In this blog, the fourth in a series on the information required for a thorough due diligence for substantial business deals, I’ll consider Human Resource Information.
Regardless of the kind of business in question, somewhere in its structure there will be a critical reliance on the people who work in it. Some businesses are more automated than others but there is always still a need for human interaction and this interaction can define the image the business portrays. When a business changes ownership or gets a new partner, there will be inevitable changes in the way the business is run and in the way it viewed but the workforce that remains is just as important in guiding the businesses course. That’s why the Human Resource Information requires a thorough analysis as part of a due diligence.
On the BusinessPortal range of websites, there is space to define the role of all employees, managers, partners and/or board members (depending on the businesses size and requirements). It also shows their income and other benefits; information that is critical for the calculation of some of the costs in the business. The ratio of Human Resource costs to other cost in a business are generally fairly industry specific and could be an indication of being under- or overstaffed. Educational background gives an indication of the skill levels of each individual (though it is by no means the only indication that should be considered) and, when compared to the cost to company of these individuals, can give an indication their value to the company. Other interesting information is the length of time that people have been at a company. If the average for this is relatively low it might suggest a high staff turnover though this should always be compared to industry expectations. If it is relatively high it might suggest that people are generally happy to work there or that there are limited employment options in the industry. Similarly, information about employees’ union affiliations might suggest what new owners might be in for some salary increase negotiations.
Unfortunately the numbers are unlikely to tell the whole story for any individual in a company structure and it is hard to predict what a change in the ownership structure might prompt people to do. The reliance of a business on its Human Resources should not be underestimated and keeping people happy and productive requires much more than a set of numbers. However, this is part of the challenge of running a business and Human Resources is often a bottleneck in a business were value can be unleashed.