【正文】 held pany at end of period* number of years 1 number of years 1 1 1 Estimated market value of shares of privatelyheld pany at beginning of period* Framework Output Measures bc Corporate Performance Measurement LON 20 CorporatePerformanceMeasurement Bain?s client stock performance slide is calculated using TSR, which is used to measure the shareholder value created B a i n c l i e n t sS amp。 Company, Inc. bc Corporate Performance Measurement LON 2 CorporatePerformanceMeasurement ? Executive Summary ? Objectives ? Background ? Performance Measurement Framework ? Market Value Added (MVA) ? Economic Profit (EP) ? Cash Flow Return on Investment (CFROI) ? Exercises –MVA –Economic Profit ? Case Study Diageo Agenda bc Corporate Performance Measurement LON 3 CorporatePerformanceMeasurement ? Corporate performance evaluation has evolved from the 1960s focus on ROE to the current variations of economic profit that measure impact on shareholder value –many firms have devised their own variations of economic profit –Stern Stewart?s Economic Value Added (EVA)TM is best known of these measures –Holt/BCG?s Cash Flow Return on Investment (CFROI) is a similar concept presented in % return format ? Both ROE and EP are business metrics, tools used to measure the performance of the business –separate from fundamental business drivers, the actual factors that influence shareholder value, and output measures the backwardlooking records of overall pany performance ? Focusing on EP instead of ROE decreases the likelihood of destructive behavior by managers –By evaluating managers based on EP, manager behavior can be altered such that only projects that add value (with NPV0) are undertaken, which does not always occur with ROE Executive Summary (1 of 2) bc Corporate Performance Measurement LON 4 CorporatePerformanceMeasurement Executive Summary (2 of 2) ? End goal of EP exercises is consistent with traditional Bain focus of maximising shareholder value –Bain has measured historical performance with Total Shareholder Return –Stern Stewart devised Market Value Added (MVA)TM as means of measuring market expectations of EP that managers will add in the future –managers? objective should be to maximise MVA ? All economic profit measures deduct charge for use of equity capital from accounting?s typical ine or profit after tax to reflect the opportunity cost associated with equity investments –Stern Stewart has trademarked EVATM by specifying adjustments to make to EP bc Corporate Performance Measurement LON 5 CorporatePerformanceMeasurement Agenda ? Executive Summary ? Objectives ? Background ? Performance Measurement Framework ? Market Value Added (MVA) ? Economic Profit (EP) ? Cash Flow Return on Investment (CFROI) ? Exercises –MVA –Economic Profit ? Case Study Diageo bc Corporate Performance Measurement LON 6 CorporatePerformanceMeasurement Objectives There are three objectives of the Corporate Performance Measures Module: ?To define the most popular measures of corporate performance ?To explain the significance of these measures in the corporate environment and potential applications in Bain?s strategy work ?To outline calculations of each performance measure bc Corporate Performance Measurement LON 7 CorporatePerformanceMeasurement Agenda ? Executive Summary ? Objectives ? Background ? Performance Measurement Framework ? Market Value Added (MVA) ? Economic Profit (EP) ? Cash Flow Return on Investment (CFROI) ? Exercises –MVA –Economic Profit ? Case Study Diageo bc Corporate Performance Measurement LON 8 CorporatePerformanceMeasurement ?With the rise of conglomerates, most panies focused on Return on Equity, or ROE, as their primary measure of performance –led most managers to undertake acquisitions solely to manipulate accounting figures 1960s/70s 1980s/90s ?With the increased focus on delivering shareholder value, managers have accepted systems that measure the change in value –managers realised equity is not free –economic profit (EP) meets these needs by telling managers where value has been created and where it has been destroyed ?As aligning interests between owners and managers has bee more important, tying management pensation to EP provided a popular solution Corporate performance evaluation has evolved from the 1960s focus on ROE to the current variations of economic profit (EP) that measure impact on shareholder value Background Corporate Performance Evaluation bc Corporate Performance Measurement LON 9 CorporatePerformanceMeasurement ?Bain was the first of major consulting firms to focus on creating shareholder value ?To achieve this, Bain has used the output measure of Total Shareholder Return and the accounting measures of ROE and ROI ?Modified accounting measures, such as EP, provide an alternative means of measuring the creation of shareholder value Background Relevance to Bain bc Corporate Performance Measurement LON 10 CorporatePerformanceMeasurement ?To illustrate the role of corporate performance measures and resource allocation to strategy work, an examination of Marakon?s “program” is useful ?Marakon applies the following program, which can take several years to plete, to all of its clients: –assess the economic profit of all customer segments and product lines –pare pany performance to industry performance –investigate three or more strategies for each business every planning cycle –shift resource allocation from economically unprofitable products/customers to economically profitable –leads to yield loss for Marakon and clients since additional scenarios frequently evaluated Mar