Relative value, in finance is a method of determining an asset's worth, that takes into account the value of similar assets, allowing comparisons across potential investments. Typically, valuation methods, and pricing models are applied, with scenario analysis run to help determine attractiveness and suitability of an investment and the potential future performance.
Relative-value, in arbitrage trading is an investment strategy that seeks to take advantage of price differentials between related financial instruments, such as stocks and bonds, by simultaneously buying and selling the different securities - thereby allowing investors to potentially profit from the relative value of the two or more securities.
A relative value strategy comprises the following fundamental steps, and a process that delivers tracked performance; A starting budget to invest ☛ Analysis from reliable information (validated data) applied to ☛ Valuation and pricing models, delivering indications of value and ☛ Performance forecasting. Framed in a ☛ Process that enables recalibration (& Revaluation), as market conditions evolve, to drive Confidence in investment decisions and in ☛ relevant Actions to ☛ Maximize value.
Valuation and pricing models such as price to earnings ratios (P/E) provide value indications, used along side scenario analysis they help to identify undervalued assets, and support calculations of future potential value. They aid in risk assessment, and enable in-depth evaluation for greater confidence in investment decisions and actions to maximize investments.
In principle, valuing assets and comparing suitability and attractiveness of investing is no different for workplace human capital decision than in finance.
In regard to talent management two of the most difficult questions we try to to answer (too often based largely on subjective assessment) are performance potential and employee life time value. What will the future productivity of incoming and current employees be and for how long?
According to CSO Insights, around 50% of sales reps are meeting their quotas. With only a small number of top-performers (around 10%) and up to 40% underperforming.
Companies invest large sums to optimize employee potential, but data reveals the traditional way of evaluating, acquiring, managing and engaging teams is economically inefficient. There is a missing link, a science-based measure of personnel potential (necessary in a relative value strategy) enabling confidence in lifecycle talent investment decisions are in the highest potential talent and in an unbiased way.
Of course, potential varies, everyone is born with certain natural abilities; cognitive, traits, aptitudes, and natural talents or inclinations for certain types of activities. For example, you may have a very high aptitude for artistic projects, but little aptitude for numerical activities. Aptitudes and traits drive behaviors that impact performance, in good or negative ways, and in both linear and non-linear relationships.
Traits and cognitive abilities can be measured through validated behavioral and cognitive assessments. Valuable, they provide a better understanding of behavioral tendencies, and speed to learn. But they do not quantify potential, meaning how well someone will perform, in absolute terms (production), and relative to others in a specific role.
Better investments in higher potential salespeople leads to better performance
As in finance, implementing a successful relative value sales strategy requires rigorous evaluation including; A valuation model capable of reliably forecasting personnel performance, and a process that enables recalibration as markets and the business evolve.
Managed well, higher potential talent increases the relative value of sales teams improving broad sales metrics, without an increase in COS, or fixed costs.
The traditional methods of assessing job fit, suitability and potential are often subjective, hit and miss, and simply not able to provide reliable quantitative forecasts of personnel performance.
There are many talent data, and business intelligence solutions available, intended to deliver valuable insights for better business decisions. They do not enable precise personnel performance predictions and the insight necessary to deploy a relative value strategy in sales!
Provides reliable, stable, validated data and the necessary conditions to develop accurate performance predictions - Performance Fingerprints
Performance fingerprints enable significant improvement in the relative value of sales teams in almost every metric : # of high-performers versus average, Speed to ramp, Turnover, COS, training efficacy, revenue and profit.
When you think about evaluating someone to determine where they will be most effective in an organization - their potential in a specific role(s) - people are very quick to look at the traditional areas of knowledge, skills and the experience someone brings to the job.
We typically look at resumes to find out about these things, and conduct in-person interviews to dig a bit further, also attempting to learn about things like the values and interests that someone has. What are they passionate about. Will they be a good cultural fit and add to or strengthen the team dynamic.
Knowledge, skills, and experience grow, even values and interests can also change over time. While integral to talent evaluation at most companies their changing nature means any correlation to performance - is less valuable than stable criteria that can be mapped to workforce KPIs to statistically calculate, and quantified personnel performance predictions.
In any case, the traditional unstructured interview has remained the most popular and widely used selection procedure for over 100 years(Buckley, Norris, & Wiese, 2000). This is despite the fact that, during this same period, there have been significant advancements in the development of selection decision aids. People trust that the complex characteristics of applicants can be best assessed by a sensitive, equally complex human being. This does not stand up to scientific scrutiny. Intuition, and subjectivity are powerful qualities, which can be difficult to reason with even in the face of science.
You can find out about these things using scientifically validated assessments.
They tend to remain stable once someone matures. If someone is tested and retested, they typically score the same or nearly the same, as behavioral drives and the rate at which you learn new things stay constant. And this is where data helps you evaluate these critical aspects of a person. Combined with performance data they deliver insight and an improved ability to hire, manage and develop sales more effectively.
Performance Fingerprints unlock sales potential in ways not possible before, changing the way C-suite, Sales and Human Resource Leaders can strategically think about building and sustaining a competitive advantage and sales team relative value. They are a bespoke configuration of psychographic characteristics that predict actual on-job performance with a high degree of accuracy in a specific job role where observed actual results are within 85% of forecast!
The Platform is designed as a decision support engine that ingests client business intelligence and employee talent data with the goal of hiring and promoting people with the highest probability of being top performers.
Performance Fingerprints are continually updated (recalibrated) by adding new performance data over time. The Platform offers forensic level talent science utilizing over 400 available psychographic measures covering personality traits, interests, attitudes, soft-skills, and abilities.
Its important to recognize that most people behavioral assessments are limited. Measuring a small number of broad traits, unable to capture the complexity and nuances of human behavior that drive workplace performance, revealed when locally validated and mapped to KPIs. Generic, they cannot help deliver accurate job specific predictions.
An example of 2 measured traits and correlation to a company performance KPI of revenue. A performance fingerprint typically comprises a combination of 15 to 25 traits achieving a minimum correlation coefficient of 0.70
Performance clarity, predicted output tracked to actual, and to team average.
Data-driven forensic insight leading to better personnel investment decisions; selection, hiring, development, raises performance.
Identify where to invest training, coaching, and diagnose precise engagement actions for highest ROI impact.
Demystify delays with low performers. Unveil, and analyze mid-performers who appear to look alike.
Beyond historical data, gut instinct and Intuition, uncommon insight and informed decisions dramatically shift all sales metrics.
Reach out, request a demo to discover how we can help increase the relative value of your sales teams.