【正文】 tives tied to shareholder value creation outperform panies without these incentives Companies with Corporate and Business unit incentives Companies with solely Corporate VBM incentives 3year TSR% 20 21 22 23 24 25 26 19972023 199497 199194 ValueCreating Behaviors, Priorities, Decisions, and Measurement Linking HR to VBM VBMAligned Management Processes Corporate Structure Alignment Corporate Culture VBMAlignment Desired ValueCreating Behaviors and Competencies Employment Relationship Personal Needs, Goals, and Strategies Individual Priorities and Skills HR Policies and Management Personal Vision Organization People Requirements “ Ownership” Culture ? Decisionmaking ? Priorities ? Reports An HR Perspective on Value Management Investor Scorecard Total Shareholder Return (TSR) Market Value Added (MVA) Management Track Record Growth / Return Profile Business Strategy Investments in Future Growth Economic Value Improvement Intellectual Capital Investor Expectations of future earnings risk Financial Performance Objectives Client Satisfaction Indicators Employee Engagement Productivity Product Offering Innovation People Strategy SHORT TERM INDICATORS (Illustrative) Decision Process and Organizational Structure Performance Management and Incentives Internal Resource Allocation Staffing and Recruitment Values and Culture Communications Training Internal Process “Alignment to Value” Internal Scorecard Long Term Goals and performance targets anchored to Investor Expectations What is Value in the Business Context? Time Today Business Value: What future cash flows are worth today $ $ $ $ $ Competing Perspectives: ? Look back at what has happened ? Look forward at what will happen ? Spread costs smoothly over time ? Look at the timing of when cash es and goes ? Only count what can be measured ? Count everything that affects value Value Perspective Accounting Perspective Bridging the Gap Accounting Results ?Returns ?Growth ?Margins ?Market share ?Product quality Strategy ?Management team ?Plan for the future ?Innovation ?Competitive position/investment Market Valuation ?Stock Price ?Total Shareholder Return (TSR) Expectations of Value ?Likelihood of success ?Degree of improvement ?Economic environment Measurement of Value ? Measurement of value is not a neutral act it is a choice which signifies management’s priorities and dictates the anization’s view of itself ? Selecting a performance measure aligned with enhancement of value influences not only that measure but also all those measures not selected Measurement of Value ? Return on Equity (ROE) ? Return on Assets (ROA) ? Return on Capital (ROC) ? Return on Net Assets (RONA) Return Measures ? Revenue growth ? Asset growth ? Investment growth ? Market share ? Volume Growth Measures ? Total Shareholder Return ? Market Value Added (MVA) ? Economic Value Added (EVA) ? Cash Value Added (CVA) ? Cash Flow Return on Investment (CFROI) Combined Measures Drivers of Shareholder Value Returns Growth VALUE The two most fundamental drivers of share holder value : Managing Shareholder Value The balance of peting objectives : GrowthReturns Tradeoff For most firms, the relationship between growth in Capital Employed and percent change in ROI is initially negative. Correlation is positive over longer time horizons. Growth in Capital Return on Capital Profit Margins Asset Turnover Shareholder Value Hierarchy of Tradeoffs Dimensions of Value Shareholder Value Creation Performance measures and targets are customized to capture short term tradeoffs in view of long term value Shortterm Tradeoffs Longterm Investments Capital Investment for long term growth potential Shortterm Returns: Returns in excess of cost of capital ? RONA ? EP spread (%) ? CFROI ? ROE Shortterm Growth: ? Net Ine growth ? Cash Flow growth ? Sales Growth Dividends Free Cash Flow Industry Factors: Not pany specific ? Macroeconomic factors ? Demographics ? Commodity prices, etc Internal Company specific (Customized metrics including EP, CVA, CFROI, TBR, and other value drivers) External Industry specific Shortterm Tradeoffs What metrics do we subscribe to? Shareholder Value Enhancement Imperatives ? Identification of value centers within the anization ? Evaluation of strategic alternatives (harvesting, divesting, acquisitions, market entry, etc.) based on value creation ? Integration of management systems (strategic planning, budgeting, resource allocation and performance measurement) based on value creation ? Implementation of MIS to facilitate operational decision making, periodic reporting and monitoring of value creation ? Rewards aligned with “value based” performance Generic Value Driver Tree Commitment Competencies Capabilities Implementation Through People Financial Results Operational Outes Structures, processes, and experiences that enable your anization to secure petitive advantage Capabilities Performance behaviors that are observable, measurable, and critical to successful performance Competencies Factors that facilitate employee mitment to the anization Commitment Balanced Measures Example Financial ? Margins ? Cost Reduction ? Project Profitability Client ? Client Satisfaction ? Perceived Value of Service Operational ? Ontime Completion Rates ? Bidding Success Rates Employee ? Employee Survey Results ? Turnover Rates EVA