Monday, February 17, 2020

The Factors before Implementing Economic Value Added Essay

The Factors before Implementing Economic Value Added - Essay Example One of the most crucial factors that are likely to have significant influence over the implementation process of EVA is the support and commitment from top management of the organization. Since the concept of EVA involves the change in attitude and behavior, it is very important to have acceptance from the top level. Researchers show that EVA and all other aspects that are associated with it will be completely accepted by the employees when they will identify that the top management of the firm has already accepted it. Often it is found that the senior executives are actually half-heartedly committed to the concepts like EVA as their understanding regarding value creation is vague. As a consequence entire implementation process gets affected and this, in turn, affects the company’s performance in the long run. However, according to Stephen F. OByrne and S. David Young, making the senior management, as well as the board, understand regarding the value-based management and EVA i s just a start of the entire implementation process (Young & OByrne, 2001). They have also opined that the executives and consultants have to take additional responsibilities and convince the top management and board of the company regarding the importance of value creation and the role of EVA (Young & OByrne, 2001). Once, this starting phase is completed, key strategic decisions regarding program design have to be taken. It is very important to consider the factors like EVA centers. It is crucial to define the EVA centers for a particular organization. In other words, organizations need to identify how far down the organizational hierarchy the EVA concept will be implemented. In order to define the EVA centers, existing profit centers can be taken into consideration.      In addition to this, there are two other important factors that have to be taken care in the process of implementing EVA in an organization.

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