The Hiring Issues and Business Challenges Investors Are Facing Today

We’ve spent the last weeks speaking with key investors and business leaders, to get a better understanding of the hiring issues and broader business challenges that they and their portfolio companies are facing today.

The insights gained, we believe will be a help both to those who are leading businesses and to candidates looking to understand trends in the executive jobs market.

Our thanks go to the following contributors for speaking with Alan (Azi) Cutter and Michael Adler , being open to sharing their experiences and opinions with us all:

Daniel Farber

David Levine🎗️

Elisha Tropper

Eric Marton

Rita Longobardi

Thibault LEMOINE

The Transformative Impact of Automation and AI

Let’s begin with the sizeable effects that Automation and A.I. technologies are having across a wide range of industries. The importance of this was a recurring theme in our conversations, both from the perspective of changing the balance of power amongst new and existing competitors within industries, and from the point of view of how the makeup of jobs will be impacted within those industries.

Leaner Teams and the Emergence of New Unicorns

According to David Levine, Principal of Glenluna Ventures and a post-exit entrepreneur, AI is radically transforming traditional hiring needs. "We're entering an era where AI-native businesses can achieve unicorn status with dramatically lean teams – potentially fewer than ten people," he explained. "This is made possible by leveraging AI automation across multiple business functions, from sales outreach to operational management."

However, Levine cautioned that this transformation is still evolving. "While we've seen a significant shift in the last 18 months toward building substantial businesses with smaller teams, certain roles remain irreplaceable. Humans are still essential for product development, maintaining customer understanding, and especially in sales of strategic products where warm relationships are critical. AI can augment these functions but won't replace the human element."

Job Displacement and Productivity Gains

This leads us nicely into the anxieties surrounding job displacement due to automation and AI. We've already seen this to a degree through the rise in outsourcing in recent years. While it's generally acknowledged that repetitive and undesirable tasks will be increasingly automated, Elisha Tropper (CEO of JAG Capital Holdings) believes this won't lead to mass unemployment, but rather to increased productivity within existing workforces. However, Thibault Lemoine of KKR predicts an acceleration of AI's impact in the next 4-5 years, potentially putting roles like lawyers and accountants at risk. 

Overall, the picture is one of the new jobs that are created being likely to more than offset those that are made redundant. Specific roles may well be vulnerable, but human skills remain crucial (at least in the foreseeable future) and there will be a sizeable need for business leaders who can push through the changes needed to fully leverage AI and Automation.

Hiring and Talent Challenges

Multiple factors have been at play, impacting how investors and their portfolio companies are staffing their businesses – and the challenges they are facing in doing so. Key themes to emerge centred around talent shortages, high salary expectations and ongoing retention challenges. Let’s look at each of these in turn.

Talent Shortages and the Fierce Competition for Talent

These conversations reinforced our view that businesses are grappling with significant talent shortages, particularly in hot sectors and geographical areas. A scarcity of skilled workers in digital/tech roles was a common concern that was voiced, as was the lack of candidates for essential functions like cleaning and maintenance. These shortages are more pronounced in smaller cities and regions outside major hubs, potentially due to factors like pandemic-era government subsidies that impacted the attractiveness of these jobs.

In addition, our lineup of business leaders highlighted the struggle to find experienced professionals who possess both industry expertise and local market knowledge, a challenge particularly acute in Europe where language and country-specific understanding are crucial for success.

This difficulty is further exacerbated by the growing need for talent to lead companies through periods of expansion and transition, as businesses seek individuals capable of navigating increased complexity. This acute shortage of the desired skillset appears to be most prevalent when companies are hiring for leadership positions. Those executives on the market, it seems, don’t always possess the change experience and transformation track record that companies are most interested in securing.

High Salary Expectations of Candidates

Contributing to the staffing headache now – and for the foreseeable future – is the high salary expectations of candidates. Companies are finding that they need to offer higher and higher salaries to attract top talent. This is exacerbated by the fact that many experienced professionals are choosing to remain "on the market", taking on fractional roles while searching for their ideal position. This is further driving up salary expectations, as businesses compete for their skills and expertise – and the pressure to secure that next role is diminished.

Retention Challenges Aren’t Subsiding

The challenge of making the necessary key hires is being made all the harder by the stubbornness with which retention challenges persist. One fascinating point we uncovered is that the shift to hybrid and remote work arrangements, while offering flexibility, has contributed to lower office occupancy rates which is fostering a sense of disengagement among employees. This, in turn, translates directly into employees being more transient, more likely to move to another employer and necessitating the search for yet another replacement hire.

This is especially concerning in major cities, where long commutes make the prospect of coming into the office less appealing. But finding a way to improve retention is a key concern, whether that be through improved employee engagement, more competitive compensation packages, or fostering a more positive and inclusive work culture.

The Economic and Investment Climate

Alongside the dual impacts of AI/Automation and the ongoing challenges of recruiting and retaining staff, our conversations also unearthed some insights about the challenging investment climate in which many businesses are operating.

Extending Financial Runways

There seems to be a trend of companies prioritising financial prudence, by focusing on extending their financial runway and reducing costs. This is primarily driven by the challenging economic climate and the difficulties in securing large funding rounds, which was highlighted in our conversation with Eric Marton amongst others.

In response to these financial pressures, businesses are adopting measures to optimise their spending and prolong their operational lifespan without requiring immediate further external investment. This focus on financial sustainability is likely a key driver behind the trend of companies seeking to increase productivity through automation and AI, as discussed with Elisha Tropper.

The Impact of Capital Constraints

Interestingly, the limited availability of capital is also hindering recruitment efforts, and so factors are combining to make business leaders’ challenges more acute. Operating with restricted budgets, many businesses are finding this is making it more difficult to offer competitive salaries and benefits packages to attract top talent. This situation is particularly acute for startups and smaller companies, that often do not have the same financial resources as larger, more established organizations. The scarcity of available capital forces these businesses to make tough choices, often prioritising essential operational expenses over expanding their workforce.

To end on a positive note, though, the feeling amongst those we spoke with is that the investment landscape is showing signs of improvement, with indications that capital is starting to become more readily available. In the coming years, this positive shift could potentially enable companies to allocate more resources towards recruitment efforts. 

We hope this has provided some good insights into the challenges business leaders are facing right now. If your business is looking to make key hires and would welcome the support of external experts, please reach out to Alan, Mike or any other members of the AC Lion Digital Executive Search team.