Corporate management has an ongoing mandate to maximize shareholder returns. But while maximizing shareholder value is an important corporate objective, it is not specific and accountable enough for operating management, who must also know which factors most influence value and which factors can be most easily affected. We call these factors “value drivers,” and they are the primary focus of companies that succeed in maximizing shareholder value.
This Executive Insights presents an approach to increasing performance that will forge stronger links between operating performance measures and shareholder value creation. Our work has confirmed that many companies unintentionally reward managers for attaining performance measures which have little impact on value. We describe how companies can identify key drivers of value creation and structure a performance measurement approach around these value drivers.