Whether we like it or not, businesses are no longer being managed in the same way. The “theory of evolution” also applies to management.

The management profession is undergoing a major transformation. Not only has the pandemic accelerated change, but it has also forever transformed the way things are done, particularly in terms of organizational governance.

To lead teams with efficiency and agility while mobilizing them to make the organization innovative and competitive, managers must adapt and avoid setting old, more paternalistic vertical management practices into stone. They need to evolve towards a horizontal, more engaging approach, where the collective takes precedence over the individual.

Today and tomorrow’s leaders must therefore acknowledge the facts and seek to adapt quickly, lest they become fossils!

Taking stress factors into account

The time has come to accept the fact that not acting will inevitably force all entrepreneurs and managers to consciously or not, take a huge step back. Leaders must quickly become aware of the stressors they face and take them into account, not only for themselves, but also in the way they manage their organization.

Below are some of the findings that reflect how management has evolved.

Pressure on labour shifts

With the pandemic, humans have had an unexpected encounter with themselves. They have returned to their deepest values and exploratory instinct, resulting in pressure on labour shifts, which is far from over.

Emotional intelligence and responsibilities

Humans want to be part of tomorrow’s solution, which forces managers to think more collectively. Emotional and strategic intelligence, as well as responsibilities, must now be expressed and distributed horizontally, which promotes a spirit of collaboration and openness.

Organizational structures must become more agile, innovative and motivating for employees. With the labour shortage, it is essential to involve players to retain key employees.

Progressive transition of power

In terms of change management, the gradual transition of power is forcing leaders to rethink their governance and communication strategies to make them more linear. It is important to recognize that more transparent and inclusive governance encourages staff engagement and facilitates decision-making.

Skills, attitudes and promising personalities

Supporting ambitions to advance will trigger a numbers game that can foster a more natural selection of skills, attitudes and personalities that can provide managers with local solutions.

Evolving towards a horizontal decision-making process

Lastly, the managerial and entrepreneurial species is evolving rapidly towards a reverse management model that better leverages grassroots skills in its decision-making process. The vertical will become more horizontal and the power pyramid will become flatter. Managers will focus more on gathering ideas and solutions from their resources with a governance that integrates a variety of experts.

Key considerations for future managers

Beyond these observations, how can leaders avoid fossilizing their management? Here are some considerations that our experts can help you with in order to make your management evolve towards the managers of tomorrow.

Ensure overall managerial health

Ensure the business’s (managers, company and employees) overall health by identifying the new stressors caused by the major changes experienced. It is essential to target the key issues that can compromise your organization’s growth and sustainability.

Review your governance by maximizing the components of your ABCD

Review your governance by maximizing the components of your ABCD (Agility, Benevolence, Collective, Diligence). This governance review ensures, among other things, that business leaders are not isolated and that part of the burden of responsibility is taken off their shoulders. If you are well surrounded and if everyone understands their role, you encourage agility and thus promote the growth and sustainability of the organization.

This will make it possible to implement a matrix of the necessary competencies and review the delegation of authority matrix to move towards a more collective and horizontal allocation of responsibilities.

Shock treatment for HR component

Initiate a shock treatment of the entire HR function (surveys, engagement, overall health, total remuneration, flattening of authority, structure and coaching, etc.).

Implement a strategic and technological plan

Implement a strategic and technological plan so that your organization can innovate, remain competitive and increase the engagement and commitment of all teams. The digital age has replaced the old ways of doing things. It’s time to evolve!

Adapt your organization to an accelerated evolution

We support many organizations in their transformations, whether it be in terms of entrepreneurial succession, governance renewal, technological levers, strategic HR advice or overall entrepreneurial health, to name a few. The pace of these types of transitions must accelerate.

In 2022, our firm invites managers and entrepreneurs to quickly take up the transformation challenge of adapting their organization to the accelerated evolution of management. The organization’s Darwinian transformation is no longer a choice, it’s a necessity to remain at the forefront and ensure its sustainability.

Take control of your organization’s destiny by consulting an experienced consultant who can help you implement a structured approach and by appointing an internal team to ensure the transformation’s pace and success.

Contact us today to find out how we can help you take the steps necessary to adapt and successfully carry out your business plans.

It’s time to evolve and adapt to avoid fossilization!

Together, let’s ensure our collective success!

IAS 36 Impairment of Assets is not a new standard, and while many of its requirements are familiar, an impairment review of assets (either tangible or intangible) is frequently challenging to apply in practice. This is because IAS 36’s guidance is detailed, prescriptive and complex in some areas.

The Insights into IAS 36 series have been written to assist preparers of financial statements and those charged with the governance of reporting entities to understand the requirements set out in IAS 36, and revisit some areas where confusion has been seen in practice.

The next three publications in the Insights into IAS 36 series cover Step 4 of the impairment review, namely estimating the recoverable amount:

• Estimating recoverable amount;
• Value in use: estimating future cash inflows and outflows;
• Value in use: applying the appropriate discount rate.

The first publication covers the definitions of recoverable amount and fair value less costs of disposal (FVLCOD) and provides an overview of value in use (VIU). The second and third publications discuss estimating future cash inflows and outflows and an appropriate discount rate in VIU calculations.

The publications mentioned above follow this IFRS Adviser Alert.

Updated on February 19, 2024

A business valuation is a complex process with several fundamental elements to consider in determining the right market price.

To achieve their goals, entrepreneurs need to make strategic decisions about their business. These decisions often involve determining the organization’s fair market value. To do this, it is necessary to:

• determine the appropriate valuation report;
• select a valuation approach and method;
• take the entity’s risk factors into consideration.

Determining the appropriate valuation report

The fair value of a business is determined by professionals known as Chartered Business Valuators, or CBVs. The value conclusions provided by a CBV are established in three different types of reports, depending on the level of assurance the client wants. The types of reports are as follows.

Calculation valuation report

A calculation valuation report contains a conclusion as to the value of shares, assets or an interest in a business that is based on minimal review and analysis of the information received. This type of report can be based on several assumptions provided by your organization’s management. It is the least expensive and detailed of the reports. It also offers the lowest form of assurance regarding the value conclusion. This is the type of report most often used by clients for tax planning purposes or for smaller transactions.

Valuation report on an estimate of value

A valuation report on an estimate of value contains a fair value conclusion based on a more in-depth analysis and corroboration of the information received than the calculation report. This report contains more detailed information about your business such as an analysis of its historical results, a description of its customers, suppliers, human resources, competitors, and a summary review of the industry and economic context. Because of the greater depth of analysis and corroboration, this report offers a higher level of assurance than the calculation report.

Comprehensive valuation report

A comprehensive valuation report contains a fair value conclusion based on an extensive or comprehensive review and analysis of the business, its industry and all other important components to determine its value. This information is substantiated appropriately and is set out in a very detailed valuation report. This type of report is often produced in the context of litigation or more complex and significant transactions. It provides the highest level of assurance of the report types.

Selecting a valuation approach and method

Considerable information needs to be obtained and analyzed to produce a comprehensive valuation report. Among others, the valuator needs to:

• Obtain sufficient knowledge of the business’s operations and inherent risk factors;
• Obtain detailed financial information;
• Analyze the balance sheet and capital structure;
• Analyze historical results and make adjustments to reflect any item that is not representative of the entity’s future earnings;
• Analyze the business’s financial forecasts.

The valuation approach and techniques will be determined depending on the type of business and the information obtained and analyzed.

Asset-based approach

The asset-based approach is generally employed in the following circumstances:

• Potential buyers would mainly be interested in tangible assets because of the company’s makeup (a real-estate company or a holding company, for example);
• The company is planning on liquidating its assets because it is no longer viable as a going concern or its profits do not provide a sufficient return on investment.

Income-based approach

The income-based approach is generally used when:

• The company is realizing sufficient return on investment;
• A potential buyer would be interested in projected future profits and cash flow.

The income-based approach assumes that the organization will continue to operate and report profits and increase either profitability or cash flow over time.

There are several recognized methods for determining the value of your business based on such an approach, including the capitalization of earnings method, capitalization of cash flows method, discounted cash flow method, and variations such as the capitalization of earnings before interest, taxes, depreciation and amortization method (EBITDA).

Market-based approach

In addition to the valuation approaches and methods presented above, determining the fair market value of a company involves a review of comparable transactions and an analysis of companies in the industry. This approach provides various financial ratios that can be applied to your business. These ratios should be applied carefully as comparable organizations may differ considerably when it comes to company size, their target market, product range, financial capabilities and growth potential, etc.

Taking the entity’s risk factors into consideration

Critical to determining the fair market value of your business is the identification of various risk factors. These risks have a direct impact on the business’s value, either upwards or downwards. Here are a few examples of various external and internal risks:

External factors

• The economy;
• Financial markets;
• Regulations;
• Competitors;
• Customers;
• New technologies;
• Availability of resources;
• Etc.

Internal factors

• Workforce qualifications;
• Management team’s experience;
• Presence of successors within the organization;
• Level of recurring revenues;
• Level of dependence on certain customers;
• Financial situation;
• Sales staff’s performance;
• Installations’ quality;
• Products and services life cycle;
• Etc.

As mentioned, valuing your business is a complex exercise where a wide range of variables must be taken into consideration and, above all, appropriately addressed.

Don’t hesitate to ask for help from a business valuation expert who will guide you through the process and help you make informed decisions.