Talent has always been central to private equity value creation. But how much responsibility should the fund itself take for supporting talent across its portfolio?

There isn't one answer.

That’s because every private equity firm operates differently.

Fund size, portfolio size, investment strategy, company maturity, geography and hiring volume all influence what the right model looks like.

For some firms, hiring should remain almost entirely within the portfolio companies.

For others, establishing trusted recruitment partners across the portfolio can create immediate leverage.

As hiring volume grows, a centralized recruiter or flexible embedded recruitment model may make sense.

And as the portfolio becomes larger or more complex, the opportunity may extend beyond recruiting into a dedicated talent function or centre of excellence.

The important question isn't whether every private equity firm needs a Head of Talent.

It's whether your portfolio has reached a point where it needs some form of centralized talent capability - and what that capability should actually look like.

In this article, we'll look at how common centralized talent functions are in private equity, the different forms portfolio-level talent support can take, the signals that suggest your current model may no longer be enough, and how to determine the right approach for your firm.

Let's dive in…

The Rise of Portfolio Talent

Centralized talent functions are becoming an established part of the private equity operating model, but they are far from universal.

An analysis by Spencer Stuart of 50 top-performing buyout and middle-market private equity firms found that 58% had a senior portfolio talent leader - a 20% increase from five years earlier.

Interestingly, fund size alone doesn't appear to determine whether these functions exist.

Separate research from Russell Reynolds found dedicated talent partners at 70% of PE funds with $3 billion to $5 billion in assets under management, compared with 61% of funds between $5 billion and $10 billion and 59% of funds above $10 billion.

There is no universal threshold at which a private equity firm suddenly needs a talent function.

A smaller portfolio pursuing aggressive growth may have greater talent needs than a larger portfolio of mature businesses with established internal teams. Investment strategy, company maturity, existing internal capabilities and the frequency of talent challenges all matter.

The pattern of need is more important than the size of the fund.

This is also part of a broader shift in how private equity firms approach value creation. McKinsey found that PE firms have more than doubled the size of their operating groups on average since 2021, while adding more specialized functional expertise and engaging those teams earlier with portfolio companies.

Talent is one part of that broader question: where can expertise sitting above the individual portfolio company create leverage across multiple investments?

Among firms that have built centralized talent functions, the answer varies considerably.

Some focus heavily on executive search and leadership networks.

Others are involved in organizational design, leadership assessment, succession planning, talent strategy and pre-deal diligence.

Others operate as something closer to a centre of excellence - creating connections and infrastructure across the portfolio rather than directly owning talent for every company.

The right model can also change over time.

A firm may begin by giving portfolio companies access to a trusted group of recruitment partners.

As hiring volume increases, it may add shared recruiting capacity.

As more portfolio companies build their own internal talent teams, the greater opportunity may shift toward connecting those teams and creating a centre of excellence.

The question isn't simply whether to build a talent function.

It's what problem you're trying to solve today - and how that problem may change as the portfolio evolves.

The Opportunity is Bigger Than Recruiting

Imagine a portfolio of 15 companies.

Each may have its own recruiter, recruitment team or HR leader responsible for hiring. Collectively, there could be decades of talent experience across the portfolio.

But how often are those people actually talking to each other?

They may be evaluating the same recruitment technology.

Working with the same agencies.

Building interview processes from scratch.

Navigating similar compensation challenges.

Experimenting with AI.

Searching for overlapping skill sets.

Developing hiring manager training.

Trying to determine which metrics actually matter.

One company may have already solved a problem that another is spending months trying to figure out.

Without some form of connective tissue across the portfolio, that knowledge stays fragmented.

This is where centralized talent support can create leverage that individual companies cannot create on their own.

A portfolio talent leader can bring recruitment and HR leaders together to share insights, common roadblocks, lessons learned, tools, processes, vendors and even talent.

Regular forums or roundtables can give leaders a place to ask a simple but valuable question:

The answer may already exist somewhere inside the portfolio.

This isn't just theoretical. Research into established PE talent functions has identified cross-portfolio collaboration - including functional networks and regular forums for portfolio leaders - as a way firms are sharing best practices and solving common problems.

A centralized function can also identify patterns that aren't visible from inside one company.

If five portfolio companies are struggling to hire the same type of technical talent, that's useful information.

If three are independently evaluating applicant tracking systems, there is an opportunity to share what they've learned.

If one company has built an exceptional interview process, why should every other company start from zero?

These patterns can also become valuable intelligence for the fund itself.

If several companies are struggling to attract the same skill set, compensation may have shifted. If leadership gaps are repeatedly appearing at the same stage of growth, there may be an opportunity to intervene earlier. If multiple businesses are encountering the same retention or workforce challenge, the issue may be broader than any individual company.

A centralized talent capability can provide visibility across those patterns - and help the fund respond before the same problem repeats elsewhere.

The value of a centre of excellence isn't telling 15 different companies to hire the same way.

It's helping 15 companies benefit from the collective experience of the portfolio.

Strategic Doesn't Have to Mean Hands-off

Creating a centre of excellence doesn't mean the centralized talent function should stay out of recruiting.

There will be moments when rolling up your sleeves is exactly where the value is.

A critical leadership search is stuck.

A newly acquired company needs to build a team quickly.

A business doesn't have an internal recruiter yet.

Another suddenly needs hiring capacity it doesn't have.

These needs can become particularly acute during moments of change.

A new acquisition may need to assess its leadership team, replace key roles or build capabilities that didn't previously exist. A company entering a new market may need an entirely different talent profile. A transformation plan may depend on several critical hires landing within a relatively short window.

The need for centralized support isn't always created gradually.

Sometimes the portfolio changes faster than its existing talent infrastructure can respond.

Sometimes the highest-value thing a centralized talent leader can do is bring leaders together to solve a systemic problem.

Sometimes it's to pick up the phone and help fill a critical role.

The role can be strategic without being hands-off.

And for some private equity firms, recruiting may be the primary reason to create centralized talent support in the first place.

The question is when the cost of leaving talent entirely decentralized begins to outweigh the cost of creating a shared capability.

You May Need the Capability Before You Need the Function

Not every private equity firm needs a full-time Head of Talent.

But that doesn't mean every portfolio company should be left to solve every talent challenge independently.

There is a wide range between having no centralized support and building a permanent internal talent function.

A firm might centralize its relationships with external recruitment partners.

It might create flexible recruiting capacity that portfolio companies can access when hiring increases.

It might hire a centralized recruiter.

It might connect existing portfolio talent leaders through regular forums and shared resources.

Or it might build a dedicated portfolio talent function that combines several of these capabilities.

These models aren't necessarily permanent destinations.

A trusted recruitment ecosystem may be enough for a firm today. Shared recruiting capacity may become necessary as hiring increases. Eventually, as internal talent teams develop across the portfolio, the greatest source of leverage may shift from directly supporting searches to connecting the expertise that already exists.

The capability can evolve alongside the portfolio.

The important thing is recognizing when the current model is no longer enough.

The Signals That Centralized Talent Support May Make Sense

There is no magic number of portfolio companies, open roles or annual hires that suddenly makes a talent function necessary.

The better question is whether the same talent challenges are beginning to repeat across the portfolio - and whether solving them independently is creating unnecessary cost, effort or risk.

1. Your Portfolio Companies Keep Solving the Same Problems

One company is evaluating an ATS.

Another is building an interview process.

A third is trying to improve hiring manager training.

Others may be working through compensation challenges, assessing new recruitment tools or trying to determine which hiring metrics actually matter.

Individually, these are company-level challenges.

When they begin appearing repeatedly across the portfolio, they become an opportunity for shared expertise.

Centralized talent support can identify those patterns, connect the right people and make sure lessons learned in one company don't disappear inside it.

The goal isn't to force every portfolio company into the same process or technology.

It's to make sure they don't all have to start from zero.

2. The Same People at the Fund Keep Getting Pulled Into Hiring

A critical role has been open for months.

A CEO needs an introduction to a recruiter.

A portfolio company needs help assessing a senior candidate.

Another is trying to build its first internal talent team.

None of these issues alone necessarily justify a centralized talent function.

But if Partners, Operating Partners or other members of the fund are repeatedly spending time connecting companies with recruiters, troubleshooting searches or finding talent resources, the need may already exist.

It is simply being absorbed informally by people whose primary role is something else.

This is particularly worth watching after acquisitions or during periods of significant change.

If every new investment creates another scramble to find recruiters, assess talent or build basic hiring infrastructure, the portfolio may be repeatedly paying the cost of not having an established capability.

3. Your Portfolio Isn't Using its Collective Buying Power

External recruiting partners will always have a place, particularly for specialized, difficult or executive searches.

But without visibility across the portfolio, every company may be independently finding, vetting and negotiating with different agencies - sometimes for very similar work.

There may even be several portfolio companies already using the same agency, each paying the same standard fee without realizing the collective volume they represent.

That's a missed opportunity.

If a fund knows multiple companies will need external recruitment support, it may be able to consolidate some of that demand and negotiate portfolio-level terms.

Instead of five companies independently paying a 20% placement fee, for example, the portfolio might commit a defined number of searches to a trusted partner in exchange for preferred pricing.

The individual portfolio companies still own their hiring decisions.

The fund simply uses its visibility across the portfolio to create leverage that no individual company has on its own.

The opportunity goes beyond cost.

Consistent partners can build knowledge across the portfolio, understand recurring talent needs and develop candidate networks that create value across multiple companies.

The goal isn't to centralize every search or force companies to use the same provider.

It's to recognize when fragmented buying is leaving money - and potentially better service - on the table.

4. Hiring Demand is Significant, But Difficult to Predict

Hiring rarely happens in a perfectly predictable line.

A portfolio company might need almost no recruiting support for six months and then need to make 20 hires.

A newly acquired company may suddenly need to build a leadership or technical team.

Another may have one critical search that is disproportionately important to its growth.

Across an entire portfolio, those needs can create meaningful demand without creating an obvious case for permanent recruiting headcount inside every company - or at the fund.

The signal here isn't simply that companies need recruiting help.

It's that the portfolio regularly moves between too little demand to justify permanent capacity and too much demand for existing teams to absorb.

Flexible recruiting models can close that gap.

An embedded recruitment or RPO model can provide dedicated recruiting capacity that scales up or down as hiring needs change, without building permanent headcount around peak demand.

Fredo's Talent+ model, for example, is designed around exactly this problem: providing embedded recruitment capacity that can increase or decrease alongside hiring demand.

For some firms, that flexibility may be the right long-term model.

For others, it can provide a bridge while the portfolio develops enough consistent demand to justify building internally.

The important part is having somewhere for the need to go when hiring accelerates.

5. Portfolio Talent Leaders are Operating in Isolation

A portfolio may already have considerable talent expertise without having any centralized talent capability.

Some companies have recruiters.

Others have established talent teams.

Others have HR leaders carrying responsibility for hiring alongside everything else.

But there may be no mechanism for any of them to learn from one another.

A centralized talent leader can create that community.

That might mean regular roundtables, shared resources, introductions between leaders dealing with similar challenges, access to benchmarks, shared vendor knowledge or simply creating a trusted network across the portfolio.

It also gives those leaders a way to share what they're seeing back with the fund.

One challenge at one company may be isolated.

The same challenge appearing at five companies is a pattern.

The collective expertise may already exist.

The opportunity is connecting it.

6. Critical Roles are Becoming a Recurring Barrier to Growth

Sometimes the issue is much simpler.

Companies cannot execute their plans without the right people.

If critical roles are repeatedly staying open across the portfolio - particularly leadership, technical, commercial or other specialized positions - there may be value in creating more recruiting capability centrally.

The exact solution matters less at this stage than recognizing the pattern.

If difficult searches are repeatedly blocking execution across otherwise independent businesses, the portfolio may have a shared recruiting problem even if every individual search belongs to a different company.

What Should You Actually Build?

Once you've identified recurring patterns across the portfolio, the next question isn't simply whether to "centralize talent."

It's which capabilities are worth sharing - and how much infrastructure you actually need to support them.

Model 1: Create a Portfolio Recruitment Ecosystem

The lightest-touch option is to make trusted external expertise easier for portfolio companies to access.

That could mean one preferred recruitment partner for common searches, alongside a curated network of specialists for executive, technical or niche roles.

The fund can negotiate preferred terms, maintain visibility into performance and help companies access partners that have already been vetted.

If enough external hiring volume exists across the portfolio, it may also be possible to negotiate better economics.

Rather than each company engaging agencies independently at standard terms, the fund may be able to direct a defined volume of work toward trusted partners in exchange for preferred pricing.

The longer those relationships exist, the more valuable they can become.

Partners begin to understand the portfolio, recurring talent profiles and the expectations of the firm.

Candidate relationships built for one company can create opportunities elsewhere.

And when a newly acquired business suddenly needs support, there is already someone to call who understands the broader environment.

This model preserves almost complete autonomy at the portfolio-company level while creating some of the benefits of scale.

Model 2: Create Flexible Shared Recruiting Capacity

If the portfolio regularly needs more recruiting capacity than its individual companies can maintain, the next step may be a shared resource.

That could be an internal recruiter, a small centralized team or an embedded external function that supports companies based on demand.

The focus here is execution.

Instead of every company independently adding recruiters during growth periods and reducing headcount when hiring slows, recruiting capacity can move toward the companies that need it most.

This can be particularly valuable around acquisitions, periods of rapid scaling or major transformation initiatives, when hiring demand can increase faster than an individual company's internal team can respond.

It can also be valuable when portfolio companies hire similar skill sets.

Candidate relationships, market knowledge and sourcing networks can compound across searches rather than disappearing every time a hiring project ends.

The risk is becoming an unlimited internal agency.

Shared capacity works best when there are clear rules around which searches receive support, how priorities are set and what remains the responsibility of the individual company.

Model 3: Build the Connective Tissue

At a certain point, the biggest opportunity may no longer be adding recruiting capacity.

It may be connecting the capability that already exists.

A portfolio talent centre of excellence can bring together recruiters, talent leaders and HR teams that would otherwise operate independently.

The mandate can include regular talent-leader forums, shared resources, market intelligence, vendor knowledge, technology evaluation, benchmarks and introductions between people dealing with similar challenges.

But the value can flow in both directions.

The function can share expertise with portfolio companies while also bringing insight from those companies back to the fund.

Which talent markets are tightening?

Where are compensation expectations moving?

Which capabilities are becoming harder to hire?

What challenges are appearing repeatedly as companies scale?

That portfolio-wide view can help turn talent from a series of isolated company-level issues into useful operating intelligence.

A centre of excellence can also preserve institutional knowledge as companies enter and exit the portfolio and individual leaders move on.

This is where centralized talent support begins to create value beyond the number of roles it directly fills.

The function doesn't need to tell every company how to hire.

It creates the conditions for every company to get better at it.

Model 4: Combine Strategy With Execution

For portfolios with broader and more mature talent needs, the answer may be a hybrid function.

A centralized talent leader or small team can build the community, identify patterns across the portfolio and advise leadership teams while still stepping directly into execution when the situation warrants it.

They might spend one week facilitating a discussion between portfolio talent leaders.

Another helping a company select an ATS.

Another supporting a critical executive or technical search.

They can manage external recruitment partnerships, identify opportunities for portfolio-level purchasing, support companies during periods of rapid change and determine when additional recruiting capacity should be brought in.

The line between strategy and execution doesn't need to be rigid.

If a critical hire is blocking growth and the centralized team can help, rolling up their sleeves should be part of the value they bring.

Choosing the Right Model

The decision should start with the problem, not the org chart.

If portfolio companies occasionally need help with difficult searches, a portfolio recruitment ecosystem may be enough.

If hiring demand is regular but unpredictable, flexible shared recruiting capacity can provide support without locking the firm into permanent headcount.

If the expertise already exists but remains disconnected, build the connective tissue.

And if several of these needs exist at once, the case for a broader hybrid talent function becomes much stronger.

The answer can also change over time.

What works for a portfolio of eight companies today may not work when that portfolio grows to 20.

What works when companies are hiring independently may stop working when several enter periods of transformation at once.

And a firm that initially needs hands-on recruiting support may eventually find that its greatest opportunity is connecting the internal talent teams it has helped build.

Ask:

• How many portfolio companies are actively hiring at any given time?

• How predictable is hiring demand?

• How often are critical roles getting stuck?

• Where does recruiting capability already exist across the portfolio?

• Which challenges are appearing repeatedly across different companies?

• Where are companies independently spending money on the same services?

• How much time is the fund already spending on talent issues informally?

• Would portfolio talent and HR leaders benefit from a stronger community?

• Which capabilities would genuinely become more valuable if they were shared?

• Is there enough consistent demand to justify permanent headcount?

There is no universal threshold.

A smaller portfolio with aggressive growth plans and limited internal recruiting capability may benefit from centralized support sooner than a much larger portfolio of mature companies with established talent teams.

Fund size alone doesn't provide the answer.

The pattern of need does.

Key Takeaways

• There is no universal portfolio or fund size that determines when centralized talent support makes sense. The pattern of need matters more.

• Centralization doesn't have to start with a full-time Head of Talent. Preferred recruitment partners, shared recruiting capacity and flexible RPO models can all create leverage earlier.

• The opportunity extends beyond filling roles. A centre of excellence can connect talent leaders, preserve institutional knowledge and turn portfolio-wide patterns into useful intelligence.

• The right model can evolve as the portfolio grows and its needs change.

• Centralization should make portfolio companies more capable - not take ownership away from them.

What Centralized Talent Support Shouldn't Become

Centralization creates leverage when it removes duplication and gives portfolio companies access to expertise they wouldn't otherwise have.

It creates friction when it becomes another layer of bureaucracy.

The goal shouldn't be to force every company onto the same ATS, use the same recruitment process or work with the same agencies regardless of what they actually need.

Nor should a centralized recruiting team become an unlimited internal agency expected to absorb every open role across the portfolio.

Portfolio companies still need ownership.

The centralized function should make them more capable - not more dependent.

That means creating shared resources without unnecessary standardization, providing access to expertise without removing accountability and stepping into execution where doing so genuinely creates value.

Where Should You Start?

If you're beginning to notice opportunities across your portfolio but aren't sure whether they justify a formal talent function, don't start by designing an org chart.

Start by looking for patterns.

Talk to the people responsible for hiring across your portfolio.

Ask where they repeatedly get stuck.

Look at which agencies and vendors they're using, what they're paying and where there may be overlap.

Understand which roles are consistently difficult to fill.

Look at where hiring demand tends to spike - after acquisitions, during periods of rapid growth or when companies are undergoing significant change.

Find out which companies have built processes or capabilities that others could learn from.

Then start with the smallest intervention that solves a meaningful problem.

That might mean negotiating portfolio-level terms with recruitment partners.

It might mean creating a trusted network of specialists that every company can access.

It might mean introducing flexible recruiting capacity that can move with demand.

It might be as simple as bringing portfolio talent leaders together once a quarter and seeing what happens when the people solving similar problems are finally in the same room.

And if those needs continue to grow, the case for a dedicated portfolio talent leader or centre of excellence may become obvious.

Not every private equity firm needs to build a talent function tomorrow.

But every firm can ask whether there are opportunities to create more leverage from the talent expertise, relationships, intelligence and buying power that already exist across its portfolio.

Because the goal isn't centralization for the sake of centralization.

It's making sure every portfolio company doesn't have to solve the same problem alone.

Looking for more resources to help you build a better hiring practice?

Try these helpful articles:

• Building Your Founding Team: Who You Need, What to Offer, and How to Hire

• How to Design a Hiring Process That Actually Works

• How to Conduct Better Interviews: A Practical Guide for Hiring Managers