Sweating the Human Asset
An ugly expression redolent of Private Equity (PE) that buys into businesses where they see they can get a much higher return from much reduced assets.
Executed ruthlessly…
But it’s worth noting how they work and what might usefully be learned from them when it comes to a small business’s people asset. Balance sheet-wise people are not an asset, but they are invariably the biggest cost so it’s not wrong to think of them that way.
So how does PE ‘sweat the people asset’ in the businesses they buy?
Well, here are the classics they deploy after they have cut the business (and people) to its core:
Business Plan
Sets out Objectives, Strategies and Actions for high performance in:
New customer acquisition (Marketing)
Customer retention (Operations)
Operating efficiency (Systems)
Productivity (People)
Finance (ROI)
And sets success measures, dates, and names of those responsible.
Workforce Effectiveness
Survey customers and suppliers for frank opinions about:
Knowledge
Attitude
Skills
Aptitude
Behaviour
Produce a schedule of the lacking areas.
Knowledge, Aptitude, Skills, Attitude, Behaviour (KASAB)
Identify what’s needed to implement every part of the business plan, matching these to the deficiencies identified in the survey.
Targeted training by name.
Performance Management
Create a job description for everyone, giving each a measurable part of the business plan for which to be accountable.
Produce weekly/monthly KPI reports showing actual measures achieved and by whom.
Quarterly/6 monthly individual performance appraisals to identify ‘KASAB’ deficiencies. Add solutions to the company’s rolling training plan, or ‘manage them out’.
Never connecting this process to pay review, or the results will be unreliable.
Career Development
Create clear pathways through and beyond the organisation for individuals to progress their pay and status based on their results. This gets the best people to join and make a massive contribution while they are there and/or moving up.
Workforce productivity
Benchmark £output per person for the industry sector and control headcount to equal or better it. Set basic pay to be competitive and pay collective bonuses based on company productivity growth and profit.
Ally this to the introduction of business systems that reduce manual working.
Recruitment & Selection
Use job ‘speccing’ where a vacant job description is matched to an ideal personality profile and pursue targeted ads and headhunting.
Use demonstrable competence testing as part of the selection process.
Management Style
At the outset things are tough, so they start with a necessary ‘Reward and Punishment’ style to get the big changes implemented. Then progressing to ‘Assertive Persuasion’, followed by ‘Participation and Trust’ as workforce attitudes and overall competence grow.
Finally, the most competent and productive response comes from a ‘Common Vision’ style where everyone visibly does what they should do without being told or micromanaged.
An incremental approach to building a high performance business.
Workforce Planning
Part of business planning, where the Objectives, Strategies and actions for: Marketing; Operations; Systems; Finance are allocated to named people via their job descriptions, thus creating the People Plan, and containing all the other activities described above.
Employment Acts
Outside experts risk-assess the business’s exposure to legal claims and introduce policies that all employees and contractors must follow.
So what?
Well, it gets top business results, and its principles can and should be applied to a business of any size that wishes for better performance, even a sole trader.
It starts by you posing these simple questions to your client:
Do I have a plan that spells out what I’m trying to achieve and how?
Do I know enough to implement it?
Do I measure my performance?
Do I improve myself?
Am I productive?
Do I employ the best people?
Is my management style effective?
Next step
Find out with a free people assessment and improvement plan.