To help us make all the short- and long-term decisions that affect our company and help it to grow, we use a highly respected performance indicator, measurement, and compensation system called "Economic Value Added" (EVA), popularized by the management consultants of Stern, Stewart and Company.
EVA is an internal measurement of operating and financial performance that is linked to incentive compensation for all employee-owners. Under the terms of the EVA plan, we shifted our focus from budget performance to long-term continuous improvements and the creation of economic value.
When we make plans for improvements around here, we include an EVA analysis. When we make decisions to add or cut programs, we look at the impact on EVA. Every month we study our performance in terms of EVA, and this measurement system is one of the first things new recruits to the company learn. EVA has proven to be a strong corollary to shareholder value since its adoption.
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