After Your Valuation: Enhance Corporate Culture for Value Creation

Business owners develop business growth plans with defined goals to maximize their companies’ value. It can be a real challenge to achieve those goals if they don’t know where to begin. To successfully build business value, owners should focus on three things:

• Understanding what the business is currently worth,
• Identifying the value gap between the current business value and its future expected value, and
• Identifying value drivers to know which business aspects support and drive that value.

Owners often do not recognize or downplay the importance of value drivers in building their companies’ value. When that happens, business valuation serves as the reality check and helps them make informed business decisions supporting building value.

After Business Valuation

Business valuation is traditionally performed to resolve legal or tax issues. Another common reason is selling or acquiring a company. Valuations also help determine the value of business assets in situations like death, disability, divorce, or disaster.

Irrespective of the reason, a formal business valuation clarifies the accuracy of their opinions regarding their companies’ value. Other than this, the marketability analysis of their business and industry helps determine the company’s relative value in the market.

Once the owner knows the value gap, they can also identify the weaker aspects of the business, understand what needs to be improved and develop a value creation strategy. A business’s strength can only be built once its risks and weaknesses are identified, corrected, or eliminated.

Problems often arise simply because the business owner denies the value gap or even its existence. This misconception is due to the owner’s unjustified optimism as a seller, lack of understanding, and diligence. Owners may also assume that the benefits reaped from business will remain unchanged for the company’s new owner. Still, in reality, the new owner may introduce new policies, procedures, and practices leading to entirely different results, often unfavorable.

One critical factor contributing to a business’s value is company culture. So let’s understand why enhancing the company culture is vital for value creation.

Create and Enhance Culture for Value Creation

A company’s culture can be defined as patterns of thought and behavior recognized and adopted by the employees. Organizations are vocal about their core business values, assuming that all employees have adopted those values. However, this is far from the truth, as employees come with different ideas, world views, and values that are part of their separate identities, making companies hubs of cultural diversity.

Managing and retaining productive employees while retaining its core values is extremely important for a company’s future success. When owners take the right initiatives to enhance corporate culture, they see higher employee productivity. According to Fortune’s annual “100 Best Companies to Work For,” for which they study stock market returns for all publicly held companies on the Fortune 500 list, it was found that 13 companies that have been on the list consistently, year after year, had a cumulative return of 495 percent, as compared to 170 percent for the Russell 3000 and 156 percent for the S&P 500.

Ways to Enhance the Company Culture

Embrace Transparency in Communication

Great organizational cultures are built on trust, and trust can only be created when there is transparency in communication. Clear and transparent communication helps share information (good or bad) upward, downward, or laterally so that all the parties see the same clear picture. Transparent communication helps employees become more innovative as they are better informed. It also encourages an easy exchange of ideas between teams and different hierarchies of employees. When people are collectively informed about the actual happenings and other events, they can align their future actions accordingly.

To build transparency in communication, ensure that your team has the proper communication and collaboration tools. Such tools are especially beneficial if your company has multiple offices and remote employee teams.

Recognize and Reward Valuable Contributions

When employees feel their contributions and work are valued, they are more likely to stay. Moreover, losing employees also means losing institutional knowledge and productivity.

Employee recognition programs are beneficial in multiple ways, as motivated employees are better performers, more committed to their responsibilities, and go over and above their assigned role if need be.

LinkedIn ranked Apple as the sixth-best company to work for in the U.S. because of its stellar employee recognition strategy. One such example is Apple’s leave policy. Besides giving extended vacations during the holiday season, Apple offers additional paid holidays to all its employees. They also customize this reward according to an employee’s location and job role, meaning that employees in different parts of the world get paid time off during equivalent holidays. Apple’s retail workers who worked during the holiday season to meet high customer demand also received the same benefit at a different time.

Embrace Employee Autonomy

“Micromanage the process, not the people.” -Joe Apfelbaum

Micromanagement is the biggest roadblock to employee autonomy. It shows a lack of trust and is ineffective and inefficient, as no one likes to be micromanaged. It’s also one of the most potent ways of destroying team culture. Signs of micromanagement include:

• Difficulty in delegating tasks
• Focus shifts to reporting over actual work
• Difficulty in trusting the employees’ capabilities
• More focused on criticizing mistakes rather than developing strengths.

To practice employee autonomy, create more decision-making opportunities for your subordinates. If you delegate a task, trust the employees to manage and complete it. Employees who believe they have more authority become more accountable for their work and performance.

Promote Team Building and Collaboration

A business faces several challenging tasks from an open exchange of ideas. Employees’ differing perspectives and ideas lead to insight or innovation.

Teamwork and collaboration promote innovation, efficient processes, and improved communication. When employees know how to collaborate, they share thoughts and ideas about new techniques and tools.

Teambuilding also promotes the exchange of knowledge, brings new expertise to the table, and imparts new skills. This diversity of knowledge is a building block of success. Other benefits of team building are increased communication, employee motivation, and collaboration. A few ways to promote collaboration among employees are:

• Evaluating what is not working in the business
• Listening to employee feedback on old and new business practices
• Sharing information and being transparent
• Focusing on team building activities through employee training programs
• Recognize employee efforts and give rewards.

Give and Solicit Feedback

Bill Gates once said, “We all need people who will give us feedback. That’s how we improve.”

Leaders and managers must share their views about new projects, business decisions, and employee performance. Without feedback, employees don’t have clarity on how to improve and will have no sense of direction.

Timely, effective feedback is essential for successful performance management programs. Ideally, feedback is used when setting performance goals, but most organizations fail to use it with employee performance goals.

When employees receive feedback on their performance and progress toward their goals, they know what action the company requires. Moreover, people need to know what’s working, how they are doing, what is not working, and what needs to be changed.

Feedback sources include managers, supervisors, performance measurement systems, colleagues, and customers. However, since feedback can lead to positive or negative emotional reactions, it is essential to consider employees’ emotional responses, especially critical feedback. Positive feedback can lead to a demonstration of expected or desired behavior, so it should reinforce incremental steps toward a goal.

Following are several ways to overcome resistance and apprehension toward receiving feedback at the workplace:

• Never presume that the receiver of your feedback also sees their behavior as you see it.
• Before you begin, acknowledge that you are expressing an opinion (yours).
• Allow the receiver to share their thoughts and opinions.
• Always use neutral language and avoid words with a negative connotation.
• Never place blame on the recipient; this will make them defensive.
• Focus on performance, not how others feel towards them. This will make the receiver more objective about their actions rather than focusing on feelings.
• Check-in regularly and ask for their opinions.
• Listen attentively.
• Respond positively and be as specific as possible.
• Last but not least, make a specific request for a behavioral change.
• Remember, people, become what you encourage them to be.

Where to Begin

A business valuation helps you identify the existing value gap and set business growth targets. The next step is to turn these targets into actionable tasks to achieve feasible goals annually, semiannually, and quarterly. Contact Quantive to see how we can help your business situation.