If it’s true that “people are our greatest asset,” how does that get measured when you are valuing your business?
Imagine a potential buyer is comparing your company to another, and that many of the traditional measures of valuation show similar results. The EBITDA (Earnings Before Interest, Taxes, Depreciation and Amortization) are similar; the revenue and profits are close; the companies are in the same industry.
Now let’s assume that over the previous few years you have done the following:
- Surveyed all your employees to get anonymous feedback on how you and your leadership team are succeeding from their perspective and what could be improved upon.
- Surveyed your leadership team to see how you are doing at leading the business and supporting them in their roles, and to find out what you could do better.
- Completed 360-degree feedback reports on all your managers to see how they are performing relative to expectations and leadership standards, and what they could do to get better results.
- Developed employee feedback systems that help each employee know themselves better and how they are perceived by their peers.
- Surveyed your customers to identify if your company is meeting their needs and how you could serve them better in order to retain and increase your business with them.
- Identified the personal characteristics of successful people in your organization and used a scientific tool to screen new hires to make sure that they match up with your preferred traits.
- Developed a databank of job descriptions and personal traits that would best succeed in that role as well as a list of up and coming employees who could best fit that job once they have the right mix of training and experience.
Further, let’s assume that you’ve not only gathered this information, but you’ve acted upon the most important recommendations that came from the reports and the consultant who guided you through the data. And assume that you did this annually for the past three years.
The results of following this sequence for an extended period of time are many, and positive. You now have the right people in the right roles. Your employees are motivated, engaged, and committed to high standards, and your staff believes that management cares about them. You’ve put in place leaders who lead effectively, and whom your employees willingly follow. Your corporate culture facilitates teamwork and open communication, which in turn encourage innovation and pride in the outfit, as well as helping with employee retention. Your customers are getting what they want from your company, and are committed to dealing with you in the future.
MORE GREAT ADVICE: Subscribe to the PROFIT E-Newsletter »
If you had all this documented in a binder that you could share with the prospective purchaser of your company, no doubt they would be suitably impressed. They would also know that your company is worth more than the other company they are considering.
In this scenario, your firm is better managed, with happy employees who are likely to stay and satisfied customers who are likely to continue buying. The firm has a leadership team that understands and works with their employees. It will have fewer hassles, fewer grievances, fewer errors, and fewer severance packages to pay than a less prepared competitor.
What’s more, you have a better story to tell. Just like you cannot judge a book by its cover (or its movie), you can’t tell what a company is worth by just its financials. The raw numbers are important, and a company modeled on people-first principles will likely have better numbers than a competitor. But the financial numbers don’t tell the whole story.
Assessment tools that enable you to measure, report, review recommendations, and act upon those recommendations will not only improve your bottom line now, they will give you a stronger asset to sell when you are ready to transition or sell your business in the future.
If your people truly are your greatest asset, prove it.
Wayne Vanwyck is the founder and CEO of The Achievement Centre International in London, Ont. He is the creator of The Business Transition Coach Forum and the author of the best-selling books,Pure Selling and The Business Transition Crisis. He has been training and coaching business owners for the past 30 years.
MORE PERFORMANCE MEASURES:
- The Best Way to Make HR Decisions »
- Do You Know How Your Employees Feel Right Now? »
- A New Way to Tell if Your Marketing Works »
- 6 Steps to Finding Out How Engage Your Staff Are »
- The Economic Indicators that Really Matter »
What tools and measures do you use to measure employee effectiveness? Let us know using the comments section below.