The Hidden Cost of Ignoring HR in Private Equity

Private equity firms are under more pressure than ever to deliver returns. With dry powder at record levels ($2.6T+ globally) and deals taking longer to close, firms are sharpening their pencils on where and how value is created.

Historically, that’s meant a laser focus on product improvements, go-to-market expansion, pricing strategies, and financial discipline. All of which are essential.

But there’s one lever that’s consistently overlooked—and it's costing firms millions. People.

HR: The Value Creation Blind Spot

In our work across founder-led and investor-backed companies, we’ve seen a pattern repeat itself:

• The operating model gets redesigned—but org design is left behind.

• New go-to-market hires are added—but onboarding and accountability frameworks don’t scale with them.

• Integration plans move quickly—but culture and retention lag behind.

Why? Because many PE firms still view HR as administrative or worse, a cost center—rather than a driver of enterprise value.

Here’s the reality: Every line item in a value creation plan depends on people executing it.

When HR is underdeveloped, you're flying blind on:

• Leadership effectiveness

• Performance expectations

• Attrition risks

• Cultural alignment

• Compliance exposure

• Change readiness

And the downstream impact? Slower ramp times, misfiring teams, and underdelivered results. That’s not a soft cost—that’s IRR erosion.

We Built a Playbook to Fix This

At Rhizome HR, we’ve developed a Private Equity Playbook that shows exactly how and where HR drives multiples.

It includes:

• Pre- and post-close HR due diligence templates

• Org readiness assessments for scale

• Board-level people metrics that correlate with value creation (e.g., attrition by function, time-to-productivity, engagement risk scoring)

• 30-60-90 day plans for standing up fractional HR leadership in newly acquired or scaling portfolio companies

  
  

This playbook isn’t about fluffy culture decks. It’s designed for PE operators, CFOs, and founders who want measurable ROI from their people strategy.

The Case for Fractional HR in PE

Bringing in Fractional HR leadership early—whether during diligence, integration, or early operational shifts—delivers:

• Faster insight into org effectiveness

• Reduced compliance and execution risk

• Proactive infrastructure for scale

• Lower turnover, faster ramp

• Higher leadership accountability

We’ve seen this move the needle across industries—from 3x faster hiring velocity, to 40% reductions in regrettable attrition, to clearer board alignment on headcount ROI.

Final Thought: Don’t Let HR Be the Bottleneck

If you’re a PE firm deploying capital into high-potential businesses, or a portfolio CEO preparing for aggressive growth, ask yourself:

“Is our people strategy keeping pace with our value creation plan?”

If the answer is no—or “not yet”—it’s time to bring HR into the spotlight.

At Rhizome HR, we embed fractional HR leaders who move fast, think commercially, and understand the investor-backed environment.

Let’s turn your people function into a multiplier—not a margin drag.

If you’re revisiting your value creation plan and wondering where HR fits in, let’s talk. We love helping investors and operators turn people strategy into real leverage.