Atlas Private Company Insider

People Strategies to Increase Value

By John O'Dea, Guest Contributor

• Reorganizing the company so there’s a clearer connection between reporting responsibilities/duties and revenue generation
• Creating employee scripts
• Implementing new employee training systems
• Connecting employee activity and company success
• Transferring responsibility to employees

Let’s look at three critical activities on this list.

Conceptually, most owners understand that all activities, responsibilities, functions and plans for the company should contribute, either directly or indirectly, to the generation of revenue.   In practice, however, owners often organize their businesses on a seniority model: lower-level employees perform simpler tasks and more senior employees perform more complex and critical tasks.

So, for some owners we may suggest that it makes sense to map all activities that the company and its employees undertake that ultimately lead to revenue, and then work backwards from the revenue through the map to see if we can identify places where we can increase efficiency.  The owner can then decide whether increasing efficiency involves eliminating redundant jobs or positions, combining activities to make them more powerful in their impact on revenue, and/or expanding activities that typically have a significant positive impact on revenue.  If an activity is good for revenue, we will ask, “Why?” and may want to do more of it.  If an activity is not good for revenue, either directly or indirectly, we may want to do less of it.

Connect Employee Activity to Company Success

Few owners can give a convincing “Yes!” to the question, “Have you regularly and directly communicated to each of your employees his or her role in the success of your company?” When employees don’t understand their specific purpose, they are easily frustrated, often lack motivation and are not terribly efficient in their activities.  From a value perspective, that’s bad enough, but if your employees don’t understand how they contribute to your company’s success, how can you illustrate that connection to a future buyer of your company?

Transfer Responsibility to Employees

The purpose of creating a value-building plan is to create the business value you need to live the post-exit life you desire.  If you are your business, there is little likelihood that any buyer will find your company at all valuable.  It is one of the most counter-intuitive maxims of business value: in the most valuable businesses, the owner is not critical to its ongoing success.  Put yourself in a buyer’s shoes.   Would you purchase a company if the owner were the only real repository of the critical knowledge, skills, and relationships?

Many owners hold onto the critical marketing and sales activities because they worry that employees who take over important tasks will fail.  Yes, it is difficult to find and hire the right employees who will successfully locate, attract and generate sales from your target market.  But we know that your ability to train, teach and trust your marketing and sales staff is critical to building value in your company.  You simply cannot carry this burden alone.  Your ability to scale your business is to work through others to multiply the impact of your value.  Your skills generate much more value when you are the mentor or counselor for a staff of employees.

The intentional development of organizational design, employee communication, and delegation can have a comparatively inexpensive positive impact on enterprise value.  My suspicion is that many owners miss this opportunity because of who they are.   To succeed in any form, entrepreneurs are required to be self motivated and inherently passionate about the mission and purpose of their organization.   When inviting others to join them in their endeavor, my experience tells me that it is hard for these owners to imagine how a person could be wired in any other fashion.  However, owners and shareholders can cost efficiently increase enterprise value through intentional effort and focus on their people.