Lecture 9 - Lehrstuhl für Controlling - Technische Universität München

Technische Universität München
The EVA implementation process is intensely company-specific and
might follow 4 steps
Step 1:
Establish total acceptance at the board and top management levels as basis
for further implementation
Step 2:
Major
strategic
decisions
on the
EVA
program
Define the EVA measurement centers, for example on the basis of existing
profit centers with the advantage that
• profit centers have the necessary responsibilities
• the required financial reporting systems exist
Fix the frequency and the way of how to calculate EVA:
• Possible adjustments to the company’s accounting system for a “better“
EVA (attention to also growing complexity!)
• Consideration of IT constraints
• Divisional versus corporate cost of capital
Design the management compensation system (decision to be made by top
management):
• Who will be covered initially and at a later date?
• Sensitivity of bonuses to EVA performance
• Will there be a deferred component?
• Role of stock options in the compensation program
• Divisional versus company-wide or group EVA bonuses
• Relation to nonfinancial measures
Value-Based Management: Lecture 9
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© Gunther Friedl – SS 2013