Real PE factor for any firm is people

Adil Malia
(Group President ( HR), Essar Group)

While investment bankers have inducted 'PE' factor - the price-earnings ratio, which helps determine the valuation of an enterprise - into contemporary management lexicon, the real PE factor in the value journey of any enterprise from a leadership perspective continues to be its 'people' factor.

'People' is the only PE factor capable of creating value for itself and unleashing value from the other factors.

Unleashing the 'low cost: high value' potential of the people factor in these volatile and challenging market conditions calls for special attention.

Future-smart CEOs- the corporate skippers and proactive leaders who plan and insulate their enterprise against unpredictable future volatility - will have to evolve and take personal responsibility for their workforce strategies. They will need to develop a navigational map that will help them traverse a unique 'value-to-value' journey.

The HR department-led general people programmes barely succeed in exploiting more than the surface capabilities of these high-potential resources. Unless the CEO leads from the front and sponsors generating value from people resources, chances are that the enterprise will under-utilise these precious resources.

The 'value-to-value' journey encompasses four critical value domains, and is linked to the CEO's performance contract: create occasions to offer unique value propositions, nurture critical values to evolve a genuine and flexible culture, energise the system to deliver value to customers and engage the system with relevant drivers to enhance its 'enterprise value'.

Every organisation needs to have eight capabilities to thrive: a competitive landscape analysis and market intelligence, demand creation, demand fulfillment, going to market, supply chain, an order-to-remittances cycle, new product innovation and talent engagement and development.

Future-smart strategic leaders build their organisation structures around these. They do not go the classical way of building their structures around power centres in their enterprise.

A firm's reputation is embedded in its capabilities, not in its structure. The value propositions that make a difference and attract talent to join and stay need to be developed around experiences and opportunities built around these capabilities and knowledge. Hence, key success factor No. 1 for the future-smart leader is offering unique value propositions and a market-competitive total rewards package to 'get' the best talent. However, the greater challenge is to ensure final delivery of this promise.

Key success factor No. 2 is to build a flexible culture with non-negotiable ethical values within the enterprise to maximise business opportunities. Future-smart leaders will never shift their eyes from markets, customer insights and customer realities as defined by market conditions. The entire system needs to harmonise to deliver 'value-for-money' to customers.

Key success factor No. 3 would be to build a delivery system within the enterprise that gives customers their desired value for money with an 'aha'. The purpose of business is value creation.

Key success factor No. 4 is to ensure that focus on short-term profits does not make the enterprise lose long-term focus on its value creation, and that the people resources are fully engaged in this.

The volatile markets have covertly indicated their preference. Enterprises that have their profit earning ratios backed by competent PEople and strong people engagement succeed in sustaining and realising their long-term projected valuations. Others perish and peter out into obscurity.