Performance Management Measures that Enhance Organisational Value: A Review

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					                     JAMAR                                           Vol. 6 · No. 2 · 2008




Editorial                                            Keywords

Performance                                          Profitability Measures
                                                     Performance Metrics
Management Measures                                  Valuation Measures
that Enhance                                         Economic Value Added (EVA)
Organisational Value: A                              Strategic Value Added (SVA)
                                                     Balanced Scorecard (BSC)
Review                                               Capability Economic Value
                    
				
DOCUMENT INFO
Description: Performance measurement plays a critical part in crafting strategy, evaluating past performance and remunerating managers. While there are numerous measures of an organisation's financial performance, the most informative are those that reflect the aspects of profitability and capital employed. Through the 1990s and early 2000s, traditional accounting measures have been viewed as inadequate as firms began focusing on shareholder value as the primary objective and thus intangible assets became an important source of competitive advantage (Upton, 2001). Subsequently, value measures were devised based in varying degrees on cash flows and NPV and EP (such as Residual Income). These measures explicitly acknowledge that equity has a cost and thus incorporates risk into its calculation. Ratnatunga, et. al. (2004) developed the CEVITA(TM) measure, based on the underlying premise that an organisation's value is not based on what it has (its assets) but what it can do with both its tangible and intangible assets (its capability) in the execution of its strategies.
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