Decor

Q4 2024 industry update

Welcome back to our inaugural quarterly newsletter! Take a look at Q4.

In the six months since our launch, we have achieved considerable progress as a business and have started the New Year with a strong sense of direction and promising partnerships. Considering the challenging market conditions experienced by most recruitment firms in 2024 – with roughly a third of recruitment consultants leaving the industry – we are in a secure starting position in the market for or ambitious 2025 plans.

The end of year results posted by the listed firms such as Robert Walters, Hays and PageGroup are testament to market conditions remaining difficult, with added volatility from a new UK government, the Labour budget and most recently, the outcome of the US elections. Headcount growth for most HR teams remained relatively stagnant throughout 2024, largely in part due to the wave of over-hiring that we saw in 2021/22. 

Recently, we’ve seen journalists and commentators such as Iain Martin at The Times [1] questioning the validity of HR as a function, with as well as others such as Allison Pearson at the Telegraph [2] and Douglas Murray at The Spectator pushing a similar narrative. However, given our proximity to the market, we have heard a different story being told by clients and candidates alike. Due to the rapid shift in the expectation of what People Teams are to deliver, accelerated by the COVID pandemic, HR as a function has moved from being largely administrative and ‘back-office’ to becoming a strategic pillar for growth, change and transformation within a business. The tired notion of ‘HR blockers’ is quickly becoming a thing of the past and we are seeing HR leaders and their teams under increasing pressure to deliver more, with less. 

The use of AI was increasingly prevalent throughout 2024. Although in its infancy, early adopters are already finding it to be an influential tool to streamline more process-oriented workstreams, with many clients suggesting that it will revolutionise not only their organisations, but the global economy. We anticipate these early adopters will be the businesses that advance the quickest in 2025 as they demonstrate a willingness to test and implement new technologies. Though this is unlikely to be from a top-down approach, meaning the organisations that deploy teams to test and configure new tech will naturally be further ahead than those waiting for the finished off-the-shelf product. 

There is a strong sense of renewed optimism in the market as we start 2025, in spite of challenges from 2024 ‘leaking over’. People leaders are playing a more prominent role in helping to grow, change or transform organisations, and this is having a significant impact on their cultural and strategy. 

People and Talent 

In Q4 we witnessed an increase in HR teams move back towards a Centre of Excellence (CoE) model. There has been a spike in demand for specialist learning professionals as organisations and Chief People Officers (CPOs) want a more bespoke, specialist offering. Organisations operating in boutique financial services (both buy- and sell-side) have begun to invest in their Early Careers functions as a result from greater deal flow in the pipeline and the expectation that junior ‘hands-on-deck’ are going to be needed. Increasingly, we have noticed buy-side firms are opting to hire Analysts straight out of university as opposed to the more traditional route of hiring from investment banks once they’ve completed their ‘corporate finance schooling’. 

In the same vein, financial services organisations have been preparing for a growing workforce by investing in their L&D capability. This is mostly seen in the smaller to mid-sized organisations where this has typically been part of a generalist remit. At the senior level there is a growing need to improve the leadership and management capability - a recent report from Gartner (2024) found that 70% of HR leaders are not prepared for the future. An additional justification for focusing investment into L&D is to enhance the employee value proposition (EP) to counter the competitor assumption of ‘the shop down the road will be hiring soon’. 

A notable trend we saw emerge over the last quarter has been within the HR leadership landscape. Conversations with CPOs, Vice Presidents of HR, and HR Directors have revealed that a significant number of People and Culture leaders have successfully secured new roles. This wave of appointments has come after many of these professionals actively seeking opportunities for a period of several months. This trend highlights a the start of a dynamic shift in the market, suggesting renewed demand for experienced HR leaders with the skillset and experience to navigate newly evolving challenges of people management and organisational culture development. 

We have seen a significant up-tick in the private equity portfolio market, particularly for mid-market firms. Deal flow had been reduced over the past two years due to increased borrowing costs, however, there has been a recent loosening of the purse strings as deals go-ahead and prioritising the focus on having the right leaders in place. These firms often see their gap in leadership capability being in the People team, most often scaling without a strategic leader in place. Throughout H2, we saw a significant shift in hiring for Head of People, HR Director and CPO roles in mid-market firms which culminated in a multitude of senior appointments in Q4 in readiness for 2025. 

US 

Comparative to the previous quarters in 2024, in Q4 we saw encouraging signs of market confidence with a spike in HR roles, in particular there were more Talent Acquisition roles becoming available within boutique financial services firms. The reason for this was the market anticipating increased hiring into investment and advisory teams in 2025 and so businesses have been future proofing their recruitment teams to manage the expected influx of roles. Many of these HR hires were made from direct competitors, leaving holes in stable teams that had seen very little attrition in the previous 24 months. This in itself created further activity, as the impacted businesses had to backfill departures of critical team members. The upside to this shift has been that the increase in job postings and activity has led to a wealth of previously passive candidates in the market now being open to hearing about potential roles. It has created a strong pipeline of talent willing to explore new opportunities. 

Across the private equity ecosystem, investor-backed businesses had a general lull in activity in H1, a continuing theme from the previous year. Rolling into the summer and this inactivity began to change as the pent-up demand combined with the increase in dry powder (up 1.7 times from 2023 as shown in a recent report by S&P Global), has meant an increase in appetite to invest moving into the latter part of the year. HR hiring spiked for private equity and VC-backed businesses on both coasts, particularly in healthcare and technology sectors, with marquee hires being made in Reward, HR Operations, and Organisation Effectiveness as firms readied themselves for further growth. This was backed up in a published report by Big 4 firm EY, showing a 36% surge in PE transactions in Q3, buoyed by the Federal Reserve’s 50-basis-point-cut in interest rates. The four largest publicly traded private equity firms (Apollo, Blackstone, Carlyle Group and KKR) projected a positive tone on end of Q3 AUM, instilling confidence in executives and investors alike for a more active dealmaking sheet as the New Year drove in. With a Republican victory in Q4 promising a reduction in inflation and sweeping tax-rate cuts, the future of “buy and builds” (therefore further strengthening of People Teams), looks more optimistic than in the last 24 months. 

HR Infrastructure and Operations 

Q4 continued to see the adoption of AI across all aspects of HR Infrastructure and Operations, with many firms planning to leverage chatbots in 2025. 

Increasingly, we are seeing large multinational businesses across all industries integrating chatbot AI into their shared service functions. Aside from the benefits to the end user experience, the adoption of AI has also had a significant impact on efficiency, availability, data integrity and scalability. Chatbots can handle repetitive, high volume, low risk tasks, freeing up time for local teams to focus on more complex issues. The technology can be used around the clock, ensuring that employees have access to support whenever they need it. Additionally, AI can assist with managing and analysing large volumes of data more effectively, which is particularly useful for tasks like performance tracking, recruitment analytics and employee engagement related tasks.     

As businesses grow, the demand for people services continues to increase and leveraging this technology can provide a scalable solution to meet this demand, without the need for proportional increases in resource - all whilst ensuring responses are consistent, the risk of human error is reduced, and all users receive the same level of service. 

Reward and People Analytics 

After a more active summer, activity slowed in early Q4 as we approached the Autumn Budget and US election, but there was a general nervousness felt in the market. 

We held a post-Budget roundtable in conjunction with EWM Global Advisory and FTI Consulting for HR, Finance and Reward professionals within alternative asset managers. High hopes were pinned on a tax reduction to allow a softened economy to grow, which ultimately were dampened when the government elect increased employers NI more than expected. Many of our clients echoed that although this didn’t immediately impact their 2025 budgets, the fallout has the potential to be kicked further down the road. With the horizon too hazy to make a judgement call on the outlook of the year ahead, a stronger year-end than anticipated increased optimism that Q1 and 2025 as a whole will see an uptick in hiring. 

Typically, Reward hiring slows down in December as people are immersed in year-end planning and activity. However, the market last year had an increased demand both for interim and permanent talent. The Benefits space showed signs of life with multiple searches out for leadership roles, particularly in US headquartered organisations. Individuals in Benefits and Pensions tend to have longer tenure due to the project nature of the profession, with their counterparts in Compensation often moving more frequently due to the cyclical nature of their role. Due to Benefits teams being lean, a departure in most organisations requires a backfill, often resulting in a game of musical chairs as Benefit practitioners swap roles. 

The conversation around the utilisation on AI within reward continues. With the confidential nature of compensation, particularly for executives in smaller, private organisations, the concern around data breaches and integrity remains a key agenda point. Many firms are reticent to make the first move and are waiting for the competition to show their hand. There has been increased usage of generative AI in adjacent verticals such as Performance where organisations have embedded automated practices to quicken repetitive and high-volume tasks. 

Interim 

In the lead up to the UK Budget in October we saw an increased demand for interim talent as firms approached permanent hiring with caution. This included fractional HR leadership for smaller businesses, where a full-time resource is too costly or where firms didn’t choose to immediately add to their fixed costs. Additionally, we saw a continuation of PE carve out activity, leading to the hiring of an interim capability to establish HR functions and create a landscape for growth. Alongside this, we experienced larger firms opting for interim talent to carry out right-sizing, restructuring, and organisational design projects. These examples of increased activity cover the larger corporate (Plc) and small-mid cap PE portfolio market. 

Looking ahead to 2025, we expect a continuation of these trends as deal activity picks up and firms look to interim professionals to help scale and transform their businesses. As businesses perform well, their next major challenges will likely be M&A activity and talent retention as the market picks up and job seekers become more active. 

If you are interested in scheduling a meeting to discuss any of the above trends in more depth with our market specialists, please do get in touch at catalyst@catalystpartners.com

[1]​​​​​​​ Bloated HR is more about woke than wealth

[2] The cult of diversity is becoming dangerous

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