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HBR Review: Managing Shareholder Value - From Top to Bottom

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Information about HBR Review: Managing Shareholder Value - From Top to Bottom
Business & Mgmt

Published on January 21, 2009

Author: sarangbhutada

Source: slideshare.net

Description

A review of a HBR masterpiece: Managing Shareholder Value, from Top to Bottom
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HBR Review Managing for Shareholder Value – From Top to Bottom David L. Wenner and Richard W.LeBer What does being successful mean? It means different things to different people! Swarnali Choudhury Saurabh Ranadive Neetha Joy Sarang Bhutada

Situation Appraisal Criteria in Industry What is SVA? Why SVA? Organizations and SVA Key Value Drivers and the disconnect Satyam Maytas Fiasco – Real challenges in identifying key drivers 06/07/09 Presented by: Saurabh 700 300 200 800 600 1400 900 500 Price of acquiring business Investments in acquired business Dividends Repaid Net Investments PV of Net Investments PV of acquired business Time Value of Net Investments Value Destroyed Shareholder Value Return - Cost of Capital Cost of Capital - Growth = 1 + Positive Economic Profit Stable Earnings Sustainable Growth

Appraisal Criteria in Industry

What is SVA?

Why SVA?

Organizations and SVA

Key Value Drivers and the disconnect

Satyam Maytas Fiasco – Real challenges in identifying key drivers

‘ Learning Anxiety’ in organisations Lack of skills/motivation Software tools & techniques The 80/20 rule Complexities in the Indian Context- Family-run businesses (The Britannia Story) Tata JLR Deal: Complexities factored in? Complexities How do we build SV-driven organizations? 06/07/09 Presented by: Neetha 65 Percentage of total economic value Org Strategy Mission/Vision Strategy maps Targets Initiatives Organization Alignment Corporate Role Corporate – Divisions Common services External Partners Everyone’s job Strategic awareness Goal alignment Linked Incentives Continual Process Linked to budgeting Linked to operations Feedback Systems Learning Process Executive Leadership Co-opted decisions between CEO/Board Performance Culture 11 3 -2 14 5 3 2 -1 100 85 Sector A Sector B Sector C Total Market Value

‘ Learning Anxiety’ in organisations

Lack of skills/motivation

Software tools & techniques

The 80/20 rule

Complexities in the Indian Context-

Family-run businesses (The Britannia Story)

Tata JLR Deal: Complexities factored in?

Strategy

Mission/Vision

Strategy maps

Targets

Initiatives

Organization Alignment

Corporate Role

Corporate – Divisions

Common services

External Partners

Everyone’s job

Strategic awareness

Goal alignment

Linked Incentives

Continual Process

Linked to budgeting

Linked to operations

Feedback Systems

Learning Process

Executive Leadership

Co-opted decisions between CEO/Board

Performance Culture

Setting a management agenda Restructuring the corporation portfolio, financial and asset redeployment Managing Individual Businesses The MindTree example Breaking the barriers: Skill Motivation Solutions 06/07/09 Presented by: Swarnali CORPORATE OBJECTIVE Shareholder Value Added (SVA) Total Shareholder Return Dividends Capital gains VALUATION COMPONENTS KEY VALUE DRIVERS KEY MANAGEMENT DECISIONS Cash flow from operations Discount rate Debt Value growth duration Working capital investments Fixed capital investments Sales growth Operating profit margin Income tax rate Cost of capital Operating Investment Financing

Setting a management agenda

Restructuring the corporation

portfolio, financial and asset redeployment

Managing Individual Businesses

The MindTree example

Breaking the barriers:

Skill

Motivation

Total Shareholder

Return

Dividends

Capital gains

Working capital

investments

Fixed capital

investments

Sales growth

Operating profit

margin

Income tax rate

Fundamentals of a business should be a part of ‘key drivers’ for SVA SVA is a comprehensive methodology, to benchmark organizations SV concepts should drive not just strategic , but tactical decisions as well Conclusion In the interest of shareholders, SV should be the foundation of all important business decisions. Although technical capability exists, the key is to build skill and motivation to use SVA consistently and well. Research on Forbes 15 firms in India Only 4 companies have ‘shareholder value’ embedded in companies’ values Tata group companies did not show a surprise! 06/07/09 Presented by: Sarang Results and Conclusion Sr No Company Industry M/V/Goals 1 Reliance Industries Oil & Gas Operations No 2 Oil & Natural Gas Oil & Gas Operations Yes 3 State Bank of India Group Banking No 4 Indian Oil Oil & Gas Operations No 5 National Thermal Power Utilities No 6 Icici Bank Banking Yes 7 Steel Authority of India Materials No 8 Tata Steel Materials No 9 Tata Consultancy Svcs Business Services & Supplies No 10 Tata Motors Capital Goods No 11 Bharti Airtel Telecommunications Services No 12 Wipro Business Services & Supplies No 13 GAIL (India) Utilities No 14 ITC Food, Drink & Tobacco Yes 15 Infosys Technologies Business Services & Supplies Yes

Fundamentals of a business should be a part of ‘key drivers’ for SVA

SVA is a comprehensive methodology, to benchmark organizations

SV concepts should drive not just strategic , but tactical decisions as well

Conclusion

In the interest of shareholders, SV should be the foundation of all important business decisions. Although technical capability exists, the key is to build skill and motivation to use SVA consistently and well.

Thank you Questions, any?

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