Relationship

Personal EVA is similar to business Economic Value Add
Chapter 10
p.1
I often hear people in referring to “EVA”. At first I thought they were speaking of some electrical component. Now I suspect it has something to do with business success. Can you explain it to me?
We widely refer to Economic Value Add. EVA for short, is the most effective way of measuring business success.
EVA is the final measure of business value. It is what investors will pay for the business. The market usually looks at two aspects:
Results: Profit measured in Rands and Cents.
Expectations and confidence:
The market’s expectations of the company’s ability to sustain, repeat and grow the profit stream. (Usually reflected in the P/E rate.)
Personal EVA is similar in that it is measured in terms of what you are worth to the company, your actual results and your economic value added to the business. Here you create space for sustainable personal income.
Are you telling me that the value of the company is related to the margins that I made on my last deal?
But how does it all hang together and how can I improve my performance?
The following diagram explains what the Economic Value Add (EVA) of our business is all about.
If your employment does not translate into more profit, why should your relationship with the company continue?
You will have noticed that this book contains several diagrams which explain key aspects of business and the company. It will be worth your while studying these carefully. For instance The Order Cycle, Areas of Growth.
Using the same diagram from the previous page, I will explain how your individual EVA ties in with the EVA of the company. By following these guidelines, you should definitely be able to improve your contribution.
Let’s say this diagram represents two moments in time relating to you:
In order to raise your
individual EVA and
contribute towards
growing the EVA of
the company, you
have to improve two
factors which in
effect create a:
a) Increase the
customer Net
Value Potential.
b) Increase the
Customer’s
Customer Value
Potential.
Raising profit by
increasing the price without a
corresponding lift of
factors and would hardly make good business sense. Profits can be raised by increasing sales and/or expanding the market. This reduce expenses and drives cost down.
Well, I am beginning to understand EVA. I guess if one improves all the elements listed above, you must be able to make a contribution to the wealth of the company.
But what else can I do?
Let me add five key truths about increasing EVA:
Understand cost and value.
Measure and communicate value.
Optimize cost.
Increase value.
Increase market.
Remember the following fundamental concept:
Wealth = Sustained profit over time + Growth

Personal EVA is similar to business Economic Value Add

Chapter 10 p.1

w&t_question

I Ask

I often hear people in referring to “EVA”. At first I thought they were speaking of some electrical component. Now I suspect it has something to do with business success. Can you explain it to me?

w&t_exclamation

I Answer

We widely refer to Economic Value Add. EVA for short, is the most effective way of measuring business success.

EVA is the final measure of business value. It is what investors will pay for the business. The market usually looks at two aspects:

1. Results: Profit measured in Rands and Cents.

2. Expectations and confidence: The market’s expectations of the company’s ability to sustain, repeat and grow the profit stream. (Usually reflected in the P/E rate.)

Personal EVA is similar in that it is measured in terms of what you are worth to the company, your actual results and your economic value added to the business. Here you create space for sustainable personal income.

w&t_question

I Ask

Are you telling me that the value of the company is related to the margins that I made on my last deal?

But how does it all hang together and how can I improve my performance?

w&t_binoculars

I Explain

The following diagram explains what the Economic Value Add (EVA) of our business is all about.

w&t_ch10_a_understanding_profit_and_economic_value_add

w&t_elephant

I Advise

If your employment does not translate into more profit, why should your relationship with the company continue?

You will have noticed that this book contains several diagrams which explain key aspects of business and the company. It will be worth your while studying these carefully. For instance The Order Cycle, Areas of Growth.

w&t_ch10_b_understanding_profit_and_economic_value_add

w&t_binoculars

I Explain

Using the same diagram from above, I will explain how your individual EVA ties in with the EVA of the company. By following these guidelines, you should definitely be able to improve your contribution.

Let’s say this diagram represents two moments in time relating to you:

In order to raise your individual EVA and contribute towards growing the EVA of the company, you have to improve two factors:

1. Increase the customer Net Value Potential.

2. Increase the Customer’s Customer Value Potential.

Raising profit by increasing the price without a corresponding lift of factors and would hardly make good business sense. Profits can be raised by increasing sales and/or expanding the market. This reduce expenses and drives cost down.

w&t_question

I Ask

Well, I am beginning to understand EVA. I guess if one improves all the elements listed above, you must be able to make a contribution to the wealth of the company.

But what else can I do?

w&t_exclamation

I Answer

Let me add five key truths about increasing EVA:

  1. Understand cost and value.
  2. Measure and communicate value.
  3. Optimize cost.
  4. Increase value.
  5. Increase market.
w&t_elephant

I Advise

Remember the following fundamental concept:

Wealth = Sustained profit over time + Growth

What is meant by delegation?
Why delegation is important
Every person has unique and valuable qualities that are for the benefit of the world. When we entrust responsibly we allow those qualities to flourish.
Our team’s capacity and abilities expand as we increase each other’s skills and experience.
Stephen Covey (7 Habits of Highly Effective people) says, “Trust is the highest form of motivation.” Delegation entrusts people with tasks deemed important – this can motivate and energize your team.
Why we do not entrust others with our work
“It would be quicker to do it myself” – short term view
“I don’t have anyone I can trust to delegate it to” – short term view: training required
“I can do it better myself” – perfectionist view
“If that’s what I am told to do that’s what I do.” – abdicating
“I don’t know how to delegate.” – abdicating: personal training required
When to delegate
When your diary is full (i.e. at least 60% scheduled) of right actions.
Organize your diary by asking key questions:
What am I doing now that doesn’t’t need to be done at all?
What am I doing that could be done by someone else?
What am I doing now that only I can do?
What to hand over
We keep what we are passionate about and what only we can do.
Who would gain the most if they were given responsibility
Someone who can grow and is available.
Someone who is competent, whose job it is and who has time or must make time.
Someone who you want to learn from – exchange in value exchange transaction.
How to delegate to someone you want to train
Situational Coaching
Process relative to task and relationship. Delegation therefore involves balancing directive and supportive functions.
The process of delegation begins with DIRECTING.
The person to whom the task has been entrusted with has low competence but is highly motivated to learn and grow from the experience as it increases their skills and responsibility in the company.
Directing involves close accompaniment with the delegatee, being specific about expectations, identifying measurable outcomes, clarifying understanding.
The next step involves COACHING.
At this stage the delegatee has some competence and some confidence but still needs some directing and some support. The process will involve asking questions, getting feedback and offering guidance.
The next stage involves SUPPORTING.
The individual has reached the stage of greater competence and is on the whole managing the task well. There may however be some lack of confidence when it comes to unexpected situations and new information. The person may make mistakes, need reassurance, and require problem solving skills. The delegating role will be supportive by listening and encouraging and giving specific and helpful feedback.
The final stage is that of actually DELEGATING.
At this stage the delegatee is not only competent but confident. They are managing the task well on a day to day basis with only the occasional monitoring.
Reflective coaching
As delegation moves through this process the task of the delegator is to guide the growth of the delegatee’s self concept through goal-directed behavior. This involves the following:
Setting mutually agreed goals starting with something relatively simple and as progress moving towards more complex goals.
As each goal is achieved reflecting on the process that led to this achievement. I t also asks where the gaps are in achieving the next goal and how these gaps are going to be bridged.
The reflection process will involve honest self-analysis and self-evaluation.
Through achieving goals and reflecting on the process the delegatee grows in their concept of self.
Keep the monkey on their back
Don’t take the entrusted tasks back.
Don’t rescue them.
Turn issues back to them by asking: “What are you going to do?”
Ask questions like: “What do you suggest?”
“What are the feasible alternatives?”
Case studies
Barry du Plessis’s experience with delegation
Leigh Harrison – “My failure to delegate”

What is meant by delegation?

w&t_question

I Ask

Please explain to me why delegation is important?

w&t_exclamation

I Answer

Every person has unique and valuable qualities that are for the benefit of the world. When we entrust responsibly we allow those qualities to flourish.

Our team’s capacity and abilities expand as we increase each other’s skills and experience.

Stephen Covey (7 Habits of Highly Effective people) says, “Trust is the highest form of motivation.” Delegation entrusts people with tasks deemed important – this can motivate and energize your team.

Why we do not entrust others with our work

  • “It would be quicker to do it myself.” – short term view
  • “I don’t have anyone I can trust to delegate it to.” – short term view: training required
  • “I can do it better myself.” – perfectionist view
  • “If that’s what I am told to do that’s what I’ll do.” – abdicating
  • “I don’t know how to delegate.” – abdicating: personal training required

When to delegate

  • When your diary is full (i.e. at least 60% scheduled) of right actions.
  • Organize your diary by asking key questions:
    • What am I doing now that doesn’t need to be done at all?
    • What am I doing that could be done by someone else?
    • What am I doing now that only I can do?

What to hand over

  • We keep what we are passionate about and what only we can do.

Who would gain the most if they were given responsibility

  • Someone who can grow and is available.
  • Someone who is competent, whose job it is and who has time or must make time.
  • Someone who you want to learn from – exchange in value exchange transaction.

How to delegate to someone you want to train

Situational Coaching

Process relative to task and relationship. Delegation therefore involves balancing directive and supportive functions.

  • The process of delegation begins with DIRECTING.

The person to whom the task has been entrusted with has low competence but is highly motivated to learn and grow from the experience as it increases their skills and responsibility in the company.

Directing involves close accompaniment with the delegatee, being specific about expectations, identifying measurable outcomes, clarifying understanding.

At this stage the delegatee has some competence and some confidence but still needs some directing and some support. The process will involve asking questions, getting feedback and offering guidance.

  • The next stage involves SUPPORTING.

The individual has reached the stage of greater competence and is on the whole managing the task well. There may however be some lack of confidence when it comes to unexpected situations and new information. The person may make mistakes, need reassurance, and require problem solving skills. The delegating role will be supportive by listening and encouraging and giving specific and helpful feedback.

  • The final stage is that of actually DELEGATING.

At this stage the delegatee is not only competent but confident. They are managing the task well on a day to day basis with only the occasional monitoring.

Reflective coaching

As delegation moves through this process the task of the delegator is to guide the growth of the delegatee’s self concept through goal-directed behavior. This involves the following:

  1. Setting mutually agreed upon goals starting with something relatively simple and progressing to more complex goals.
  2. Reflect on the process that led to the achievement as each goal is completed. This leads to reflection on where the gaps are in achieving the next goal and how these gaps are going to be bridged.
  3. The reflection process will involve honest self-analysis and self-evaluation.
  4. Through achieving goals and reflecting on the process the delegatee grows in their concept of self.
w&t_elephant

I Explain

Keep the monkey on their back

Don’t take the entrusted tasks back.

Don’t rescue them.

Turn issues back to them by asking: “What are you going to do?”

Ask questions like: “What do you suggest?”

“What are the feasible alternatives?”

Case studies

Barry du Plessis’s experience with delegation

Leigh Harrison – “My failure to delegate”