In my workshop at the XPX Summit 2013, I’ll be leading a session with exercises to teach exit planners how to help their client create realizable value from their intangibles. Today 80% of the value of the average business is intangible so we’re not talking about a trivial thing. In fact, making intangibles visible and understandable is one of the best ways to increase the exit value of a company. Here are some thoughts on one of the key components of intangible capital: people.

Knowledge in an organization begins and ends with people. The knowledge and experience that employees bring to their work is probably the greatest driver of an organization’s success. What employees know helps to build an organization as well as to preserve, maintain and improve it. This importance is generally accepted. It is rare to meet a CEO who won’t tell you that his or her organization has the “best people” in the market. But this kind of statement is rarely challenged. Most businesspeople still don’t know how to see beyond the people and understand the employees and managers of an organization as knowledge assets—as human capital.

Each human being is different. As employees, human beings bring unique talents and abilities to their employers. This diverse skills set brings a richness to an organization that can be difficult to capture. There are actually some very clear ways of describing the contributions of your employees:

• Competencies - Competencies are one of the basic ways of understanding the knowledge contributed by your people. They are the right starting point for developing a clear picture of your employees as a productive asset, as part of your knowledge capital.
  
• Experience - Another way of understanding the depth of knowledge represented by human capital is experience. Although years of work are not, in itself, a guarantee of a high level of knowledge, it is generally a good starting indicator.
  
• Longevity and Turnover - Longevity and turnover are related to experience as a way of framing human capital. In fact, they used to be critical metrics of the strength of a workforce. In today’s more mobile world where large amounts of an organization’s work may be done outside the normal employee base, these factors are less important. Nevertheless, an employee’s choice to stay at a company is still a positive thing and turnover can be an expensive drag on productivity so it bears watching.
  
• Attitude - We all know that a good attitude can make the difference between effective and ineffective employees. This was confirmed in a study compared the performance of the companies on Fortune’s list of the “100 Best Companies to Work for in America.” A study by Alex Edmans showed that the performance of these companies from 1984 to 2005 exceeded that of the overall market by 4%.
  

These metrics can be a good first step toward making the value of your people real. You can generate these metrics internally but they can be even more powerful if you use the feedback of external stakeholders to round out your measures. Join us and learn some easy ways to make intangibles real (with realizable value) at the 2013 XPX Summit.

About the Author: Mary Adams is the founder of Smarter-Companies, a marketplace of learning and consulting tools to optimize returns on the intangible capital that makes up 80% of corporate value in companies today. She is the co-author of Intangible Capital: Putting Knowledge to Work in the 21st Century Organization. Previously she spent 14 years as the founder of Trek Consulting and 14 years as a high-risk lender at Citicorp and Sanwa Business Credit.

This post is part of a series of posts that the upcoming speakers of the 2013 XPX (Exit Planning Exchange) Summit are contributing. The theme of this year’s summit is The Art and Science of Collaborative Innovation. The event will be widely attended by business owners and trusted advisors to privately-held companies which are preparing for a successful exit. 

Originally posted by Mary Adams on March 28, 2013 at 3:30pm