating behavior change within companies. As noted, private equity-owned businesses employ nearly 12 million U.S. workers who earn $900 billion annually in wages. By comparison, the 20 biggest private employers in the country combined employ 10 million U.S. workers, and about 3 million work for the federal government, which is the largest single employer. But the number of workers isn’t the only thing private equity has going for it.
Their focus on the bottom-line safeguards quality-jobs practices
The most common critique of private equity firms can also be a strength when it comes to a focus on quality jobs: their reputation and purpose center on making money. That means when they adopt principles that center workers, those practices are inherently part of the bottom line—and less vulnerable to cost-cutting measures or leadership transitions.
In practice, this can look like profit-sharing practices. The global investment firm KKR, for example, has promoted employee ownership of its portfolio companies since 2011, and in 2022, cofounded Ownership Works, a nonprofit that helps companies create and implement shared ownership plans. Recent private equity investments in the skilled trades, the Wall Street Journal reports, are also offering paths to wealth-building and stability for small business owners across the country.
Private equity companies also have the capacity and resources to take a strategic, forward-thinking approach to corporate social responsibility. Take the Climate-Resilient Employees for a Sustainable Tomorrow (CREST) initiative, created by the Ares Charitable Foundation in partnership with the World Resources Institute and my organization, Jobs for the Future. The five-year, $25-million effort takes a worker-focused approach to the climate crisis, emphasizing regional strategies to help workers train for and transition into climate-resilient careers.
They can prove that quality jobs lead to higher revenue
While private equity companies do remain accountable to their investors, the firms that have taken innovative, worker-centered approaches have seen a literal payoff in the process. KKR’s shared ownership model has yielded returns that are between three and 10 times greater than the amount of capital invested.
Companies that are more diverse and inclusive—like what those in Blackstone’s Career Pathways program are looking to achieve—are likely to realize a cash flow that is 2.3 times higher than cash flow rates at companies that are less inclusive. Centering worker voice and creating quality jobs isn’t just a social good—today, it’s a business imperative.
The concept of “do well by doing good” isn’t new (it’s often attributed to Founding Father Benjamin Franklin). But for too long, companies have seen investing in workers or focusing on profits as an either/or. In the past, private equity has been guilty of this, too. Today, however, private equity firms are proving that worker voice and financial success can be a “both/and,” and updating the concept of doing well by doing good for the 21st century.