Why companies should be bought based on the value of their human capital or as we like to call it, HT (Human Talent).

When companies are sold a number of metrics are considered; their revenue, growth, market share etc. but the value in the human capital within the company is rarely considered. Despite human capital being key to any company’s success, it’s difficult to assess its value. Rather it used to be. Osterus can evaluate a company based on their human capital, rather than any vanity metric a CEO might want to present to you.

When you look at an IPO or merchant acquisition the financials are looked over in granular detail and then assessed and benchmarked against competitors. Otherwise, how would you know you’re buying the right company? You only want to put money into acquiring or buying into the best. So why isn’t human capital evaluated in the same way? It’s the people that build the company, and people who have made it successful. Just as you want to make sure you have invested in the best product, you want to invest in the best team.

The Wall Street Journal reported on how private-equity firms are walking away from deals if they see a company with high turnover rates or other such indicators. There’s no doubt about it — investment is becoming more about people.

Osterus has been perfecting their analysis and benchmarking of human capital for companies. This allows investors and shareholders to truly invest in people and in teams.

Our recent analysis between 3 major IT companies across Europe assessed the experience, diversity, educational background and team skill set for their respective employees. This enabled us to clearly see the value of the human capital in each team and use that to benchmark them against each other.

Company A

One team is small, highly diverse and led by an experienced CEO & Founder, let’s call this company A. The average work experience of the team is nearly 14 years with a range of experience across the arts, engineering and communications. This means that this team can not only create a good product, but also have the education in non-STEM subjects to enable them to communicate it.

Company B

Another company, company B, is mostly made up of engineers and developers, where most have masters degrees. The length of professional experience is much shorter for the majority of employees, with a number of highly experienced senior employees, especially within the technical roles. This shows that there is a strong pyramid structure within this organisation and a lot of young, hungry employees.

Company C

The third and largest of these companies, company C, has an average professional experience length between the other two firms. It’s the specialists, including customer support specialists that have the highest work experience at this firm. This demonstrates that every team leader needs a lot of experience across all areas of the business, both technical and non-technical.

If you’re an investor — this matters.

Why?

Would you believe company B if they had the strongest brand team? Even though their human capital shows this is where they fall behind companies A&C.

Would you believe company A or B when they claim their customer support was superior to that of company C? Despite company C’s customer support team being led by senior, experienced officials?

Human capital doesn’t lie — that’s why companies should be bought and partially appraised based on the value of their human capital.