I recently saw a social media post saying the employees of a professional services business were “way more valuable” than its clients.
I hope the employees appreciated this praise.
I wonder if their clients would agree. If I was a client, I would have a conversation with the professional firm’s management about this philosophy.
Notice that the most valuable “assets” of a business aren’t reported on the balance sheet. Since they aren’t traced to a financial transaction, they aren’t captured by conventional accounting. In addition to the customer list and employees, this would include the business’s intellectual property (what is the value of the formula for Coca Cola?), the management team, and business relationships like subcontractors, advertising and marketing consultants, and suppliers.
Valuing employees and customers is rather like a chicken-and-egg situation. A business will have trouble getting and keeping customers if it doesn’t have a great customer service team. The team will have nothing to do without customers. In the final analysis, customers pay the bills.
Right now our country is experiencing a great employee shift. Employees are deciding to leave their current employment to seek better opportunities, including higher wages, better benefits, and a better quality of life, so many employers feel the urgency of finding and keeping their employees. Employers should express appreciation to their employees, pay them well, help them grow, and treat them well so they will want to stay. Employers shouldn’t be surprised that employees decide to leave when they feel unappreciated and have been working in an unsafe or emotionally toxic environment.
Employers can’t tolerate customers abusing their employees. For example, airlines can’t permit passengers to attack flight attendants who are enforcing COVID-19 safety procedures during a flight.
Southwest Airlines expresses its support to its employees by placing their safety first and empowering them to make customer service decisions, such as entertaining guests during a long flight.
Employers also have to be sure employees are being providing excellent customer service and not being abusive to customers. They need to provide training to their employees and be clear when defining their responsibilities.
(So one of a business owner’s roles is to be a referee? Maybe so.)
In one merger that I was involved with, the merging companies were of equal size and had similar philosophies and procedures. Most of the employees and clients stayed.
In another merger that I was involved with, one of the merging companies was significantly larger that the other one. Almost all of the employees of the smaller company left soon after the merger, and many of the clients also left. In that case, the larger firm was seeking the affiliation with other international firms of the smaller firm, so they didn’t consider the employees and clients that left to be very important.
In the business acquisition marketplace, it seems to me that buyers of businesses are mostly seeking speed for getting customers — the customer list — when buying a business. Being able to get some good employees is a bonus, but not the major consideration. Despite all of the hype of the value of “systems”, I think most buyers think their ideas are much better than those of the previous management, so they disregard the existing systems of an acquired company and replace them with their own. Intellectual property and trade secrets are valuable because they save time and expense compared to independently developing them and can avoid litigation. The buyers usually don’t want the existing management to stick around very long.
The key metric for business acquisition is generally sales (or expected sales), which is based on customers and transactions, possibly from intellectual property, such as medications under development for pharmaceutical companies.
It’s great to appreciate and support your employees. It’s also important to remember that customers pay the business’s bills in exchange making their lives better. I believe the business exists to provide valuable products and/or services to its customers (usually solving a problem), and, in the process, to provide quality of life for its owners/investors and employees.