When the management of the firm uses metrics, such as Economic Value Added (EVA) or Value Based Management, to achieve corporate goals, these relevant value measures—or their derivatives—must be made available to all of the company employees. In “The Missing Link,” (see the attached document) the author describes the disconnect that takes place in planning if appropriate performance measures are not driven down the company structure to employees at all levels. The author makes some suggestions on how to make value-based management concepts meaningful to employees at the operation level.
After reading the article, answer the following questions:
1. What is a value driver and how could it be used in compensation plans for operational employees?
2. How could a company identify value drivers for its overall Economic Value Added metrics?
3. What roles should education and reporting play in the process of using value drivers?