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The EVA Challenge: Implementing Value Added Change in an Organization , Joel Stern, John Shiely and Irwin Ross, Wiley Finance, 2001, 240pp.
Even Coca Cola, an early adopter of EVA, has had difficulties. Responsible Wealth reported that "Although Coca Cola stock lost 22% of its value in 2001 (compared to a 12% loss for the S&P 500), and 6,000 Coca Cola employees (21% of the company's workforce) were laid off just a year earlier, Coca Cola CEO Doug Daft enjoyed a 47% compensation increase in 2001, to more than $74 million." Al Ehrbar, author of EVA: The Real Key to Creating Wealth2, writes "EVA is the framework for complete financial management and incentive compensation system that can guide every decision a company makes ... that can transform corporate culture, that can improve the working lives of everyone in an organization by making them more successful, and can help them produce greater wealth for shareholders, customers, and themselves." As you can see from the previous paragraphs, EVA works in regard to "themselves". The pressure to conform is tremendous. For example, listen to what C. B. Rogers, Jr., Chairman of Equifax stated in 1996, "At the monthly meetings, (of Equifax's 29 business units), we separate them (business unit managers) into value creators and value destroyers. You don't want to be a value destroyer. Its a terrible term, but that's what you are doing." EVA focuses on shareholders. Shareholders are only one of the many groups that make up the stakeholders of an organization. We believe that any approach to wealth creation that fails to take into account the entire stakeholder universe of an organization is doomed. Moreover, an organization's strategy for wealth creation must incorporate three other elements: Opportunities/Threats in the Market; the Current Capabilities of the Organization; and its Capacity for Change. A successful Innovation Roadmap will include all four elements! Peter Drucker has written, "Business has only two basic functions: marketing and innovation. Marketing and Innovation produce results. All the rest are costs." We go even further, to state that innovation in marketing is also essential! Therefore business has only one basic function -- Innovation. Innovation is the basis of all competitive advantage: the means by which organizations anticipate and fill customer needs and the method by which organizations utilize technology. Innovation either endows resources with a new capacity to create wealth or it creates a new resource.
EVA: The Real Key to Creating Wealth, Al Ehrbar, Wiley, 1998, 256pp