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Volume 18, Number 13 Copyright 2001 Business Book Review, LLC All Rights Reserved

The EVA Challenge

Implementing Value-Added Change
in an Organization
Joel M. Stern and John S. Shiely
with Irwin Ross
2001 Joel M. Stern and John S. Shiely
Publisher: John Wiley & Sons
ISBN 0- 471- 40555-8

Reviewed by Lydia Morris Brown

Chapter One: The Problem
At one time, entrepreneurs always knew the basic importance of cash in valuing their businesses. Usually, they would
very simply work out a comparison of their total expected returns with what they can plausibly earn elsewhere, with
the same amount of money at the same level of risk (i.e., the opportunity cost of capital). However, major developments
in American capitalism have obscured this approach. First, although shareholders own a corporation, control over its
operations is held by professional managers, whose interests often diverge from those of the majority of shareholders.
In addition, managers possess detailed information about the companys prospects that outside shareholders lack.
Lacking inside information, shareholders accept accounting measurements to gauge corporate value; however, these
measurements were never intended for this purpose.
Accounting criteria are inadequate and misleading because they elevate net income, which is translated into
earnings per share (EPS), to supreme importance. As a companys EPS grows, its share price is supposed to rise,
assuming that its P/E ratio remains relatively constant. To work their way to net income, accountants make several profitBusiness Book Review Vol. 18, No. 13 Copyright 2001 Business Book Review, LLC All Rights Reserved

The EVA Challenge

Joel M. Stern and John S. Shiely, with Irwin Ross

and-loss calculations that distort reality. For example,

management trick often employed in consumer goods
instead of regarding R&D, advertising/marketing, and
companies), utilize merger magic gimmicks, overstate the
training costs as investments and capitalizing them, they
expenses of restructuring, or use unrealistic assumptions
expense these items, which has the effect of understating
to [overestimate] liabilities such as sales returns, loan
a companys true profit for the year.
losses, or warranties. Although a number of corporations
Accounting practices also cause distortion on a
have attempted to escape the EPS trap by basing bonuses, in
companys balance sheet. An asset it listed either at
part, on ROE, ROI, or RONA (return on net assets), because
original cost, less depreciation,
or at market value, whichever Lenders are much less interested than shareholders in going-concern
values, and more concerned about liquidation values.
is lower. Of course, in a rising
Jerold Zimmerman, Simon School of Business
market, this understates value.
Or, when one company buys another, and the transaction
they are better indicators of corporate performance, they
is listed as a pooling of interest, there is no adverse
too can be manipulated.
impact on future earnings.
Another problem is that executive compensation
These practices fail to focus on measurements that
increases as the size of the corporation increases. However,
assess the underlying economic reality of the company
this sets up a perverse incentivegrowth for the sake
criteria relevant to shareholders. Instead, their purpose is
of the personal rewards it brings, which has nothing to
to value assets and the operating condition of the company
do with enhanced shareholder value. In the 1960s and
conservatively, in order to give lenders an idea of what
1970s, the conglomerate became all the rage (the easiest
they could collect if the company were to fail. This is
way to grow is to merge or acquire), and high-profile
the accountants book value, but it reveals little about
conglomerates enjoyed a sharp increase in their share
market valuethe amount of cash shareholders can take
pricesin the short term. But, in the long term, many of
out of the company.
them were disasters, and by the late 1970s, widespread
In addition, the calculation of EPS is easily manipulated
disillusion with conglomerates led to a lot of talk about
by senior executives, whose bonuses may be tied to
true shareholder value and how it had been betrayed by
earnings improvement. Oftentimes, they cut back on
incumbent management. This led to the rise of hostile
R&D or advertising in order to lower costs and raise
takeover artists, the LBO, and the pursuit of greenmail.
stated profits, engage in trade loading (an earnings
The LBO has been effective in that it has turned
managers into owners and burdened them with a debt
load that forces them to be efficient or face bankruptcy.
About the Authors
However, they are also a cumbersome and expensive
Joel M. Stern is the managing partner of Stern
way of creating shareholder wealth. Great effort goes
Stewart & Co. and serves on the faculties of five
into putting the deals together, high fees are necessary
graduate business schools. He is a leading advoto motivate LBO firms, and huge debt discourages risk
cate of the concept of shareholder value and a
taking. Economic Value Added (EVA) is simpler and far
widely published writer.
more flexible.
John S. Shiely is president of Briggs & Stratton,
one of the most successful implementers of EVA.

Chapter Two: The Solution

Irwin Ross, a regular contributor to Stern Stewarts

EVAngelist, has authored a number of books,
including The Loneliest Campaign, The Image
Merchants, and Shady Business. He has also written for a variety of magazines, including Fortune
and Harpers and was formerly a roving editor for
Readers Digest.

Economic Value Added is the profit that remains after

deducting the cost of the capital invested to generate that
profit. In the EVA equation, the cost of capital includes both
debt and equity capital. Properly implemented, EVA aligns
managements interests with those of the shareholder,
because real economic profit is the measure of corporate
performance. This goal benefits the shareholder, and

Business Book Review Vol. 18, No. 13 Copyright 2001 Business Book Review, LLC All Rights Reserved

Page 2

The EVA Challenge

because bonuses are tied to EVA, managers are no longer

interested in manipulating EPS, ROI, or RONA.
EVA is the net operating profit after tax (NOPAT), less
a capital charge that reflects a companys cost of capital
(i.e., required rate of return). If the firms profits are only
equal to the required rate of return, the investor has not
made any money. Thus, the merit of EVA is that it is a
system for determining corporate performance based on
hard data rather than projections.
NOPAT is a key ingredient. Although net normally
means after tax, in the EVA equation, net refers to the
adjustments one must make to eliminate various accounting
distortions. These adjustments must have an effect on
managements behavior, be easy to understand, and have
significant impact on the companys market value. Costs
for R&D, advertising and promotion, and staff training and

Joel M. Stern and John S. Shiely, with Irwin Ross

In these ways, EVA provides strict restraints on the

extravagant use of capitalnot only for the company as
a whole, but for divisions, a factory, a store, or even a
product line.

Chapter Three: The Need for a Winning Strategy

and Organization

A fully articulated EVA system is not a sufficient

condition of success if a company does not also have a
winning strategy and an appropriate organization. This
involves identifying a suitable competitive position (i.e.,
defining the core business) and then dedicating all of
the organizations time, resources, people, and capital to
reaching and sustaining that position.
In formulating a high-value strategy, the role of growth
must be considered. Optimum growth is not by itself
evidence of shareholder valued
As a measurement system, EVA is not only a guide and a prod to
added; revenue growth without
managers seeking to maximize returns, but also a godsend to investors capital discipline destroys
trying to determine the reality behind the maze of accounting numbers. value. However, companies
development are among the most common adjustments.
that only continue to earn the cost of capital on a stable
Under EVA, these costs are included on the companys
or shrinking capital base exhibit Market Value Added
balance sheet and amortized over the period of years
(MVA) that is less than impressive. Market Value Added,
during which they are expected to have an impact. In
defined as the difference between the market value of a
deriving NOPAT, only the annual amortization charge is
company and the amounts invested in it over the years,
included as a cost item.
also precisely captures the gains or losses accruing to a
Taxes show up in the NOPAT calculation only in the
companys shareholders. If present market value is greater
year in which they are paid. In contrast, accounting custom
than total investment, the company has created wealth. If
deducts them in the year they were deferred, which distorts
not, it has destroyed wealth. Thus, there is a significant link
the companys operating results for any one year. The
between EVA growth and growth in MVA.
same considerations apply to the reserves set up to pay the
To achieve continuous increases in EVA and MVA, a
costs of fulfilling warranty obligations. NOPAT provides
company must develop a growth strategy that has reasonable
an accurate picture by listing only the actual disbursement
promise of success. Once management has embraced a
of warranties during the year.
particular value disciplineeither cost leadership, product
Whereas corporate tax departments use accelerated
leadership, or best total solution, based on the identified
depreciation, EVA uses sinking fund depreciation. The
core competencies of the businessit is duty bound to
annual charge does not vary from year to year, but the
explore every avenue of potential growth that is consistent
return of principal is small early on and dominates later.
with that discipline and reasonably likely to deliver at least
This reflects the actual decline in the economic value of
a cost-of-capital return.
facilities and equipment in later years, which is mirrored by
It is equally important to create an organizational
steeply declining asset values on the balance sheet.
architecture that furthers the chosen strategy. This
Under EVA, the full price paid for acquisitions is
structure must expedite internal information exchanges
recorded on the balance sheet, even if the pooling of
and coordinate behavior across the various parts of the
interest method is used. This forces managers to impose
organization. For most organizations of any significant
practical limits on the prices they pay for acquisitions,
size or maturity, segmentation (along geographic, process,
especially if their incentives are tied to EVA.
product, industry, or customer lines) and decentralization
Business Book Review Vol. 18, No. 13 Copyright 2001 Business Book Review, LLC All Rights Reserved

Page 3

The EVA Challenge

Joel M. Stern and John S. Shiely, with Irwin Ross

are the answers. Companies that create the greatest

focuses on dividing up the existing pie rather than enlarging
value tend to assign capital decisions at the level in the
it) is what EVA attempts to replace.
organization where there is the best information to make
The model can be extended to include a one-page Road
that assessment. At the same time, the organizational
Map to Value Creation that identifies key methodologies
architecture must ensure that there are appropriate systems
for creating valuestrategies, structures and systems, and
in place to evaluate performance and provide rewards to
designs and processes. This gives employees important
motivate desired behavior.
insights into how the companys various value-creating
EVA centers (i.e., an investment center where
initiatives coalesce. Each employee can see how the
the chosen performance measure is EVA) require the
company intends to create value in his or her own
broadest grant of decision rights relative to the array of
primary functional area. And, each can see how the
subunit decision
Those companies that have shown a consistent ability to earn more than the cost
assignments (e.g.,
of capital are most likely to succeed when they expand their range of activities.
cost,
expense,
revenue, profit, and investment centers). To designate
companys strategies, structures and systems, and designs
a subunit as an EVA center, management must believe
and processes are integrated along functional lines. One
that value optimization will be achieved if profit and
of the greatest failings of modern management is, perhaps,
capital expenditure decisions are assigned to the subunit,
the belief that any good idea can effectively be plugged into
and management must be willing to relinquish control in
an organization. However, the discipline of preparing a
assigning those decision rights. If thats not the case, the
road map to allows management to look at the consistency
only EVA center will be the entire firm. The organizational
of strategy across functions. This makes it more difficult to
level at which EVA centers should be created is determined
err by plugging in a best-total-solution type of process, for
by the size of the organization, where relevant information
instance, into the strategic framework of a cost leader.
is located within it, and the extent to which subordinate
Chapter Five: The Changes Wrought by EVA
units are self-contained and effectively led.
Usually companies are attracted to EVA because
Chapter Four: The Road Map to Value Creation
theyre in trouble, and EVA reorients the corporation in the
After decades of indifference, now companies have
direction of true economic profit. For example:
increasingly moved, not only to increase shareholder
In 1992, Herman Miller, the celebrated furniture
value, but also to align shareholder interests with those
manufacturer, suffered its first loss in years. It rallied
of other stakeholders. The goal has been to create
temporarily, but by 1994-1995, it was ailing seriously.
value (i.e., maximize the amount of total wealth) for all
Although sales were increasing, so were operating expenses
groups involved. How this value is increased is different
and the amount of capital spent. Too many executives
for every organization, depending upon competitive
reported to the CEO, and too many consultants were
position, proprietary capabilities, and internal operational
involved because there was no formal method of making
challenges.
trade-offs. In January 1996, the company adopted EVA,
The Briggs & Stratton holistic model of Managing
and by the end of fiscal 1998, it boasted record sales of $1.7
for Value Creation enables companies to communicate
billion, record profits of $128.3 million, and record EVA of
to employees and other stakeholders precisely what is
$78.4 million (an improvement of nearly $70 million). In
involved in creating value. The model identifies the groups
addition, Millers share price surged from $7.72 (adjusted
(employees, customers, suppliers, and communities) for
for two stock splits) to $27.69.
which everyone in the organization should be dedicated to
In 1990, The Manitowoc Company, an owner of
creating value. The most important functions associated
shipyards and a highly diversified manufacturer of icewith each group, and which integrate each group into the
cube-making and refrigeration equipment and construction
value-creating process, are set forth. However, none of
cranes, was in a state of malaise, typical of a mature
these functions must be associated with specific corporate
company. Earnings were failing and there was no market
departments. This kind of distributive thinking (that
growth in any of its products or companies. An EVA
Business Book Review Vol. 18, No. 13 Copyright 2001 Business Book Review, LLC All Rights Reserved

Page 4

The EVA Challenge

program was instituted, and, EVA went from a negative

$12 million in 1993 to a positive figure in 1995. By
1998, it had topped $30 million, and in 1999, it reached
$41 million.

Chapter Six: Extending EVA to the Shop Floor

Although EVA is effective and practical on the shop
floor, most companies start EVA bonus programs at
the executive level, gradually pushing it down through
managerial ranks, and then on to salaried personnel. Hourly
workers tend to be left out. Sometimes this is due to union
resistance; sometimes it is because management believes

Joel M. Stern and John S. Shiely, with Irwin Ross

(perhaps the greatest concern of the unionized employee).

If a plant or division cannot be EVA-positive in the long
run, it cannot continue to exist. Once the rank and file are
convinced, it will be easier to persuade the union leadership
to adopt EVA as a basis for incentive compensation.

Chapter Seven: Getting the Message Out

Training and Communications

EVA represents a major transformation in the way

a company measures its performance, rewards its staff,
and even how it conducts every aspect of its business and
practices. Although change can rejuvenate an organization,
those in the trenches are likely
Including employees in the value-creating process will change their to perceive it as a threat. Thus,
entire view of themselves, their colleagues, their superiors, and their training employees is the most
company; they will think and act like owners.
important aspect of implementing
that workers lack the decision-making capabilities to
an EVA program. It is far better to offer clear, detailed
respond effectively to EVA incentives. This view overlooks
descriptions of imminent changes that explain and persuade
the great store of knowledge about the production process
than it is to coerce. All this should be part of a formal
that can be tapped if workers participate in EVA.
training program, at the onset of EVA implementation,
While conflict is inherent in the bargaining process,
followed by ongoing communications with the workforce.
there is also a tradition of union-management cooperation.
Chapter Eight: EVA and Acquisitions
Many unions understand that enlarging the pie benefits
Because of global competition and rapid technological
the rank and file. They will also be attracted by the fact
change,
monopoly power, as well as oligopoly power, is
that the cash-adjusting features of NOPAT and capital
now beyond the aspirations of most companies. Thus, the
calculations address the concern that management might
motive for acquisition must be the creation of additional
eliminate accruals in order to reduce the size of the bonus
value on the part of the acquiring company, reflected in a
available to union workers.
rise in its share price. Additional value must also accrue
However, winning over the rank and file, directly,
to the sellers shareholders, by way of a premium, unless
can be the real key to success in promoting EVA on the
the seller is failing. EVA analysis is an excellent method of
shop floor. Although unilateral discussions, with hourly
calculating whether a proposed acquisition creates value,
employees concerning wages, benefits, and other terms
and if so, how much.
of employment, are off limits, management may discuss
There are two parameters that have the greatest
EVA as a performance metric. Management may also train
effect on the likelihood of success: (1) the types of
employees in EVA basics and in how to apply the strategies
products/services produced by the acquired business and
to their work areas.
(2) the nature of the potential integrating efficiencies (i.e.,
To most unionized employees, the value creation
financial, managerial, and operational).
process is incomprehensible because they are not made
While financial synergies have the least likelihood
privy to the companys value discipline, operating model,
of creating value, opportunities to mine value become
and the basic economics of the particular operations
considerably more concrete on moving into managerial
in which they are involved. Thus, they do not trust
synergies. However, the biggest increase in economic
management because they dont know what the business is
value is likely to be garnered in the area of operational
up to. EVA can help explain previously incomprehensible
synergies, because they have the potential for substantially
decisions, providing the kind of information that will
reducing costs and also for driving revenue growth through
drive behavior and create a participative workforce. An
a broader exploitation of the fixed costs and capital bases
understanding of EVA can also allay job-security concerns
Business Book Review Vol. 18, No. 13 Copyright 2001 Business Book Review, LLC All Rights Reserved

Page 5

The EVA Challenge

Joel M. Stern and John S. Shiely, with Irwin Ross

of the merged companies. Looking at the products/services

exceeded if EVA improvement exceeds its target by a
parameter, the greatest potential for creating value is
stipulated amount.
in the acquisition of companies that have comparable
If EVA achievement falls short of the target by a
product/services lines. The acquiring enterprise is likely
certain stipulated percentage, the target bonus is shaved by
to understand clearly the competitive and operational
that amount. A greater shortfall generally means no bonus
challenges of the acquired business and will be able to
at all. And, if theres a decline in EVA, accrued bonuses
realize economies of scale, distribution, and development,
that employees have received will be debited from the
quickly.
bonus bank. With this system, some of managements
Nonetheless, realized synergies may not compensate
prior earnings are always at risk, which tends to squelch
for an excessive acquisition premium or a flawed analysis
any impulse to inflate one years results at the expense
of the targets competitive and operational challenges,
of the future.
or of its projected growth profile. Less
An EVA incentive plan provides strong motivation for growth
attractive businesses can also be part of
combined with capital discipline.
the package. And, differences in cultures,
financial systems, pay plans, etc., can make integration
For the top tier of executives, leveraged stock options
difficult. Thus, what can be achieved expensively through
(LSOs) are an additional incentive. Under this plan, a
acquisitions can often be gained more cost-effectively
portion of the annual bonus is distributed in the form of
through various forms of strategic alliance, including
stock options (more than would normally be available at
licensing, contract development, contract manufacturing,
the price). But, unlike normal options, LSOs can only
commercial agreements (nonequity ventures), partial
be exercised at ever-higher prices, year by year. This
equity ventures, and joint ventures.
ensures that executives cannot be enriched by options
unless stockholders are equally enriched by rising share
Chapter Nine: EVA Incentives
prices.
Nothing is more important to the success of EVA
implementation than a carefully designed EVA incentive
Chapter Ten: How EVA Can Fail
program. Without an incentive program, employees will be
One primary cause of EVA failure is the lack, or
rewarded for achieving goals (e.g., earnings per share) that
perceived lack, of full support from the CEO. Thus, the
may be counter to EVA goals. Besides, ROI and RONA
chief executive must lead the charge by chairing the
(frequent criteria for executive bonuses) are flawed. EVA
steering committee, not as a referee, but as the champion of
incentive plans, on the other hand, have several benefits.
the program, coordinating discussions, resolving conflicts,
They are not set annually in lengthy negotiations but are
and enforcing the timetable for implementation.
fixed in advance for a three- or five-year period. EVA
Failure will also ensue if a companys top executives
bonuses are also uncapped; thus, if the company is
are being overpaid for poor performance and/or if they
successful, bonuses amount to a far higher proportion
are of mediocre talent. If they are being paid exorbitant
of total compensation than is offered under traditional
salaries, despite poor performance, they are likely to earn
bonus plans.
less under an EVA bonus plan. And, success will be
The essence of an EVA incentive plan is that it
elusive if existing executive talent is incapable of effecting
promotes increased shareholder value, in concert with the
substantive improvement in performance.
EVA measurement program and management system. The
However a far more common cause of failure is
target is the annual expected EVA improvement, and
an incompatible corporate culture, characteristic of a
achieving it will result in receipt of 100 percent of the
rigid bureaucracy. In these organizations, jobs are often
target bonus, which is a percentage of the employees
sinecures, and promotions are dependent on seniority
annual salary (typically 100 percent for the CEO, down
rather than merit. In this kind of setting, employees are
to 10 percent for the lowest-ranking employee). Moreover,
unaccustomed to variable pay, unless it is negotiated, and
because bonuses are uncapped, the target bonus will be
they do not look forward to being objectively measured by
EVAs rigorous standards.
Business Book Review Vol. 18, No. 13 Copyright 2001 Business Book Review, LLC All Rights Reserved

Page 6

The EVA Challenge

Chapter Eleven: New FrontiersReal Options

and Forward-Looking EVA

Joel M. Stern and John S. Shiely, with Irwin Ross

Chapter Thirteen: Recipe for Success

Successfully implementing value-added change in

an organization requires six key factors. First, the
company must have a workable business strategy and
appropriate organizational structure before EVA can
have a salutary effect on performance. Second, in order
for EVAs full potential to be achieved, a company
must install a measurement system,
EVA is such a radical departure that it requires unremitting
a management system, and an
pressure from the top to enforce compliance in the echelons below.
incentive systemall of EVAs
problem is that the upstream operationsexploration
components. Third, an EVA incentive plan is essential,
and production (E&P) present a problem for standard
and it must reach as far down into the organization as
EVA measurement. However, forward-looking EVA
possible. Fourth, a comprehensive training program is as
adds the enhanced (or reduced, if prices decline) value
essential as the incentive plan. Fifth, the EVA program
of a companys reserves to the firms NOPAT. It is an
must have the full and enthusiastic backing of the CEO.
adjustment that recognizes current market credit for future
And, sixth the CFO and/or controller must be equally
value. It also provides a realistic incentive system. Annual
committed.
increases in capital because of oil, gas, or mineral strikes
Epilogue: EVA and the New Economy
are included in NOPAT, thus, greatly boosting managerial
rewards.
* * *
Chapter Twelve: 25 Questions
A subject index is provided.
Over the years, a variety of questions have arisen about
EVAs theoretical principles and its practical applications.
The following is a sampling: Why are companies in
the private sector, as well as state-owned enterprises,
turning to economic profit as a measure of performance?
What determines how broadly and how deeply EVA is
Oftentimes, senior management seems to forget that
deployed in an organization? Does the type of remuneration
its most important job is to maximize a companys current
drive investment decisions? How is the task of investor
market value in order to reward its shareholders (the
relations altered by employing an EVA framework? Is it
companys owners) and, by extension, the firms other
true that efforts required to introduce EVA have been
stakeholders and society at large. However, according
underestimated and insufficiently stressed? What can
to Stern and Shiely, this all-important quest for value
be inferred from the fact that most EVA companies
is being deterred by obsolete accounting systems that
have adopted additional criteria for bonus evaluation?
emphasize the wrong financial goals and the wrong
What happens when companies attempt to balance the
performance and valuation measures. This emphasis on
effect on EPS and pay the bonus? What can be done
the wrong goals and measures also allows executives
about dysfunctional behavior between departments when
and managers to be improperly compensated for their
someones EVA is threatened by someone elses proposal?
efforts. The EVA Challenge explains that the cure for this
How linked has EVA been with the development of a
malaise is Economic Value Added (EVA), and it outlines
Balanced Scorecardwas it a help or a hindrance? What
how to implement an EVA program and integrate it into
have been the effects of EVA on the culture and behavior
strategy development, organizational design, training, and
of businesses? How easy is it for individuals who do not
incentive compensation.
have well-developed business and financial acumen to
EVA was developed by the consulting firm, Stern
grasp the concept of EVA?
Stewart & Co. (Stern is a cofounder), after years of
experience advising clients on valuations, restructurings
The relatively new concept of real options can be used in
all industries but is vital in the oil, gas, and other extractive
industries because much of the market capitalization
of these companies is represented by the developed
and undeveloped reserves they own below ground. The

Remarks

Business Book Review Vol. 18, No. 13 Copyright 2001 Business Book Review, LLC All Rights Reserved

Page 7

The EVA Challenge

and recapitalizations, acquisitions and divestitures, and

management incentive compensation plans. (In 1991, Stern
and G. Bennett Stewart, III published The Quest for
Value, in which they detail the what and why of EVA.)
Thus, The EVA Challenge can be considered Quest
for Value, Part II, for it details the how. Using companyspecific initiatives and case examples, the work shows
senior management, key operating people, and planning
and financial staff how to customize and implement EVA.
And, it provides a practical framework that this audience
can use to set goals, allocate resources, develop strategy,
valuate acquisitions, set financial policy, train the troops,
plan a fair incentive compensation system, and build
shareholder value.
Although many different companies and types of
businesses are used to provide insight into the practical
aspects of EVA implementation, the work focuses on
Briggs & Strattons (an old-line company and producer
of air-cooled gasoline engines)some of the models
presented are those developed by Briggs & Strattonand
also gives a lot of attention to Herman Miller, the furniture
manufacturer. Nonetheless, the authors make a strong case
for EVAs relevance to new-economy companies, taking
great pains to address the e-commerce situation in which
many companies do not even have profits, let alone
enough to cover a capital charge.
The authors are also staunch advocates for the
shareholder, fervently adhering to the view that focusing
on the maximization of shareholder value simultaneously
maximizes the wealth of society, including such stakeholders
as labor, suppliers, customers, and the community at
large. They see no conflict of interests and make a
credible case for this viewa case that also provides a
solid framework for a broad range of corporate decisionmaking. Thus, companies struggling to balance the needs
of investors, with the need to reach informed decisions
regarding effective business strategy, will find The EVA
Challenge invaluable.

Joel M. Stern and John S. Shiely, with Irwin Ross

Reading Suggestions
Reading Time: 8 to 10 hours, 240 Pages in Book
The authors insist that EVA is simple and easy enough
for nonfinancial types to grasp and apply; however,
the truth of that assertion depends on what is meant by
nonfinancial types. Noone does not need to be an
accounting/finance professional, but we believe that it is
necessary at least to have some rudimentary knowledge of
these principles if one is to have more than just a cursory
understanding of the general premise behind EVA.
If the details of EVA are new to you, or you dont have
the requisite accounting/finance knowledge, we suggest
that you spend some time with The Quest for Value. We
also suggest that you begin The EVA Challenge with
Chapter Twelve: 25 Questions and Chapter Thirteen:
Recipe for Success. The responses to the questions repeat
much of the contents of the book (as does the information
in the thirteenth chapter), but do so in a more accessible
manner. If you are familiar with the EVA concept, and are
considering implementing the program, you can choose
only those chapters that address your particular concerns.
However, you should also make a point of reading the two
chapters mentioned. We also recommend that everyone
read the epilogue.
One last caveat: The work presents an extensive
review of the literature. Incomprehensively, however, no
bibliographic notes and/or bibliography are provided. If you
wish to explore these resources further, it will be a difficult
undertaking, because they only appear as in-text citations.
Moreover, these many, full citations are cumbersome and
might greatly impede your momentum.

Business Book Review Vol. 18, No. 13 Copyright 2001 Business Book Review, LLC All Rights Reserved

Page 8

The EVA Challenge

Joel M. Stern and John S. Shiely, with Irwin Ross

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Business Book Review Vol. 18, No. 13 Copyright 2001 Business Book Review, LLC All Rights Reserved

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