EVA Challenge: Implementing Economic Value Added Transformation Program

Author: Sitengen
Publisher:
Publish Date: 2002-01-01
Features: Economic Value Added (EVA) – It is both a measurement method for a company's true economic performance and a strategy for creating shareholder wealth. It is also a method for changing a company's advantages and behaviors across the entire company, from the production line. Properly implemented, EVA will free company performance measurement from the whims of accounting conventions and align the interests of management with those of shareholders, ending the decades-long conflict between the two. The EVA Challenge provides valuable insights not only for beginners in EVA but also for advanced practitioners of EVA. The real-world case studies illustrate how the practical application of shareholder value positioning can align the goals of all levels of the organization, motivate management by linking compensation to EVA performance, and deliver additional value to shareholders. Essentially, an EVA program consists of three components: a measurement system, an incentive system, and a financial management system. For example, when measuring performance, the key elements of EVA include identifying capital charges—the cost of capital for the company, department, subsidiary, or product. It demonstrates to executives worldwide how to adapt EVA to their organizational needs and increase the economic value they create.