July 9, 2026 | Our Thinking
The Evolving CHRO Role in Private Equity-Owned Manufacturing
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For most of private equity’s history, the Chief Human Resources Officer (CHRO) was an administrative appointment. The function encompassed benefits, employee relations and compliance, and it operated at a distance from the value creation plan. While the CEO and CFO positions carried urgency to fill, the head of HR was hired later, if at all. That structure no longer supports value creation. Hold periods now demand HR leaders who not only build the human capital infrastructure, but also prepare that infrastructure for a buyer’s review. Most firms think only of the former, yet nearly all firms eventually require both. |
The Levers Are Thinning
Hold periods have extended as exit markets slow and buyers grow more selective, which leaves sponsors creating value organically rather than through a quick sale at a higher multiple. Meanwhile the traditional value creation levers of cost reduction, pricing discipline and operational efficiency produce less differentiation when every firm in the market applies them. As those margins compress, human capital becomes one of the few remaining advantages.
The assumptions that carried HR leadership for a generation, including steady labor supply, abundant capital and talent that moved freely across borders, are eroding.¹ In their place, the seat is expanding into decisions over which the function once had no claim such as workforce automation, sourcing and training.
In manufacturing, the shift carries added urgency. Manufacturers could need as many as 3.8 million additional workers by 2033, and roughly half could go unfilled if the skills and applicant gaps already visible today are not addressed.² The CHRO is most responsible for a manufacturing platform’s ability to staff its own growth, not simply maintain headcount.
These pressures expand what the CHRO seat must carry, and over a single hold period that broader role splits into two distinct jobs.
Two Mandates, One Seat
The two jobs share little beyond the title, and most manufacturing portfolio companies still hire for only one.
The build-phase CHRO tends to enter a company with no functioning HR infrastructure and must construct one while the business operates. In the lower middle market, this is frequently the company’s first true HR executive. The title itself varies with company scale, from chief human resources officer to chief people officer to vice president of human resources, but the work is consistent. The strongest candidates for this role have built an HR function from a generalist base or from nothing, integrated acquired workforces into unified payroll, benefits and management structures, and designed leadership assessment frameworks that produced real promotion and termination decisions.
The exit-phase CHRO enters later in the hold, once the infrastructure exists, and prepares it for a buyer’s review. The right candidate for this job has carried a company through human capital diligence on either side of a transaction, restructured executive compensation under founder or family ownership, and documented a leadership bench deep enough that no buyer flags key-person risk below the CEO.
These are different candidates with different track records. Hire the former into an exit and the building continues past the point it creates value; hire the exit profile too early and there is nothing yet to document.
Compensation should follow the same split. Build-phase incentives are based on value creation plan milestones and platform-level equity that reflects construction difficulty; exit-phase incentives are based on the valuation outcomes a buyer will test. Compensation structure is not a retention mechanism. It is a signal about the role’s true purpose.
Before the Next SearchBefore a search begins, companies need to determine what profile is required. That starts with assessing whether the HR infrastructure, including workforce analytics, succession planning and leadership assessment, is already in place or still requires foundational work. From there, the CHRO profile should align with the remaining hold period, distinguishing between the executive needed to build systems and the one needed to prove they perform. Leadership bench strength should also be evaluated against the value creation plan, extending beyond the organization and compensation reviews completed before close. Companies should plan for the transition from the build phase to the exit phase rather than assuming one CHRO can successfully lead both. Without this level of assessment, companies risk a costly mid-hold leadership transition. An interim executive covers the gap, a retained search runs for months and the value creation plan waits. Months are lost, and in a five-year hold, months are expensive. |
SOURCES
(1) Bain & Company, The Great Talent Recalibration: How Macroeconomic Shifts Are Reshaping the CHRO Agenda, January 2026
(2) Deloitte and The Manufacturing Institute, 2024 Talent Study
