Improving Performance: How to Manage the White Space on the Organization Chart

12.3. Performance Logic

Another way to make sure that there is a clear link from organization measures to end-of-process measures to upstream process measures to function measures to individual/work team measures is to develop a performance logic. A performance logic begins at the very highest level, with the one to three most important indicators of organizationwide health. Many organizations are now using return on net assets (RONA) or economic value added (EVA) as indicators of company or division performance.

Let's say we're using EVA, which is after-tax operating profit minus the total annual cost of capital (Tully, 1993). We ask what measures influence EVA and we conclude that it is cost of capital, tax, and profit after tax. We then ask ...