I’m Rhonda. I founded Alexander Bain and Associates. We have been serving clients internationally since 2010. Back then I was also a Director at one of Europe’s top property investment firms. Head-quartered in London, it was where I had discovered that the traditional range of taught accounting solutions could not provide the deep analytics my Board colleagues needed to aggressively grow the business as planned.
What people-businesses need are improved assessment tools. Tools that would link the intangible value employees deliver, with overall revenue performance. With that insight, executives could have a logical approach to prioritize and distribute limited financial resources and earn the highest returns.
Value Analytics is the tool we created to do that job. It is an algorithm used to support improved strategic decisions.
When the pandemic struck we felt duty-bound to share with more businesses the importance of retaining and growing employee numbers in a way that is more suited to today’s VUCA environment and employment trends. That’s because today’s economy facilitates less capital requirement for growth than in previous eras.
We too are growing our practice. We are recruiting Associates in the United Kingdom, Nigeria, Ghana, India, and across the Caribbean. To enquire about joining our team of delivery partners feel free to connect with me on LinkedIn.
Most valuations aren’t calculated until exit.
Yet all organizations upkeep monthly records for the capital value of its physical assets. Those records are eventually used to justify the valuation. However, such rigour seldom extends to reporting the more significant human capital, which represents about 80% of a valuation. This means professional valuators are left to assume intangibles are worth value after the fact. This often results in undervaluation.
Organizations are solving this with Value Analytics.
What is Value Analytics?
Value Analytics applies principles of corporate finance to the organization’s strategic operations. Accountants collect and analyze management information for value, very much in the same way that they would do for cost. While the cost accounting technique has expanded significantly since its inception in the early 1900s, it’s not the only basis for the accounting function.
Cost + Value = Revenue
Globally, around 84% of businesses now provide services as opposed to manufactured products. This growing sector is why today’s managers are looking into the analysis of the second component (value) for more insightful capital allocation decisions.
When you start accounting for the value of intangibles monthly, expect:
There are only four ways in which a workforce adds value. These categories simplify the results managers try to capture on conventional time-sheets. Using the categories you can begin maintaining up-to-date records fast.
Every result is generated by people. Cause and effect. It’s the Accountant’s responsibility to provide information to inform decisions. Having at the finger-tip insight on what’s behind the results will improve capital allocation decisions.
Although maintaining records for value is simple, the complexity of value means that retroactive computations are less dependable. The earlier you start accounting for value the more evidence you’d have created.
Some other practical uses of Value Analytics
Revenue per employee
The revenue per employee ratio (revenue / no of employees) is used to benchmark productivity across businesses within the same industry. While every employee contributes to revenue, inherently we know that each person’s contribution is unique, not constant. Users of value analytics can calculate a true measure of each employee’s matchless contribution, so management can make critical talent decisions e.g. whether they should outsource certain roles, invest in automating them or train existing staff.
How important is setting up effective systems in your organization? Users of value analytics understand how employees currently deliver results (the value spread). This is imperative when managers are organizing departments; for example, when you need to identify specific gaps when expanding the team. That insight can be used to develop essential in-house training programmes and objectively identify differently skilled workers.
Cost versus value
The ratio of useful work performed to the total energy expended to perform it tells managers how efficient an activity is. With value analytics users can understand the cost versus true value of activities performed. That way every member of the workforce can be responsible for building efficient departments and systems, supporting the organization’s competiveness.
One of the major drawbacks of valuations in private organizations was the dependency on competitor’s similarities to estimate value (i.e. those that trade on the stock exchange). Such a best guess is no substitute for an independent valuation based on organizational capability. Users of value analytics can justify the value of their private businesses more accurately.
Value analytics does for the tertiary industry what cost accounting did for the manufacturing in the early 1900s. The development of the costing method over the years meant that activity-based costing later identified the activities and assign costs to each activity involved in the development process of products and services. That model was used to assign even more indirect costs into direct categories than conventional costing did. Value analytics goes even further and explores the value of the results of activities being performed. By also looking at the outcome achieved, not just the time or cost spent, users can make critical decisions about the value of production.
Dr. Steve Priddy
Former Director of Technical Policy & Research, Association of Chartered Certified Accountants
“Value analytics is driven by the realization that historic cost measurement is no longer fit for purpose in a world where services weigh more heavily than products, and intangibility of assets significantly outstrip tangible assets in terms of how markets evaluate and investors make decisions. Value analytics provides a new methodology that enables the capture of information relevant not only to recent historical performance but also to future prospects. It is able to do this through a closer understanding of the business model, and attention to the human and intellectual capital of the firm.”
Business owners often try Value Analytics through our Minimum Viable Transformation (MVT) plan.
MVTs are fully managed change programmes that complete within 20-days. The transformation begins with an assessment of current operations together with a projection for what the change will accomplish.
All transformations are customized to be congruent with the company’s existing growth strategy.