Many companies never realize their full potential because the transfer of knowledge runs smack dab into a limited span of control. Fortune 500 companies flounder because even the most innovative strategies die when second, third, and fourth-generation leaders struggle with what it means to implement these new ideas.
Some mid market and most publicly traded companies have introduced some form of ‘return’ concept into their organizations. Whether it is Economic Value Added (EVA), Return on Investment (ROI) or Return on Invested Capital (ROIC), the concept is to engage everyone in activities that have a positive impact on the company’s value.
Now this all sounds great. No one is a bigger proponent of aligning business activity with value-added results than I am. I couldn’t be happier that large companies are beginning to push these concepts deep into their organizations. The problem that has popped up however is that concepts like EVA, ROI, ROIC and even P&L and EBITDA don’t always translate well into employee actions that can make a real difference to the company.
The companies that successfully implement these strategies will be the ones that can draw a line of sight between the daily activities of all employees and the indicator they are tracking, like EVA. Those that don’t will be relegated to the management theory of the month club, where employees sit back and say: “If I just keep my head down for the next two months, this too will pass.” The missing link between management theories and successful implementation is education grounded in a solid understanding of business financials, delivered in a manner that sticks.