Human Equity Value Management for Private Equity

LeadFirst Learning Systems is a highly specialized human capital analytics and performance improvement firm founded in 1982. The firm’s Private Equity Practice serves private equity firms and other investment firms with a broad range of human capital research, advisory and performance improvement services we call Human Equity Value© Measurement & Management. LeadFirst, delivers these services to PE partner firms and their portfolio companies throughout the investment lifecycle.
Net income and market value can be regarded as functions of the return on either capital or workforce talent. Although both produce similar results, return on workforce talent represents an increasingly attractive model. Unlike 40 years ago, when tangible assets comprised the lion’s share of corporate value, in today’s knowledge economy, intangible (off balance sheet) assets account for a far greater share of newly created corporate value. These assets are largely created by, and through, a firm’s talent force. 
Total workforce cost is, typically, a company’s first or second largest operating expense, but GAAP accounting and standard financial statements are ill-suited to quantifying this expense. Worse, GAAP accounting does not capture the inordinate amount of corporate value created through these intangible assets nor the insights required to manage and optimize them. 
Traditional performance ratios including Return on Assets (ROA) and Return on Invested Capital (ROIC) are poorly correlated with Compounded Annual Growth Rates (CAGR) and corporate value, and can be misleading to PE and portfolio company managers seeking to maximize investment returns. Human Equity Value is a much stronger predictor of growth and corporate value creation. 

Most PE firms and portfolio company managers, in their quest to drive EBITDA growth, do not have the means to understand and track Human Equity Value, thus they are “flying blind” when it comes to managing their largest operating expense and “greatest asset.”
Human Equity Valuation enables any company to quantify, track and systematically improve its Total Workforce Value Impact and Retained Human Equity Value Add over time in a way that is auditable, predictive, prescriptive and appeals to the rigorous sensibilities of CFOs. 

LeadFirst developed the Human Equity Value System in collaboration with its PE client-partners as a means of driving EBITDA growth via workforce performance improvement in the contemporary economy. At the core of the system is a set of three Human Equity Value Statements that are analogous to and supplement the three GAAP accounting statements. The information presented in these statements enables operating managers to pinpoint where and how to improve workforce deployment and performance to accelerate EBITDA growth and corporate value creation. In addition to providing these analytical insights, LeadFirst provides management with an array of proven implementation tools and methodologies that form the backbone of a value-creating human resources strategy.
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