Formalizing HCAP’s Impact Approach
HCAP Partners provides mezzanine debt, private equity, and technical assistance for underserved businesses to drive operational excellence, quality job creation, and economic opportunity for women, people of color, and low- to moderate-income (LMI) workers.
As part of formalizing our impact strategy and guiding our ongoing work with our portfolio companies, we developed an impact thesis that summarizes the positive impacts we seek to achieve through our capital and approach to value creation. An impact thesis illustrates an investor’s hypothesis for how its actions positively contribute to a set of social outcomes.
Our impact thesis is organized as a logic model that can be read left to right. It describes (1) the job quality challenges in the U.S., particularly among low-wage workers, women, and people of color, (2) how we contribute to addressing these challenges in partnership with our portfolio companies, including through the Gainful Jobs Approach™, and (3) the associated positive societal outcomes that we hope to achieve together as identified by the United Nations Sustainable Development Goals.
HCAP Partners’ Impact Thesis
Challenge
- 50.5 million Americans reside in distressed communities and a majority of distressed zip codes lost businesses and jobs6
- 44% of the U.S. workforce
are low-wage workers with fewer opportunities for upward mobility
Women and Black workers are overrepresented in low-wage jobs7
Hispanic and Black women have the lowest shares of upward transitions: 37% and 43%, respectively8 - 40% of American
workers experienced
worsening job quality since the start of the COVID-19 pandemic9 - Social and economic inequities across race, ethnicity, and gender are exacerbated by low job quality, hindering economic opportunity10
HCAP Contribution
- Capital and value creation activities
＋ Mezzanine debt and private equity tailored to business needs
＋ Strategic support, engagement, and value-added resources - The Gainful Jobs ApproachTM
＋ Quantitative measurement system to assess job quality
＋ Hands-on engagement with leadership and management to improve job quality
＋ Access to HR guidance, tools, resources, and technical assistance to support job quality improvements
＋ Sharing of data, evidence, expertise, and lessons learned to support investors, employers, and government in creating quality jobs
Impact
- Outputs
＋ Greater access to capital for underserved businesses, particularly those led by women and people of color
＋ Increased wages for frontline workers
＋ Increased access to 401(k), ESOPs, and profit sharing
＋ Increased access to healthcare and wellness benefits
＋ Increased workplace satisfaction
＋ Reduced turnover
＋ Greater pay equity
＋ Increased women and people of color in leadership - Outcomes
＋ Targeted societal outcomes as identified by the United Nations Sustainable Development Goals
INVESTING IN QUALITY JOBS TO DRIVE BETTER BUSINESS OUTCOMES
HCAP Partners focuses on building quality jobs at lower-middle market businesses, particularly for LMI workers, women, and people of color to foster operational excellence and achieve business success. This work is done alongside deeply committed management teams who value and understand the benefits of investing in their employees to strengthen their business.
GAINFUL JOBS APPROACH™
Developed through collaboration with our LPs and industry thought leaders, HCAP Partners’ Gainful Jobs Approach™️ is our operational impact framework for understanding job quality standards at our portfolio companies through:
＋ A robust quantitative measurement system to assess existing job quality standards and improvements
＋ Active portfolio engagement to identify and implement workplace initiatives aimed at creating and maintaining high-quality jobs
Job Quality Framework
Operational Impact Creation Cycle
KEY STEPS IN THE GAINFUL JOBS APPROACH™️
HCAP applies a systematic approach to impact management through the Gainful Jobs Approach™️ by undertaking the following key steps to support portfolio companies throughout the investment period to achieve job quality outcomes and operational excellence.
Pre-Investment
- Deal leads socialize the Gainful Jobs Approach™ including HCAP’s DEI commitment with prospective companies
- HCAP includes language in term sheets on companies’ commitment to implementing the Gainful Jobs Approach™
- Companies complete quantitative and qualitative baseline job quality assessment as part of due diligence
- Baseline job quality assessment results are examined by HCAP with DEI lens and reviewed with company leadership
- Company leadership and HCAP develop an initial Strategic Roadmap with quality jobs and DEI goals prior to investment close that is integrated in company’s overall value creation plan
Ongoing Investment Management
- HCAP provides ongoing advisory support, guidance, resources, and tools to company leadership as they implement the value creation plan and make progress towards their quality jobs and DEI goals
- Portfolio companies report quarterly progress on their quality jobs and DEI goals within the value creation plan
- HCAP analyzes job quality data and administers employee engagement surveys to understand how employees are experiencing job quality improvements and progress on DEI
- HCAP conducts quarterly check-ins with companies to review progress towards goals, discuss job quality and DEI data and findings, and revisit/update the value creation plan where necessary
Prior to Exit
- HCAP and company leadership conduct a final check-in to review overall progress on quality jobs and DEI goals utilizing the Gainful Jobs Approach™ exit analysis and to capture successes, challenges, and lessons learned to inform the Gainful Jobs Approach™ moving forward
- HCAP and company leadership review plans to implement carrot agreements that provide low- to moderate income and frontline workers with cash bonuses upon a successful exit so they share in the upside of the acquisition; HCAP and company leadership ensure that the bonus pool is distributed equitably to employees