How To Use Assessment Tools To Value The People Side Of Your Business

If it's true that "people are our greatest asset", how does that get measured when you are valuing your business?

Imagine yours and another company are being compared by a potential buyer. Let's assume 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 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 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 how 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 - those that you'd like to clone - 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, the kind of personal traits that would best succeed in that role and a list of up and coming employees who could best fit that job once they had 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, you did this annually for the past three years, measuring, reviewing the feedback, reviewing the recommendations, and most important, acting upon the information to bridge the gap between where you are today and where you'd like to be.

As a result:

You have the right people in the right roles.

You have motivated employees who believe management cares about them.

You have employees who are engaged and committed to high standards.

You have leaders who lead, and employees who willingly follow.

You have customers who are getting what they want from your company and are committed to dealing with you in the future.

You have teamwork and open communications which encourages innovation, pride in the outfit, and employee retention.

If you had all this documented in a binder that you could share with the prospective purchaser of your company, they would be suitably impressed.

They would also know that your company is worth more than the other company because:

It is better managed,

It has happy employees who are likely to stay,

It has satisfied customers who are likely to continue buying,

It has a leadership team that understands and works with their employees,

It will have fewer hassles, fewer grievances, fewer errors, fewer severance packages to pay.

Just like you cannot tell a book by its cover, you can't tell a company by its books. The raw numbers are important, but they 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.

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