Value Driver #4: Human Resources

At first glance, it may be difficult to see how human resources can function as a value driver for your business. Most of the time when we think “value” we think about reducing costs and increasing profits. Human resources, though, has a role to play, and it is not a minor one. How employees are recruited, trained, and disciplined are all under the purview of the human resources department. Additionally, HR usually handles decisions about various costs, such as insurance, and those decisions most certainly impact a company’s value.

In many ways, it is the employees who create the value of any company. Whether you offer a product or a service, it is your employees who make sure that your customers are happy and satisfied. Strong systems can help, but without equally strong employees, even the best systems will fail to build the value of your business. Since HR selects and trains new employees, it is critical to the value of the company overall.

Just as all departments within a successful business follow set policies and procedures, HR should have a clear delineation of responsibilities. How should HR work with other departments to make sure that key positions are filled? What are the policies regarding hiring, disciplinary action, or company benefits? When and how are employee reviews conducted?

Business valuation experts consider the length of service of key employees, the companies’ approaches to filling important positions, and overall employee morale, along with many other factors when they determine the worth of a business. The human resources department shepherds the company’s most important asset: people.

Internal Operating Policies & Procedures as Drivers of Business Value

In July, we discussed the importance of operating policies and procedures in the context of developing a useful (and legal) employee handbook. The quick summary is that having policies and procedures in place:

• gives your business a guide for growth,
• provides some legal protections, and
• makes it possible to see changes over time.

Today, we will talk about internal operating policies and procedures as drivers of business value. Whether you are getting ready to sell your company in the next few years, or you are working toward creating the most value in case you decide to sell much later, having policies and procedures in place will contribute to making your business worth more.

Internal operating policies and procedures help make sure everyone knows what to do and when and they reduce risk in the case of unexpected events. A strong and functioning set of policies and procedures could dictate whether or not the business would continue to function in the case of a sale -- or a key employee leaving, an unexpected weather event, or some other potentially business-stopping situation.

While policies and procedures serve as a guide for employees, they can also serve as a historical record of how the company responds to change. When policies don’t work, they should be reviewed and changed. Being able to appropriately react to real circumstances makes a business worth more.

Strategic Planning Tools

The elements of a good strategic plan are the same for almost any business. How owners and managers arrive at those elements can differ. 

Here are some links that will help you decide how to go about creating a strategic plan that works for you and your company:

SmallBusinessChron.comcovers SWOT Analyses, Mind Mapping, and more in their article "Four Tools Used in Strategic Planning for Marketing and Sales." 

There are many ways to analyze in addition to completing a SWOT Analysis.This article fromReferenceforBusiness.comgoes into detail about some of the other types. If matrices and charting are helpful for your thinking, be sure to check these out! 

The Research Administration Performance Improvement and Development (RAPID) Department at the University of Washington has compileda list of tools and templates to help in strategic planning. It's an excellent list, with some helpful graphics. 

Value Driver #2: Strategic Planning

This is the second installment in a series we are sharing about value drivers -- the things that make businesses more valuable. If you missed the first installment, you can find it here. 

Creating a strategic plan is one of the most important responsibilities of an organization’s top management. It is the vehicle that sets the goals and objectives of the organization, provides the roadmap as to how to reach those goals, identifies the resources needed for success, and describes how all of that information will be communicated throughout the organization.     

The plan should consist of the following:

Vision and Mission - The vision details the goals and objectives, where the company wants to be at a given point in time. The mission is preparing the roadmap as to how to get there.

SWOT Analysis - The SWOT analysis is a management tool used to scrutinize internal and external factors to help identify its strengths, weaknesses, opportunities and threats.

Strategy - After completing the SWOT analysis the following should be included
Develop strategies required to achieve the goals and objectives of the organization both internally and externally.

• Identify critical success factors.
• Develop overall organizational performance measures.
• Develop a tactical plan for each strategy.
• Develop performance measures for each tactical plan.
• Determine the resources needed to execute the plan.
• Develop a communication plan to align the entire organization.
• Assign strategic and tactical responsibilities to appropriate personnel.
• Develop a monitoring and measurement system

A well thought out strategic plan minimizes risks, enhances profitability and provides a documented, measurable, realistic plan for organizational growth.

Additional Resources on Business Structure

If examining your business structure seems overwhelming, or confusing, you may want to consult a few more resources. Here are some that we recommend for further reading:

Corporate by-laws serve as an internal  guide to how things are done within the business the company. This article contains more information on how to approach writing them:
http://www.ehow.com/info_8107137_corporation-bylaws.html

Having a clear organizational structure helps keep things functioning smoothly. There are various ways to consider organizing. This article describes several and offers examples: 
http://www.businessdictionary.com/article/557/which-organizational-structure-is-right-for-your-business/

Your business structure is important for several reasons, including tax purposes. The Small Business Administration offers a clear breakdown of the different types of structures, and some of the pros and cons for each one:
http://www.sba.gov/category/navigation-structure/starting-managing-business/starting-business/choose-your-business-stru

Keeping an eye on your competition is a smart way to drive up the value of your business. Inc.com offers 10 tips that may help you research your competition in this article: 
http://www.inc.com/guides/201105/10-tips-on-how-to-research-your-competition.html