Goals, Values and Performance

Chapter 2 - Goals, Values and Performance

Goals;

As the title describes, the lecture discussed the goals, values and the performance of the organization. Integral part of the lecture was the in depth exploration of how goals are set in a firm. As all businesses have a sole motive of maximising profits for the firm, strategy is about creating value for the firm. It is about creating purpose and promising revenues and principles. Often manager complicate shareholder value maximization with enterprise value maximization, shareholder value is enterprise value – total debts. Grant outlines two ways in which shareholder value can be maximised;

1. Intrinsic values;

Shareholder value = NPV – Interest payments

1. Market Value;

Shareholder value = Current value of firms shares

The core is to understand the relation between the two – Profit and enterprise value. Grant has outlined the best way to link both;

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C = Net OP (Operating profit) + Depreciation – Taxes – Investment in FC (Fixed Capital) & WC (Working capital)

The above formula proves that in order to maximise value a firm must maximise its future net cash flows while also be able to manage the risk of minimizing the capital cost.

Values and performance;

The second part of the lecture focuses on the values & the principles the firm functions on. They are a set of rules followed by each employee globally of a particular firm. Firms put in a lot of effort in making sure these values are continuously adhered by each employee and take it a matter critical importance if not being followed. The values built an organizations external image to the consumers, society and the competition which adds value to the firm. As working for a MNC; AkzoNobel takes pride in promoting these values. The firm focuses minutely globally to see any deviances of non-following. The company will not at all bear fall in reputation due to non-conformity to the values.