A New Tool to Measure Performance

By Spinner, Karen | Global Finance, November 1997 | Go to article overview
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A New Tool to Measure Performance


Spinner, Karen, Global Finance


Perhaps it's activity-based costing (ABC). Or economic value added (EVA). Or yet another performance measurement. Whatever yardstick a company uses, calculating it once or twice a year can be done with a spreadsheet, although it is a laborious process. But having such measurements available on an ongoing basis is increasingly important for top multinational companies. Says the CFO of a large US industrial company: "We hired consultants to come in, show us how to calculate EVA for our global operations, and suggest improvements to our business processes. It was a valuable exercise, but we are concerned that we don't have the technological infrastructure in place that would allow us to monitor EVA on a regular basis and maintain our improvements."

For CFOs in his predicament, the answer may be one of the software packages offered by the consulting arms of the larger accounting firms that run on standard 486 desktop PCs. Indeed, New York consulting firm Stern Stewart, which developed EVA, sells such a package, Finanseer, to compute this measurement.

None of the desktop systems is robust enough for regular use by multiple operators, however. For companies that require heft, the answer is often to build a custom system that feeds off the enterprisewide information system.

That makes news from PeopleSoft especially welcome to those who have opted to implement this enterprisewide system for client-server hardware environments. PeopleSoft, in Pleasanton, California, is currently in beta-testing with the most comprehensive set of performance measurements yet. Its new module, to be released in the first quarter of 1998, will include EVA and ABC. The module will also let a company define its own standards of customer profitability, innovation, shareholder value, and similar benchmarks, and compare its performance against its goals on an ongoing basis.

To allow for consistent reporting, the performance measurement application will be integrated with other PeopleSoft financial modules, such as general ledger, payables, receivables, and asset management.

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A New Tool to Measure Performance
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