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In one of our earlier articles on mergers and acquisitions, we provided a check list for those contemplating a sale. One of the elements we outlined was “Identify your Key Players.” In this article we go behind the scenes and dive deeper into this topic.
Identifying your key players is a relatively easy task: these are the strongest members of your management and technical staff and will likely remain with the business after the deal is made. You know these people well. They make your company successful, are customer focused, and without them all you have is a building, inventory, and equipment. The physical assets all appear in financial statements. If there is an equivalent framework for doing an employee valuation, we haven’t seen it. The closest reference we found was “determine the value of your intellectual property.”
Determining that value is a difficult task for two reasons: there is no user manual, and most sales are confidential. Assessing the competencies, culture, and level of cooperation and cohesiveness across, and within, the various departments is almost impossible. So, what do we suggest?
Do an Organizational Audit
Most graphics arts companies in North America have less than 250 employees. For this reason, few of them have a certified human resources professional or organizational development professional on staff. In our experience, this is a double-edged sword. Competent professionals don’t come cheap but if you don’t know their value you may miss an opportunity to increase the net worth of your company. You don’t know what you don’t know. An investment in the services of an organization expert for a week or two could pay huge dividends. As we said earlier, “intellectual property” is usually associated with patents and technology, not with people.
Look at Your People as if You Were the Potential Buyer
Discriminating buyers want to know the value of the human resources as much if not more than the physical resources of the company. As a buyer, wouldn’t you be impressed if you were given a comprehensive employee profile – think resumés, a list of competencies, an organization chart and summary – showing employees’ length of service, salary, position description, most recent performance assessment, and feedback from customers? Your employees and customers are your most important asset, and an honest objective and subjective evaluation can give you an advantage.
Involve your Employees
Selling an ongoing business is not an asset sale. It’s turning over the ownership to someone else. Imagine you were one of the people who would be affected by this transfer. You would want to know, in advance, what was going on. Now that you’ve decided it’s time to sell and have narrowed the field of potential buyers, tell your employees – all of them. Ideally, the transfer will be seamless, and your employees will know the reasons for the sale and be part of the process. We have repeatedly said high involvement leads to high engagement leads to high performance. This not only applies to the ongoing business but also to its transfer of ownership. Since your employees are in the know, in their own best interest they can be a formidable and valuable part of the due diligence process.
Taking stock of the value of your people will put you ahead of the game, impressing future buyers, and resulting in better offers.
To quote my colleague, Business Strategy & People Development Specialist, Mike Suter:
“Far too often the value of the human capital being acquired is overlooked. It can take years to create and develop a strong cohesive team that drives a business to success and in many/most cases the people are the most valuable asset of the business.
On the opposite side as a buyer, if you acquire a business with weak employees, it can be very costly in severance costs and recruiting to replace those employees. An expense often overlooked in the total acquisition cost.
Doing an organizational audit of the human resources is a tremendous idea for the seller, would certainly increase value to the buyer.”
If you’re considering selling a business and want to know the value of your people, contact us. Our specialists are here to help.
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Gary Forget is the People & Leadership expert at Connecting for Results. He considers himself an organizational doctor and everyone who has worked with him can attest to his deep understanding of people and the barriers to high performance. Whatever the root cause of lackluster performance, Gary has the tools, experience, and knowledge to significantly increase bottom-line results. Besides his diagnostic capabilities, Gary is adept at mentoring employees, so they are more effective and capable of achieving their personal, team, and business goals. To get in touch with Gary, contact us!