Install EVA efficient engine for performance prism

Install EVA efficient engine for performance prism

With the rapid development of global economic integration, the competition among enterprises is increasing. People began to doubt the essence of "economic man" in enterprises, and tried to re-examine the essence of enterprises from another brand-new perspective "social attribute", so new performance evaluation methods such as BSC method and performance prism came into being.

First of all, the questions raised

Based on the transcendence of BSC (Balanced Scorecard), Professor Andy Neely of Kirkfield Business School in the United Kingdom and others put forward performance evaluation in 2002: the complex organizational relationship under the unique background is transformed into the interest relationship of multiple stakeholders through the refraction of prism; It provides an innovative and comprehensive framework to guide operators to pay close attention to those factors that affect long-term success, and to help enterprises design, establish, operate and update their performance management systems according to their respective business environments. Its framework consists of five perspectives, in which the satisfaction and contribution of stakeholders constitute two bottoms of the performance prism, and strategy, process and capability constitute three sides of the performance prism; After the introduction of performance prism method, successful cases such as DHL, London Junior and Fraser Home Chain Store emerged.

Compared with the BSC method, the performance prism has made the following improvements: firstly, the performance prism introduces the concept of system thinking and skillfully uses the "causal closed loop" to solve the "dynamic complexity" problem that the "one-way causal chain" in the BSC method can not solve; Secondly, the performance prism broadens the range of stakeholders and changes the "narrow vision" of BSC method-only paying attention to shareholders, employees and customers and ignoring other stakeholders (such as suppliers, competitors, communities, etc.). ).

In short, the performance prism is almost perfect in theory, but the disadvantage is that many evaluation indicators can be derived from each perspective, resulting in too many evaluation indicators scattered in multiple functional departments. In this way, it not only brings great difficulty and error to the data processing of performance evaluation, but also submerges the key indicators in the flying evaluation indicators. In addition, its implementation requires a solid enterprise management foundation and a relatively perfect information system, which many enterprises are relatively lacking in.

How to give full play to the advantages of performance prism at this stage and guide it to take off This paper focuses on the feasibility of establishing a performance evaluation system based on EVA.

Second, the EVA needle overview

In view of the shortcomings of traditional performance indicators, academic and industrial circles have gradually developed many performance evaluation indicators with shareholder value as the core since the 1980s, among which "Economic Value Added" (EVA for short) proposed by Stern Stewart Company of the United States is the most influential and widely used one. In overseas markets, is it strict? Stewart used it to conquer a large number of institutions, including Coca-Cola and Singapore Government Investment Corporation, and became a basic tool for a large number of investment banks, such as Goldman Sachs, JPMorgan Chase and Credit Suisse First Boston Bank, to analyze the company's value.

The difference between EVA and most other performance indicators is that it considers all the capital costs that bring profits to enterprises, that is, what economists call opportunity costs, that is, the expected returns of investors who invest in other stocks and bonds with similar risks because they hold existing corporate securities.

EVA aims at a single financial measurement index, which changes the chaotic situation of enterprise performance management. Can automatically guide and motivate managers and ordinary employees to think and do things for the interests of shareholders, and truly combine the interests and actions of managers and employees to the maximum extent, thus establishing an effective incentive system; For the information users outside the enterprise, EVA may be the most ideal index to evaluate the performance of the enterprise, which truly reflects the operating performance of the enterprise.

The disadvantages are: the EVA management system is too single and comprehensive, and it is impossible to involve all aspects of enterprises, which is contrary to the great uncertainty of all kinds of information in the information age; As a financial index to evaluate enterprise performance, its accuracy largely depends on the accuracy of the weighted average cost of capital; There are also problems of post-event reflection of other financial indicators and insufficient attention to non-financial information. Therefore, EVA financial evaluation is also very important for enterprises, but it cannot completely replace non-financial evaluation.

? ? Thirdly, the feasibility of establishing a performance evaluation system based on EVA.

As an important part of enterprise management system, performance evaluation is the key to give full play to the efficiency of organizational behavior, improve the distribution system and achieve enterprise goals. It can be said that the rationality of performance appraisal will determine how far an enterprise can go. To establish a performance evaluation system with EVA as the engine, we need to emancipate our minds and update our concepts;

1. target confusion-the performance prism with clear targets can derive many evaluation indicators. However, too many indicators will distract managers and even make them at a loss, and the cost is high, and they often can't grasp the main points.

EVA only uses one financial measurement index to link all decision-making processes, and summarizes all kinds of business activities of enterprises as one purpose. Because the sole goal of the company's operation is to improve EVA, all departments will automatically strengthen cooperation, decision-making departments and operation departments will automatically establish contact, and the situation of mutual distrust between departments will be improved.

2.*** Common benefits-the biggest feature of the performance prism of shareholder wealth is to put stakeholders at the center of performance evaluation, form the strategy of the enterprise from the perspective of stakeholders, determine the internal process of the enterprise, and develop the ability of the enterprise; Undoubtedly, it emphasizes the common interests of many stakeholders; In contrast, the ultimate goal of EVA management is to maximize shareholder wealth and company value.

Emphasizing the pursuit of shareholder wealth will ignore the interests of other stakeholders? The answer is no: the maximization of shareholders' wealth is a necessary condition to ensure the fundamental interests of other stakeholders. First of all, the maximization of shareholders' wealth can guide the allocation of resources in the most efficient and valuable fields, and the process of shareholders' wealth creation is also the process of every member of society (including other stakeholders) creating wealth; On the other hand, if the enterprise does not pursue the maximization of shareholders' wealth, it will lead to the wanton waste and exhaustion of resources, and ultimately damage the wealth accumulation of every member of society (including other stakeholders); Also, as the economist Ronald? According to Gauss, a company is a "collection of contracts". If a company emphasizes the pursuit of shareholders' wealth and ignores and damages the interests of other stakeholders, it will inevitably cause dissatisfaction of other stakeholders, which will lead to the decrease of EVA.

3. Trend of the Times-In September 2000, Anders Dahlvig, CEO of IKEA, gave this feeling: "Great changes have taken place in the world in the past decade ... All of us are living in a different way than we did ten years ago. Globalization means that the stakeholders to be considered and the responsibilities to be assumed are everywhere, and the complexity of the problem is unprecedented. " Gone are the days when enterprises can survive and thrive only by paying attention to the interests of a certain stakeholder (shareholder); The years of focusing on the interests of two stakeholders (shareholders and customers) are numbered, if not completely faded; Still simply paying attention to a small number of stakeholders with decisive significance, but ignoring the needs of the rest, in today's era of information flying all over the sky, it is undoubtedly a blind man touching the elephant, which is of no help.

It seems that we urgently need to capture all stakeholders and immediately come up with chips that satisfy all parties.

In fact, creating maximum value for shareholders is the most basic concept that modern companies should have; Shareholders are the ultimate undertakers of business risks and the ultimate winners of the remaining enterprises; Only when the capital invested by shareholders increases will investors increase their investment and attract more investors.

4. The causal closed-loop in the real profit BSC-the one-way causal relationship has serious defects: it cannot solve the "dynamic complexity" problem in a large number of real economic activities. Performance prism introduces the concept of systematic thinking, which is mainly reflected in the design of five perspectives, thus forming a "causal closed loop" logically: the existence of "causal closed loop" not only enables enterprises to clarify the logical relationship between various results and their driving factors, but also enables enterprises to see that every action will affect all aspects of behavior or results before and after the closed loop, which actually greatly broadens the horizons of enterprise decision-making.

EVA is an index that comprehensively reflects the real profitability of enterprises' production and operation by the amount of money. Because the key to evaluate the operating status and value creation ability of an enterprise is whether the investment income exceeds the total cost invested for the income.

From the experience of western developed countries, in order to evaluate the business performance of enterprises, it has become an important research topic in the western accounting field to combine financial information with non-financial information, and it has become a significant development trend to improve financial reports and formulate long-term development strategic plans for enterprises.

In a word, the performance prism dynamically shows the reasonable steps of enterprise performance evaluation with its clear context; EVA scientifically reveals the correct direction of enterprise performance evaluation with its concise goal. Therefore, in the current enterprise performance evaluation, it is feasible and necessary to establish a performance evaluation system with EVA as the engine and performance prism as the intellectual pillar; Their integration will certainly produce brilliant and win-win flowers.

;