m3202.1 real work real leadership real value organization structure & leadership capabilities to...

M3202.1

Real Work Real Work Real Leadership Real Leadership

Real Value Real Value

Organization Structure & Leadership CapabilitiesOrganization Structure & Leadership CapabilitiesTo Drive Value Creation inTo Drive Value Creation inThe Knowledge EconomyThe Knowledge Economy

Mark Van ClieafMark Van Clieaf

Managing Director, MVC Associates InternationalManaging Director, MVC Associates International

www.mvcinternational.comwww.mvcinternational.com

Toronto • Chicago • TampaToronto • Chicago • Tampa

416-489-1917 / 813-891-6644416-489-1917 / 813-891-6644

© Copyright 2001, MVC Associates International

M3202.2

Evaluating Corporate PerformanceEvaluating Corporate Performance

• No longer ONLY about hard assets.No longer ONLY about hard assets.

• How do you really measure Leadership capital that contributes to How do you really measure Leadership capital that contributes to short, medium & longer term performance ?short, medium & longer term performance ?

• Many Boards / CEO’s / CFO’s are not focusing on the right measures Many Boards / CEO’s / CFO’s are not focusing on the right measures that guide medium term performance. that guide medium term performance.

• How do you structure the organization & put differentiated metrics & How do you structure the organization & put differentiated metrics & decision making in place to unleash intellectual capital & create value decision making in place to unleash intellectual capital & create value at all leadership levels ?at all leadership levels ?

• There really is NO link between pay & value creating performance in There really is NO link between pay & value creating performance in most organizations.most organizations.

• What capabilities & mindsets link to performance & return, medium to What capabilities & mindsets link to performance & return, medium to longer term?longer term?


M3202.3

OverviewOverview• Industrial vs. Knowledge Economy - Implications Industrial vs. Knowledge Economy - Implications

• Boards, CEO’s and Investors using inadequate metrics & many NOT Boards, CEO’s and Investors using inadequate metrics & many NOT structured for long term value creation structured for long term value creation (Board Governance not (Board Governance not working)working)

• Link between Organization Structure and Value Creation (Creating the Link between Organization Structure and Value Creation (Creating the Viable Business System)Viable Business System)

• Complexity Based Organization™ A new model for the Knowledge Complexity Based Organization™ A new model for the Knowledge EconomyEconomy

• Leadership Value Added - LVA ™ & Implications for Assessing Leadership Value Added - LVA ™ & Implications for Assessing Leadership that delivers real valueLeadership that delivers real value

• Measuring & rewarding what really countsMeasuring & rewarding what really counts


OVA™ is a Trademark of MVC Ass IntLVA™ is a Trademark of MVC Ass IntEVA™ is a Trademark of Stern Stewart

M3202.4

Organizing for the Knowledge EconomyOrganizing for the Knowledge Economy


Industrial EconomyKnowledge Economy

FactorsExternal EnvironmentOrganizational ModelRole RelationshipDecision AuthorityMetricsPay & RewardsInformation SystemsCommunicationsBusiness PlanningResource ManagementStability / Closed SystemUncertainty / OpenAdaptive SystemMechanistic &RoutineOrganic, Planned & OpportunisticMainframe & BatchNetworked &Real TimeFixed with Annual CycleFluid & Constantly AdaptedPast is Justification for Future ResourcesPotential Future Justifies ResourcesVertical Command& Centralized Decision Making

Velocity-Based& Non-LinearPoint in Time &Linear / StaticValue Added Work& Distributed Decision Making

Title & StatusCapability to Manage ComplexitySize of Budget & TeamReal Time Virtual TeamBatch between Mgr / SubordinateComplexity of Work& Real Value

M3202.5

A New Organizational ModelA New Organizational ModelBased on the Principles of Based on the Principles of

Levels of Complexity & Complex Adaptive SystemsLevels of Complexity & Complex Adaptive Systems

–Social Systems “Weick”Social Systems “Weick”

–Complex Adaptive Systems “Santa Fe / Kauffman”Complex Adaptive Systems “Santa Fe / Kauffman”

–Performance Systems “Rummler”Performance Systems “Rummler”

–Viable Systems “Beer”Viable Systems “Beer”

–Stratified Systems “Jaques”Stratified Systems “Jaques”

–Work Systems “Hoebeke”Work Systems “Hoebeke”

–Value Added Work & Value Added Leadership Value Added Work & Value Added Leadership Integrated into holistic business system “Van Clieaf”Integrated into holistic business system “Van Clieaf”


M3202.6

Global Financial CapitalGlobal Financial Capital

• Recent 10 year ReturnsRecent 10 year Returns

– S&P 500 S&P 500 = 19.2 %= 19.2 %

–TSE 300 TSE 300 = 10.5 %= 10.5 %

– MSCI World Equity MSCI World Equity = 9.0 %= 9.0 %

– US Govt. Bonds US Govt. Bonds = 9.0 %= 9.0 %

• Efficient, Strategic & Forward LookingEfficient, Strategic & Forward Looking– Biotech & Internet - Big Market Caps & NO EarningsBiotech & Internet - Big Market Caps & NO Earnings

Source: Micropal , VanguardSource: Micropal , Vanguard© Copyright 2000, MVC Associates International

M3202.7

Free Capital ?Free Capital ?

• Equity Capital is not freeEquity Capital is not free

• Stock Options are not freeStock Options are not free

• Many Boards, VC’s, CEO’s, Many Boards, VC’s, CEO’s, CFO’s think they are ?CFO’s think they are ?


M3202.8

Wealth & Value CreationWealth & Value CreationTwo MeasuresTwo Measures


Hidden ValueHidden Value

Value DestroyersValue Destroyers

Value BuildersValue Builders

Value MythsValue Myths

PositivePositive

NegativeNegative

NegativeNegative PositivePositive

∆ ∆ Economic Profit (EP) =Economic Profit (EP) =Yr/Yr ∆ Net Operating Profit Yr/Yr ∆ Net Operating Profit After Tax minus Weighted After Tax minus Weighted

Average Cost of CapitalAverage Cost of Capital

Market Value Added (MVA) =Market Value Added (MVA) =∆ ∆ Total Market Value of Shares & Debt Total Market Value of Shares & Debt

Minus ( Total Capital Raised+ Retained Earnings ) Minus ( Total Capital Raised+ Retained Earnings )

M3202.9

Leadership & Value CreationLeadership & Value CreationOver 4 Years in CanadaOver 4 Years in Canada



11 %11 %


48 %48 %


24 %24 %


17 %17 %

PositivePositive

NegativeNegative

(65 %)(65 %)


∆ ∆ Economic Profit =Economic Profit =Yr/Yr ∆ Net Operating Profit Yr/Yr ∆ Net Operating Profit After Tax minus Weighted After Tax minus Weighted


Market Value Added =Market Value Added =∆ ∆ Total Market Value of Shares & Debt Total Market Value of Shares & Debt


SourceSource

1996-1999 Corporate Renaissance Group1996-1999 Corporate Renaissance Group

Canada Wealth Creation - 453 Public CompaniesCanada Wealth Creation - 453 Public Companies

M3202.10

Leadership & Value CreationLeadership & Value CreationOver 5 Years in U.S.Over 5 Years in U.S.



US - 8 %US - 8 %CDN -11 %CDN -11 %


US -10 %US -10 %CDN-48 %CDN-48 %


US -57 %US -57 %CDN -24 %CDN -24 %


US -25 %US -25 %CDN - 17 %CDN - 17 %

PositivePositive

NegativeNegative

US = 35 %US = 35 %

CDN CDN = 65 %= 65 %


∆ ∆ Economic Profit =Economic Profit =Yr/Yr ∆ Net Operating Profit Yr/Yr ∆ Net Operating Profit After Tax minus Weighted After Tax minus Weighted


Market Value Added =Market Value Added =∆ ∆ Total Market Value of Shares & Debt Total Market Value of Shares & Debt


SourceSource

1994-1999 MVC Analysis of 1994-1999 MVC Analysis of

Stern Stewart 1000 = 773 companiesStern Stewart 1000 = 773 companies

M3202.11

MVC ResearchMVC ResearchPerformance MeasuresPerformance Measures& CEO Compensation& CEO Compensation

• 55 % S&P 500 only measuring and paying based on 55 % S&P 500 only measuring and paying based on 1 year results - does not measure value & viability of the 1 year results - does not measure value & viability of the business system business system (NPV or ∑ of ∆ in net operating profit after tax after cost of (NPV or ∑ of ∆ in net operating profit after tax after cost of capital 3 + years)capital 3 + years)

• Only 11 % S&P 500 measuring results beyond 3 yearsOnly 11 % S&P 500 measuring results beyond 3 years

• Less than 1 % measuring beyond Financial Measures: Less than 1 % measuring beyond Financial Measures: Customer, Suppliers/ Partners, Employees , EnvironmentCustomer, Suppliers/ Partners, Employees , Environment

– Governance system is flawed - fails to recognize the complex , non-linear Governance system is flawed - fails to recognize the complex , non-linear relationships between the enterprise and its business system design, all relationships between the enterprise and its business system design, all resource inputs, & the interface with all external stakeholders / societies resource inputs, & the interface with all external stakeholders / societies that impact system viability, 2- 5 years + that impact system viability, 2- 5 years +


M3202.12

Structure & Leadership Structure & Leadership Make A DifferenceMake A Difference


Industry Sector /Company5 year Avg Shareholder Return 94-99

5 yr ∆ in MVA 94-99 $ millions

5 yr ∑ yr/yr ∆’s in EP 94-99$ millions

Metals - AlcoaMetals - NucorChemicals - DupontChemicals - Great Lakes

Healthcare - PfizerHealthcare - Bausch & Lomb

Retail - WalmartRetail - Toys-R-UsSemiconductor - IntelSemiconductor - National SemiSoftware - OracleSoftware - Novell$ 5,509 4 %20 %- 8 %49 %6 %10 % - 16 %50 %- 4 %38 %- 3 %$ 1,14116 %$ -1,983 $ 23,196 $ 132,793 $ - 2,964 $ 95 $ 113,538 $ - 8,836 $ 150,391 $ - 1,345 $ 29,263 $ - 1,222 $ -146$ 4,217$ - 186$ - 17$ 1,264$ 638$ - 417$ 2,886$ - 45$ 833$ - 290

M3202.13

Value Creation & Value Creation & CEO Turnover in the U.S.CEO Turnover in the U.S.

• CEO turnover 8.2 % for firms with MVA above median vs. CEO turnover 8.2 % for firms with MVA above median vs. 20 % with firms below median20 % with firms below median

• Firms with below median MVA performance fired CEO 2.5 Firms with below median MVA performance fired CEO 2.5 times more frequently times more frequently (including Stempel at General Motors, Whitmore at (including Stempel at General Motors, Whitmore at Kodak, Akers at IBM, Lego at Westinghouse, etc)Kodak, Akers at IBM, Lego at Westinghouse, etc)

• CEO turnover 9 % for firms with EVA above median vs. CEO turnover 9 % for firms with EVA above median vs. 19 % for firms with EVA below median19 % for firms with EVA below median

• Neither ROA nor ROE correlated to CEO turnoverNeither ROA nor ROE correlated to CEO turnover

• Shareholders / Analysts starting to use growth in MVA and Shareholders / Analysts starting to use growth in MVA and Economic Profit / Free Cashflow as performance measures Economic Profit / Free Cashflow as performance measures even if enterprise does noteven if enterprise does not

Source: Study of 241 large US companies 1987-1993 by Lehn & Makhija of University of Pittsburgh


M3202.14

Internal Value CreationInternal Value Creation& Market Value Added / & Market Value Added / Total Enterprise ValueTotal Enterprise Value

• Correlation of Business Performance and MVA / TEVCorrelation of Business Performance and MVA / TEV– Economic Profit / Free Cash FlowEconomic Profit / Free Cash Flow = 50 %= 50 %

– Return on EquityReturn on Equity = 35 %= 35 %

– Earnings Per Share GrowthEarnings Per Share Growth = 18 %= 18 %

Source: Credit Suisse First Boston


M3202.15

Earnings Per Share Earnings Per Share is NOT an Effective Measureis NOT an Effective Measure

• Does not tell youDoes not tell you–RiskRisk

–Capital IntensityCapital Intensity

–Time Value of MoneyTime Value of Money

–Future Free Cash PotentialFuture Free Cash Potential

• Is used because ofIs used because of–SimplicitySimplicity

–CommonalityCommonality

Source: Credit Suisse First Boston © Copyright 2000, MVC Associates International

M3202.16

Market Value & Market Value & Organization StructureOrganization Structure


Competitive Advantage PeriodNOPAT MinusWACC

Current Products &Services

Future Products &Services

Future BusinessModels

Current Operations Value ™Future Operations Value ™COV and FOV trademark Stern Stewart

M3202.17

Market Value to CapitalMarket Value to CapitalIndustryMarket Valueper Capital $Future Growth

as % MVSoftware & ServicesPharmaceuticalsPersonal CareBeveragesMeanNon-Ferrous MetalsCars & TrucksAluminumForest ProductSteelsource: Stern Stewart$ 6.60$ 8.20$ 4.40$ 4.30$ 3.20$ 1.20$ 1.20$ 1.10$ 1.00$ 0.9080 %71 %66 %70 %63 %63 %53 %33 %78 %17 %

M3202.18

Value Creation ModelValue Creation Model


LVA™OVA™

CVA

RTSR /MVA /EVA /CFROI

CVACVA

RTSRRTSR

MVAMVA

EVA™EVA™

CFROICFROI

OVA™OVA™

LVA™LVA™

= Customer Value Added= Customer Value Added

= Relative Total Shareholder Return= Relative Total Shareholder Return

= Market Value Added= Market Value Added

= Economic Value Added = Economic Value Added (Stem Stewart)(Stem Stewart)

== Cashflow Return On InvestmentCashflow Return On Investment= Organization Value Added = Organization Value Added (MVC)(MVC)

= Leadership Value Added = Leadership Value Added (MVC)(MVC)

M3202.19

Designing The Designing The Complexity Based Organization ™Complexity Based Organization ™


Business Planning & Business Planning & Performance MeasurementPerformance Measurement

Leadership CapabilityLeadership Capability& Talent Management& Talent Management

Organization / Work DesignOrganization / Work Design

Complexity Based Organization™Is a Trademark of MVC Assoc Intl

M3202.20

Getting The Structure of Work RightGetting The Structure of Work RightOrganization Value Added-OVA™Organization Value Added-OVA™

• Not only about steep vertical hierarchies with Not only about steep vertical hierarchies with too many too many managerial layersmanagerial layers not adding value not adding value

• Work that is a unique output, adds to future growth & viability Work that is a unique output, adds to future growth & viability of the business, & uses resources efficientlyof the business, & uses resources efficiently

• Nested Work Processes & Accountability structure where Nested Work Processes & Accountability structure where roles have distributed & differentiated decision making that roles have distributed & differentiated decision making that varies by varies by complexity level of workcomplexity level of work

• Executive Leadership is about creating the right structure Executive Leadership is about creating the right structure that provides clarity of work design for career development & that provides clarity of work design for career development & executive selection, concurrent with creating valueexecutive selection, concurrent with creating value

© Copyright 2001 , MVC Associates International / The Institute For The Complexity Based Organization ™

M3202.21

Scope & Variety as Determinantsof Complexity

• Inherent in Scope & Variety are complexity, Inherent in Scope & Variety are complexity, diversity, uncertainty, paradox & ambiguitydiversity, uncertainty, paradox & ambiguity

• Innovation ComplexityInnovation Complexity

• Leadership ComplexityLeadership Complexity

• Planning ComplexityPlanning Complexity

• Customer / Stakeholder ComplexityCustomer / Stakeholder Complexity

• OtherOther

© MVC Associates International 1994

M3202.22

Complexity LevelsComplexity Levelsof Innovationof Innovation


ServiceContinuous ImprovementProcess / SystemsBusiness DevelopmentBusiness ModelStewardship / CitizenshipGlobalEnterprise Purpose

M3202.23

Complexity LevelsComplexity Levelsof Leadershipof Leadership


Lead SelfLead TeamLead Others Who Lead TeamsLead Multiple Functions/ProcessesLead BusinessLead BusinessesLead Global Enterprise

M3202.24

LeadershipLeadershipComplexity JumpsComplexity Jumps

• Walt Mahler’s early research on Career Crossroads Walt Mahler’s early research on Career Crossroads ( basis of GE’s executive development still )( basis of GE’s executive development still )

– Lead selfLead self

– Lead teamLead team

– Lead others who lead teamLead others who lead team

– Lead multiple functions / processesLead multiple functions / processes

– Lead businessLead business

– Lead multiple businessesLead multiple businesses

– Lead global enterpriseLead global enterprise


M3202.25

Complexity LevelsComplexity Levelsof Resource Management & Planning of Resource Management & Planning

1 Day to 3 Months3 Months to 1 Year1 to 2 Yrs2 to 5 yrs10 to 20 yrs20 yrs +LabourMaterialsRevenuesExpensesQualityCustomers

Multiple Processes Multiple FunctionsNew ProductsNew MarketsNew TechnologiesNet IncomeStakeholders

Culture & ValuesGlobal Economic RiskGlobal Political RiskSocial SystemsGlobal TradeEVA / MVA / RTSRSocieties / World Order

5 to 10 yrs


M3202.26

Planning & Planning & Resource Management Resource Management

Complexity JumpsComplexity Jumps

• Elliott Jaques’ findings on time-spanElliott Jaques’ findings on time-span– PlanningPlanning

– DiscretionDiscretion

– AccomplishmentAccomplishment

• US Army 10 years + of Leadership research confirms quantum US Army 10 years + of Leadership research confirms quantum jumps in jumps in conceptual capabilityconceptual capability at at eacheach Complexity Level as # 1 Complexity Level as # 1 predictor of executive success, potential or derailmentpredictor of executive success, potential or derailment

• MVC Assoc Intl research (300 + interviews, etc) confirms levels of MVC Assoc Intl research (300 + interviews, etc) confirms levels of conceptual capability & time-spans still valid conceptual capability & time-spans still valid


M3202.27

Three Distinct Work & Leadership Three Distinct Work & Leadership Domains For Value CreationDomains For Value Creation


CurrentCustomers

Stakeholders

Societies

Short Term

Medium Term

LongTerm

Respondto ChangeLocally

AnticipateChangeNationally

Create ChangeGlobally

Engineeringof Processesfor SuperiorExecution

Evolve New Products, Services,Business Model

ChangeIndustryStructure

Work Assignmentfor Short TermResults

Resource Balancing& Integrationfor MediumTerm Profit

Investment Policy& Principlesfor Long TermSustainability

Budgets& 1 yearProfit Plan

2-5 yearOperatingIncome & CapitalManagement

Balance SheetStrategy &Total ShareholderReturn

DirectLeadership

IndirectLeadership

LeadershipofBusiness UnitLeaders

Strategic Innovation DomainOperational DomainPurpose / Values Domain

M3202.28

Complexity Based Organization™Complexity Based Organization™


Innovation LevelPlanningHorizonResourceManagementResultsLeadershipCustomerService

Quality /ContinuousImprovement

Process

Business Development

New BusinessModel

Stewardship /Citizenship

GlobalEnterprisePurpose

GrowthHorizon 1Defend & ExtendCoreBusiness

GrowthHorizon 2BuildNewBusinessesFor Medium Term Profitability

GrowthHorizon 3StrategicInvestmentsTo SecureLong Term Future and Enterprise Sustainability

M3202.29

Complexity & E-StrategyComplexity & E-Strategy

• Each Complexity Level is different work & Each Complexity Level is different work & requires different skillsrequires different skills

– CL 3 - E-Process (automating processes through the Internet)CL 3 - E-Process (automating processes through the Internet)

– CL 4 - E-Commerce (selling new products / new services on-line CL 4 - E-Commerce (selling new products / new services on-line through the internet) LL Bean, AMEX, Wells Fargo, American Airlinesthrough the internet) LL Bean, AMEX, Wells Fargo, American Airlines

– CL 5 - E-Business (transforming the business model & value chain and CL 5 - E-Business (transforming the business model & value chain and becoming a customer led enterprise through the internet) Dell, Cisco, becoming a customer led enterprise through the internet) Dell, Cisco, SchwabSchwab

– CL 6 - E-Industry ( transforming the industry structure through the CL 6 - E-Industry ( transforming the industry structure through the internet - i.e. B to B exchanges like GM/Ford/Daimler-Chrysler = internet - i.e. B to B exchanges like GM/Ford/Daimler-Chrysler = Covisint )Covisint )

• Some delegated CL 4 and CL 5 work to CL 3 capable Some delegated CL 4 and CL 5 work to CL 3 capable team members - result was a website design and team members - result was a website design and automation of existing processes vs. E-Business strategyautomation of existing processes vs. E-Business strategy


M3202.30

Layering Across Complexity LevelsLayering Across Complexity Levels

CL 1CL 1

CL 2CL 2

CL 3CL 3

CL 4CL 4

CL 5CL 5

CL 1CL 1

CL 2CL 2

CL 3CL 3

CL 4CL 4

CL 5CL 5

CL 1CL 1

CL 2CL 2

CL 3CL 3

CL 4CL 4

CL 5CL 5

GAPSGAPS

JAM-UPSJAM-UPS

CORRECTCORRECT


M3202.31

Complexity LevelComplexity Level

6H6H

6M6M

6L6L

5H5H

5M5M

5L5L

4H4H

4M4M

4L4L

3H3H

3M3M

3L3L

Proprietary & Not to be shared with third parties

CONFIDENTIALCONFIDENTIAL

5M President, U.S.5M President, U.S.

4L VP & GM ABC4L VP & GM ABC

3M VP, Science3M VP, Science

3L VP, Strategic3L VP, StrategicBusinessBusiness

DevelopmentDevelopment

3H President, XYZ3H President, XYZ

3M VP & GM3M VP & GM

Technology ServicesTechnology Services

3M VP, Technology3M VP, Technology

InvestmentInvestment

5H Group President, Services5H Group President, Services

4H President, Canada4H President, Canada


Organization Value Added -OVA™ Diagnostic

M3202.32

Leadership / StructureLeadership / Structure& Value Creation& Value Creation

• Quantum Difference in Role Design & Skills to Create Quantum Difference in Role Design & Skills to Create Customer and Shareholder Value between:Customer and Shareholder Value between:

– General Manager of Business Unit (partial P&L)General Manager of Business Unit (partial P&L)

– General Manager of Business Unit (full P&L)General Manager of Business Unit (full P&L)

– General Manager of Multiple Business Units (multiple General Manager of Multiple Business Units (multiple P&L’s = Sector of Businesses across multiple geo-political P&L’s = Sector of Businesses across multiple geo-political systems and diverse cultures)systems and diverse cultures)

– General Manager of Global Enterprise (multiple business sectors General Manager of Global Enterprise (multiple business sectors operating across multiple continents, geo-political systems, & cultures)operating across multiple continents, geo-political systems, & cultures)

• MVC 300 + interviews, many Board members, CEO’s, MVC 300 + interviews, many Board members, CEO’s, top HR and leading Executive Search Firms had no top HR and leading Executive Search Firms had no

discernable point of view on the differencesdiscernable point of view on the differences


M3202.33

General Manager Complexity Level 5

Leadership Value Added - LVA™ Capabilities

• Can they describe the profit drivers & key success factors in their business Can they describe the profit drivers & key success factors in their business model & how this may change ?model & how this may change ?

• Do they recognize how capital efficiency & the cost of capital impacts the Do they recognize how capital efficiency & the cost of capital impacts the business model, NOPAT & Free Cashflow ?business model, NOPAT & Free Cashflow ?

• Can they succinctly describe their customer needs, competitive set, size the Can they succinctly describe their customer needs, competitive set, size the market, & how this may change ?market, & how this may change ?

• Can they balance resource management between the 1 year operating plan Can they balance resource management between the 1 year operating plan & the 2-5 year investment plans to grow the business?& the 2-5 year investment plans to grow the business?

• Can they integrate and balance non linear linkages between such functions Can they integrate and balance non linear linkages between such functions as research, development, production & sales ?as research, development, production & sales ?

© Copyright 1998, MVC Associates International, All Rights Reserved

M3202.34

Executive Compensation StrategyExecutive Compensation StrategyFor a New Organizational ModelFor a New Organizational Model

• Link Compensation to metrics for both: Link Compensation to metrics for both: – Internal Value CreationInternal Value Creation = Economic Profit / CFROI AND = Economic Profit / CFROI AND

– External Value CreationExternal Value Creation = MVA / RTSR metrics = MVA / RTSR metrics

• Differentiates Differentiates duration of Performance Measurementduration of Performance Measurement based on the based on the Complexity of Executive Work & value created ( NOT size of budgets & Complexity of Executive Work & value created ( NOT size of budgets & team), team), HR locked in an old industrial modelHR locked in an old industrial model

• Should include Customer, Company, & Societal measures otherwise will Should include Customer, Company, & Societal measures otherwise will sub-optimize business viability over timesub-optimize business viability over time

• Recognize Organization Value Added-OVA ™ in determining Performance Recognize Organization Value Added-OVA ™ in determining Performance MeasuresMeasures

• Decide on Policy for STIP & LTIP plan linked to Performance Measures and Decide on Policy for STIP & LTIP plan linked to Performance Measures and Real Value createdReal Value created


M3202.35

SummarySummary

• There is a direct link between organization structure, leadership There is a direct link between organization structure, leadership capability & market cap in the Knowledge Economycapability & market cap in the Knowledge Economy

• Design the organization structure so value is created in each Design the organization structure so value is created in each nested Work Level. nested Work Level. Govern the firm recognizing the Business Govern the firm recognizing the Business Strategy and link to Complexity Levels of REAL WORK = Strategy and link to Complexity Levels of REAL WORK = Organization Value Added- OVA™ Organization Value Added- OVA™

• Recognize there are differentiated levels of Leadership capabilityRecognize there are differentiated levels of Leadership capability. . Recruit / Match executive leadership talent based on the complexity Recruit / Match executive leadership talent based on the complexity of the work = Leadership Value Added-LVA ™ to drive long term of the work = Leadership Value Added-LVA ™ to drive long term value = Economic Profit / MVA / RTSRvalue = Economic Profit / MVA / RTSR

• Design metrics & reward / compensation strategies to reward Design metrics & reward / compensation strategies to reward REAL WORK & REAL LEADERSHIPREAL WORK & REAL LEADERSHIP that creates that creates REAL VALUE REAL VALUE long term!long term!


m3202.1 real work real leadership real value organization structure & leadership capabilities to...

Documents

work value

pay value

medium term performance

leadership capital

medium longer term performance

real valueleadership

leadership levels

performance return