Business valuation traditionally is determining the economic value of a company. Business valuation is typically used to determine the fair value of a business for a variety of reasons which includes sale value, establishing ownership, taxation, or mergers and acquisition’s to name a few. Owners will often turn to professional business evaluators for an objective estimate of the value of the business for the defined purpose.
Some of the common means of determining the valuation of a business would be
- Market Capitalization
- Times Revenue Method
- Earnings Multiplier
- Discounted Cash Flow (DCF) Method
- Book Value
- Liquidation Value
Business valuation is typically conducted when a company is looking to sell all or a portion of its operations or looking to merge with or acquire another company and never towards understanding how the business is doing. The valuation of a business is the process of determining the current worth of a business, using objective measures, and evaluating all aspects of the business which essentially means that the true nature of the working of the business with its human capital is never mapped.
Human Capital and Enterprise Value
Various studies and reports have been released on the importance of human capital and essential factors of how it helps determine and increase enterprise value.
Companies which have been able to differentiate between financial capital and human capital are the ones who have been able to wade the tide in the new-gen talent market and achieve better enterprise value.
Talent transformation and alignment is one the key means to increase enterprise value. Being more agile on how they manage human and financial capital are key factors to achieve better value, where human capital being the more relevant of the two in current market conditions.
Talent to Value, how companies get it wrong
Using traditional means executives often use hierarchy, relationships, or intuition to make determinations on how they map talent to value created.
Executives usually incorrectly assume that the most critical roles are always within the “top team” which is the first and second layer from the top and usually ignore the third or below layers. In fact, critical positions and critical people can be found throughout an organisation and are never closely associated with the top two hierarchies.
Gaining a true understanding of who your top talent is and what your most critical roles are is a challenging task and disconnects such as this between talent and value are more risky factors for a business
Identify and clarify critical roles
Identifying and quantifying the value of the most important roles in an organisation is a key step in mapping talent to value. Such critical roles can be commonly put into two broad two categories: value creators and value enablers.
Value creators are team members who directly generate revenue, enable lowering operating costs, and increase efficiency.
Value enablers, such as leaders of support functions like data security or risk management, perform indispensable work that enables the value creators
It is responsibility of each of the business-unit leaders or heads to work and define their value propositions and agenda to map; in collaboration with their HR teams, the most critical roles. Some base questions that might help such a exercise are below:
- Where does the value for this business-unit come from?
- Which roles are the most critical?
- Would a new strategy entail new roles to be created?
- What big disruptions, if any might change role responsibilities?
Matching defined roles to talent
The next step will be for business leaders to find talent for the defined critical roles. The process would be much clear given a detailed definition of critical roles.
This is where business-unit leaders need to work closely with HR teams or Talent Partners who can define KPIs, identify trends, talent pools and define processes on how to find right talent for the critical roles.
Companies typically should examine whether the HR team or Talent Partners is up to the task of managing talent acquisition from this strategic context. The following set of questions can help make this determination:
- Does the HR team have sufficient analytics capability from this perspective?
- Can the department mine relevant data to hire, develop, and retain the critical employees more effectively?
- Does the HR team’s business partners consider themselves internal service providers, or are they talent partners ensuring a high return on human-capital?
About CUBENANT
Cubenant team handholds and helps talent to determine possible career paths and guides through possible opportunities with access to global market data and statistics.
Cubenant is a new age, niche tech, global talent acquisition and management partner helping startups, SMEs and corporates hire talent faster and retain longer. We are focused towards a customized approach to talent acquisition to provide better results.
Our core capabilities are into STEM, FinTech, Edutech, eCommerce, Data, AI, Virtual Reality and other new age verticals and tech stack. Our re-engineered talent acquisition strategy (currently in Beta) helps companies hire with minimal touch points and seamless engagement.
How to reach us
Website https://cubenant.com
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