If you want to know whether people really matter look no further than our current Prime Minister’s issues. Trust begets trust, and if you take it for granted then your value, be that personal or corporate, slides rapidly.
But how do you put a value on a business? Whether it’s a multi-national or a small sole trader, there are some obvious indicators to answer this question, but first you need to decide on your perspective.
If you’re an investor or a senior figure in the boardroom, a simple answer might be to look at a recent set of accounts. By reading the profit and loss account, you’ll get a good understanding of the financial viability of the business.
Alternatively, if you do some number crunching on the balance sheet you’ll get a better viewpoint on the health of the company and its intrinsic worth.
While metrics like these provide a snapshot of the financial position of any company, they don’t really tell the whole story. Less tangible numbers, such as the impact and contribution of staff, are where the real value lies.
Employees define a company as much as the products it sells. Staff are an essential asset for any business, and yet they are a commodity that many businesses appear to take for granted.
A lack of emotional, pastoral or financial investment result in unmotivated or underperforming staff which in turn can lead to staff leaving for better opportunities.
In 2021, data from the US suggested that employees were resigning in greater numbers than ever before, either in pursuit of better money or opportunity.
Both cases are very avoidable for companies choosing to invest in their own people. But that means more than simply having an “investors in people” plaque on the wall. It means understanding people, rewarding them, offering opportunity, progression, training, or recognition.
However, all-too-often businesses and their leaders are driven solely by financials, do not engage with their people – if the employees want to leave, so what?
A high churn of staff might reduce the wage bill as older and more expensive people are replaced by younger and cheaper ones.
But it comes at the expense of a much less tangible, but arguably-more-important asset: experience: the insider knowledge of how a department or industry works; the reliability of one supplier over another; knowing when to act and when to hold firm; the confidence of dipping a toe into the water versus jumping in with a splash.
The workforce of a business is even more important for customers. Check the ratings of any company in online comparison site, such as Trustpilot.
Every comment is based around accessibility, amenableness or friendliness – in other words, human characteristics. Whenever value or price is mentioned on these websites, it’s as an afterthought.
What concerns customers is the personal touch, everything from the knowledge and understanding of the initial query to the way a solution is reached. Customers want to trust the individuals with whom they deal.
So, if having the right staff is crucial to maintaining the value of a business, it’s rather surprising that so many companies don’t make more direct efforts to retain staff.
It’s an employee market and there’s plenty of opportunity for disenchanted or unfulfilled employees to move to a competitor, taking with them insider knowledge and crucial data about customers, suppliers and contracts.
It’s why ultimately people are so important in the service sector. If employees do head to new pastures, so too might customers. Such an exodus then will put pressure on a company’s profit and loss account and balance sheet.
People are intrinsic to a company’s value but their impact is notoriously absent in the profit and loss account and balance sheet beyond cost. That should change.
