Organizational Behavior: Foundations, Reality and Challenges (with InfoTrac®)

EVA-economic valued added-is a measure of the true financial performance of a company, and a strategy for creating corporate and shareholder wealth. It is also a method of changing corporate priorities and behavior throughout a company, right down to the "shop floor." In The EVA Challenge, the authors outline how to implement EVA-from training employees to answering the most frequently encountered implementation problems faced by companies.

This detailed "how-to" guide represents the second phase in the "EVA Revolution", showing executives around the world how to customize and implement EVA at their companies. Here, EVA converts learn how to work some "EVA magic" through company-specific initiatives and case study examples. Coverage includes completely new materials on "real options", leveraged stock options, and other concepts critical to corporations in both new and old economy industry sectors.

Second, generally accepted accounting principles do not align expenses with benefits, distorting economic reality. As a result, investors who want to compare the cash they can take out of a company with the cash they have invested are hampered.

The authors argue Economic Value Added (EVA) is a true measure of a company's economic performance, in addition to being a strategy for creating shareholder value. Properly implemented, they state, EVA frees the measurement of corporate performance from the vagaries of accounting principles and gives both shareholders and management a clear picture of the value the company creates.

EVA is the profit that remains after deducting the cost of the capital invested to generate that profit or EVA = Net Operating Profit After-Tax minus capital charge. Effectively implemented, the tool becomes the basis for an incentive plan that rewards managers for actions that increase shareholder returns and vice versa.

John S. Shiely, president of Briggs and Stratton and co-author of the book, notes this strategy provided the foundation of his company's turnaround. In 1989, the world's largest producer of air-cooled engines had an EVA of negative $62 million based on $1.3 billion in sales. By re-organizing and focusing its strategy while developing its EVA program, the company staged a dramatic turnaround. By 1999, it reported a record positive EVA of $50.9 million. Shareholders, who bought $100 worth of stock at the beginning of the program, saw it increase in value to $673 in 1999.

The authors claim EVA is ideal for knowledge-based companies making heavy infrastructure investments today for any anticipated return later. EVA treats cash outlays that represent investments as capital rather than expenses. The capital in these knowledge based industries consists of research, development, marketing, advertising and start-up costs. Accounts view these expenditures as expenses, but it is realistic to capitalize them and amortize them over their useful lives.

I was hoping the book would deal with more of the matamatics associated with defining EVA in relation to various projects and business decisions. This book contailed very little information in this regard.

"It is the framework for a complete financial management and incentive compensation system that can guide every decision a company makes...that can transform corporate culture, that can
improve the working lives of everyone in an organization by making them more successful, and that can help them produce greater wealth for shareholders, customers, and themselves."

Stern and Shiely (with Irwin Ross) focus on the specific challenges which will probably be encountered when initiates are taken to implement value-added change in an organization. They suggest all manner of strategies and tactics to achieve that objective, agreeing with O'Toole's key points in Leading Change when he analyzes what he calls "the ideology of comfort and the tyranny of custom."

For the authors of this book, there have been two major developments in American capitalism which explain why "the opportunity cost of capital" has been miscalculated: "(1) the split between ownership and control of publicly held corporations and (2) the widespread acceptance of accounting measurements [i.e. GAAP] to gauge corporate value, a purpose for which they were never intended." Having defined and then analyzed various problems in Chapter 1, the authors proceed into 12 more chapters whose titles suggest their focal points: The Solution, The Need for a Winning Strategy and Organization, The Road Map to Value Creation, The Changes wrought by EVA, Extending EVA to the Shop Floor [an absolute imperative], Getting the Message Out: Training and Communications, EVA and Acquisitions, EVA Incentives, How EVA Can Fail [and it does...the authors explain why], New Frontiers: real Options and Forward-Looking Eva, 25 Questions [which must be answered fully or forget about EVA], and finally, a Recipe for Success. The book then provides its own value-added benefit: an Epilogue written by Gregory V. Milano which discusses EVA and the "New Economy."

Briefly, I would like to comment on Chapter 13 which offers a "Recipe for Success." The authors introduce and explain six key factors. Having already acknowledged various forms of resistance and resentment which implementation of EVA principles may well encounter, the authors understand full well that these factors may offer the promise of success but by no means guarantee it. They are:

1. "The company must have a viable business strategy and appropriate organizational architecture before EVA can boost performance."

2. To achieve full potential of EVA, a company should install all of EVA's components -- a measurement system, a management system, and an incentive system."

3. An EVA incentive plan is essential, and it should reach as far down in the organization as possible."

4. "A comprehensive training program is equally essential. It should not be limited to top executives but should infiltrate all managerial levels and, ideally, reach down to the shop floor."

5. "The EVA program must have the full and fervent backing of the CEO, who should chair all the all-important steering committee that puts EVA in place."

6. "The CFO and/or the controller should be equally committed. Because they have to deal simultaneously with standard accounting practices, these specialists may have an even greater problem focusing on value creation than a CEO newly introduced to EVA."

Stern and Shiely (with Ross) offer a comprehensive, cohesive, and cost-effective program which, after appropriate modification, can be of substantial benefit to almost any organization, regardless of its size or nature. Milano's insights are especially important in 2001 as so many organizations are attempting (with mixed success) to reconcile the basic principles of the so-called "Old" and "New" economies. (I hope they or Ehrbar next write a book which explains how EVA can be of greatest benefit to privately-owned smaller companies.) Drucker was right: "Until a company returns a profit that is greater than its cost of capital, it operates at a loss." We have all manner of mechanisms by which to determine the exact net worth of an individual executive. Properly understood, EVA principles can do the same for an organization IF if those who lead that organization are guided and informed by the aforementioned "six key factors." If you share my high regard for this book as well as Ehrbar's, you are urged to check out Fitz-enz's The ROI of Human Capital.

A true learning tool for students and scholars alike; the third edition of Organizational Behavior: A Management Challenge has been designed to effectively present an overview of the challenges facing managers and employees in today's competitive organizations.

The latest research in organizational behavior has been interwoven with real-life cases and practical applications to provide a highly accessible text for advanced undergraduate and MBA students of management and psychology.

To reflect the evolving challenges of today's organizations, this text contains expanded coverage of new technologies and global businesses and brings the sophisticated world into the classroom. A new chapter on Inclusion has also been added.

New Features:
* Research in Action Boxes--contributions from leading researchers in the field.
* Focus On--vignettes and boxed items that emphasize technology issues and international issues.
* On Your Own--experimental exercises that can be either completed individually or collaboratively.
* The Manager's Memo--a unique format for end-of-chapter cases. Real-life management problems presented through a memo. Provides the opportunity for formal written responses, as well as class discussion.
* Photos and NEW Artwork-- with captions that tie the relevancy of the graphics to the text concepts.

Supplements:
*Instructor's Manual
*PowerPoint on CD--packaged automatically with the Instructor's Manual
*Text Specific Web site: www.organizationalbehavior.ws

**Special Copy for 4C mailer**
Below the bios:
These three leading scholars in their field have written the new Third Edition of Organizational Behavior to include coverage of technology in the workplace and the challenges of a global market. A NEW chapter on Inclusion (chapter 16) has also been added.

The latest research in organizational behavior has been interwoven with real-life cases and practical applications to provide a highly accessible text for advanced undergraduate and MBA students of management and psychology.

We at LEA invite you to examine our new exciting learning tool for students and scholars alike. Please preview the wonderful new features of Stroh, Northcraft and Neale's new textbook that will help the reader gain the knowledge to succeed in today's changing work environments.

Supplements

INSTRUCTOR WEB RESOURCE - www.organizationalbehavior.ws Prepared by Christine L. Langlands, this FREE, text-specific website includes the entire Instructor's Resource Manual, all of the PowerPoint slides described below, the Preface and Table of Contents for the textbook, author biographies and ordering information to obtain a copy of the text. This valuable on-line resource is designed to be completely intuitive and enhances both the live contact course and the virtual classroom. To keep pace with the evolving field of Organizational Behavior, the website will be updated by the author team over the life of the text.

INSTRUCTOR'S MANUAL
Written by Mary C. Freeman-Kerns and Christine L. Langlands, in conjunction with the authors of the textbook, this IM was created in the classroom. This rich resource contains detailed chapter outlines, the answers to the questions in the textbook, and additional case or group exercises for each section of the text. Available directly on the website OR in hardcopy (upon adoption), this IM is a tool that will guide new instructors smoothly through their course.

POWERPOINT CD-ROM
Containing more than 250 PowerPoint slides, this dual-platform CD-ROM enhances any lecture with interesting and accurate visuals. The CD-ROM will be packaged FREE with the hardcopy Instructor's Manual.

Third Edition Features

Research in Action
Contributions from leading researchers in the field highlight the connection between high-quality research and effective application.

On Your Own
Experimental exercises that can be completed either individually or collaboratively.

Focus On
Real-life vignettes and boxed items that emphasize Technology and International issues.

The Manager's Memo
A unique memo format for end-of-chapter cases providing actual management problems with the opportunity for formal written responses as well as class discussion.