Your business functions as a thriving ecosystem. However, what might surprise you is that roughly 80 percent of its value is derived from intangible assets, according to the Exit Planning Institute. These encompass human capital, customer capital, structural capital, and social capital.
While each of these intangibles are critical components of your business valuation, human capital stands out as the most impactful.
Your employees are the cornerstone of your business, responsible for selling products or services, managing day-to-day operations, and supporting your customers. Without people, your business would not enjoy the success it has today.
To maximize the potential of your human capital and create a workplace that thrives well into the future, consider implementing these five strategies.
1) Communicate Your Vision to the Organization
A strategic vision is essential as it determines the long-term direction of your business. All decisions should align with this vision.
“Start by defining the common fabric of your professional DNA through a unifying mission and common set of values,” said Emily Wood, Partner at Connecticut Wealth Management (CTWM). This process helps clarify who your organization is, where it is headed, and how it plans to get there.
To ensure the vision permeates the entire organization, enlist your management team to communicate it effectively. Each employee should understand their role and how they contribute to the success of your business.
“Some of the most successful business owners we work with implement this holistically,” said Wood. “Their employees are aligned with the company’s vision and core values. Their clients work with the company due to this alignment, and the organization engages with vendors who share similar values. This helps to promote synergy throughout.”
2) Recruit & Retain Top Talent
“Business owners consistently identify human capital either as one of their top challenges or a key driver of their success,” said Wood.
To effectively attract, retain, and develop talent, ensure your business offers more than just competitive compensation and traditional benefits. You need a thoughtful strategy and plan. This can range from offering fringe benefits to structuring your organization for social impact.
“Be aware of the tax implications these incentives may have on your business,” said Wood. “Decisions made on the business side can impact your personal finances, so it’s critical to ensure both sides are coordinated.”
A retirement benefit plan is another crucial element. Navigating the wide range of plan options and understanding their impact on you as a business owner and your employees can be challenging.
“Your corporate retirement plan shouldn’t be on autopilot,” said Wood. A trusted advisor can provide value by managing the plan for you and determining the best course of action based on your unique needs and vision.
3) Professionalize Your Management Team
Your management team is an integral part of your succession plan. By formalizing this team and focusing on their professional development, you protect the legacy of your business.
Consider this: without a strong leadership team, how will your business continue to thrive when you exit?
“Your leaders need coaching to continue growing,” said Wood. “We believe people don’t leave companies; they leave or choose to stay because of their manager.”
Investing in training and development programs that emphasize emotional intelligence, strategic thinking, and effective communication can significantly enhance your management team’s capabilities and improve employee retention.
Additionally, these programs can serve as mentorship opportunities, facilitating the transfer of industry knowledge and intellectual property to the next generation of leaders.
4) Motivate Your Team
Recognition for hard work and dedication is crucial for employee motivation. Develop a recognition program that is aligned with your organization’s vision and values to incentivize your team to remain with the company long-term.
The primary goal of this program should be to cultivate a positive work environment where employees feel valued, engaged, and committed to the organization’s ongoing success.
“Be cautious of recognition becoming too transactional,” said Wood. “Providing your management team with the necessary training to support each individual and find meaningful ways to express appreciation is critical.”
5) Measuring Progress
“Once you determine you want to build human capital within your business, make it a priority,” said Wood. “Then identify a person or team that will be held accountable for its rollout and success.”
We recommend looking at metrics such as average employee tenure, turnover rate, and the average timeline to promotion to quantify progress made and your success. Additionally, establish a system for collecting regular feedback from your employees, surveying their overall happiness and satisfaction with the organization.
“Set clear intentions about what it is you are trying to achieve. This will help you navigate potential challenges in the road ahead,” emphasized Wood.
Wrapping Up
The true strength of your business lies in its people. To enhance human capital, focus on creating a unified vision for talent recruitment, leadership development, and employee motivation.
It is important to remember that change takes time. Implementing small, incremental changes will gradually increase the value of your company’s human capital over the long term.
Are you ready to elevate human capital management within your business? Connecticut Wealth Management has experience helping business owners assess their company’s value, strategize for their eventual exit, and plan for how this impacts their wealth.
Take the first step and contact us to learn more about our holistic business owner services.