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VALUE ADDED MEASURES OF ORGANIZATIONAL PERFORMANCE
Abstract
The primary concern of the research study was the problem of effective measurement and comparison of diverse business unit economic performance, with particular emphasis upon the identification and empirical investigation of selected value added measures of organizational performance. The purpose of the study was to determine whether or not value added measures can be effectively utilized as comparative measures of diverse business unit performance. The study's source of data was the Strategic Planning Institute's PIMS Project Data Base, and the exploratory study consisted of three phases. The first phase focused on the following questions: How do selected value added measures compare with the more traditional measures of organizational performance? The second phase addressed three questions: (1) What independent variables (such as market share, capital intensity, and others identified in PIMS findings) exhibit a strong relationship with return on value added (ROVA)? (2) What independent variables explain the variance of ROVA? (3) What is the value of ROVA, given the interaction of selected independent variables? The third phase addressed the following question: How do the elements that make up value added differ by lifecycle stage and type of business unit? The investigation has generated the following conclusions: First, change in net sales and change in value added are growth measures which can be used to compare businesses of all types. Second, ROVA is the least variant overall measure of organizational performance, regardless of the lifecycle stage, type of business, and vertical integration. Third, six independent variables--market share, investment intensity, marketing intensity, employee productivity, capacity utilization, and relative product quality--are major determinants of ROVA. Market share has the most consistent and positive impact on ROVA. Fourth, the mean values of the ten elements comprising value added provide preliminary normative guidelines when the criterion is type of business unit or lifecycle stage. Based upon the results of the study, top management can use the quasi-invariant value added efficiency measure, ROVA, as an effective comparative measure for six of eight diverse types of businesses.
Subject Area
Management
Recommended Citation
SWANSON, NEIL EUGENE, "VALUE ADDED MEASURES OF ORGANIZATIONAL PERFORMANCE" (1982). ETD collection for University of Nebraska-Lincoln. AAI8423833.
https://digitalcommons.unl.edu/dissertations/AAI8423833